National Center for Policy Analysis

MONTH IN REVIEW

Government

April, 1996

WHEN BIGGER WASN'T BETTER

Big labor, big business and big government dominated the U.S. economy and society for nearly a century. Today the decline of big institutions is evident.

• Steel industry employment has plummeted by two-thirds, from 512,00 in 1980 to 170,000 today.
• Union membership in the private sector has declined from 36 percent of the labor force in 1953 to 11 percent.
• General Motors' market share dropped from 45 percent to 35 percent during the 1980s, and IBM's stock price collapsed from $140 to $40 between 1991 and 1993.
• Meanwhile, corporations are shedding their bureaucrats; for example, middle managers, who make up only 8 percent of the work force, accounted for 19 percent of the job losses between 1988 and 1993.

And confidence in government has declined, causing upheavals in recent elections, such as Ross Perot receiving 19 percent of the vote for president in 1992, and Republicans sweeping Congress and a number of state houses and state legislatures in 1994.

Many conservatives and liberals claim that new information and communications technologies require more decentralized decision making and individuality, implying that the big institutions of the past were appropriate and worked well, but are simply outmoded. But there is evidence that the big institutions themselves were the result of a counterrevolution against the competitive, innovative, brain-powered market economy.

For a century, many political progressives, business leaders and intellectuals believed that competition is wasteful and central planning more efficient; too much profit is bad; and labor and capital are inherently in conflict. They implemented these ideas in waves from the Progressive Era to the New Deal to the Great Society, and during wartime.

Their error was assuming that the central problem of economics -- the problem of ignorance, of figuring out what to make and how to make it -- was merely a technical detail, and the solution was to put a few people in charge to tell everyone -- in the workplace and society -- what to do.

The difference today is that we realize that experts never knew and can never know as much as millions or billions of consumers and producers in the marketplace.

Source: Brink Lindsey, "Big Mistake," Reason, February 1996, Reason Foundation, 3415 S. Sepulveda Boulevard, Suite 400, Los Angeles, CA 90034, (310) 391-2245.

RATING CONGRESS ON "THE CONTRACT"

As promised, House Republicans voted on the entire "Contract with America" and sent 95 percent of it along to the Senate. While few items actually made it into law -- stumbling on Senate filibusters, Clinton vetoes and the large number of votes needed to pass Constitutional amendments -- the ideas gained headway.

• The first defeat came on term limits, which didn't gain the two-thirds vote needed to pass the House.
• Congress' budget was cut by 10 percent, or $200 million; laws regulating the private sector were applied to Congress; gifts were banned to representatives and staff; and a new "sunshine" law has forced Washington lobbyists to register in public.
• While a Balanced Budget Amendment failed in the Senate, a plan to balance the budget by 2002 was passed and the timetable agreed to by the President.
• Clinton's vetoes of welfare, Medicare and Medicaid reform left more than half of all federal spending stuck on automatic pilot.

Moreover, despite vetoes that preserved the status quo, the GOP managed to cut $33 billion in discretionary spending -- keeping it below the prior year's level for only the 4th time since 1962.

• The line item veto was passed and signed by the President.
• Although Clinton vetoed pro-growth and pro-family tax cuts, the GOP raised the limit on outside earnings for those on Social Security.
• Senate filibusters stalled the Contract's efforts to reduce red tape, crime and lawsuit abuse -- with the exception of frivolous shareholder suits, which survived a Clinton veto.
• The GOP's tough-on-crime limits to frivolous appeals awaits the President's signature, and modest inroads were made on regulatory reform.

Non-Contract reforms were acted upon also: the telecommunications bill and the end to farm subsidies.

Source: Editorial, "Do-Nothing Congress?" Investor's Business Daily, April 25, 1996.

CONGRESS SHY OF BUSINESS EXPERIENCE

Does your Congressional representative have business experience? Probably not, since less than half of them have ever really worked in the private sector. The career politician/civil servant/attorney is still the rule, rather than the exception.

• Of the 535 men and women in Congress as of January 1995, 129 had spent their entire careers on the public payroll (82 Democrats, 47 Republicans).
• Another 164 (81 Democrats, 83 Republicans) were formerly practicing attorneys.
• Discounting work for a private university or as a journalist, just 172 had ever held jobs in the for-profit sector -- 49 Democrats and 123 Republicans.
• Younger members are more likely to have been involved with business -- 71 of the 123 Republicans with business backgrounds are freshmen or sophomore members.

This lack of real-world experience shows up in the politics of professional office-holders, because members with no business experience tend to favor government intervention when market results don't suit them.

• Most of the 20 or so House Republicans calling for minimum wage increases have little or no business experience.
• And five of the GOP Senators who voted against Medical Savings Account legislation this month also have little or no familiarity with the private sector.
• Legislative lifers have fought against everything from telecommunications reform to bank ATM fees.

Source: Editorial, "Congress' Business Credentials," Investor's Business Daily, April 29, 1994.