Now that communism has collapsed, the most powerful socialist force in the world is the coalition between George Bush and the national Democratic Party. The Washington establishment has learned absolutely nothing from the collapse of socialism. It still ignores Ludwig von Mises and the Austrian School by responding to its worldwide collapse with—you guessed it—more socialism.
In 1928 Herbert Hoover rode the coattails of Calvin Coolidge into the White House, and everyone thought he would hold the line on taxes, for he talked of "individual freedom" and criticized his opponents as "socialists."
As I see it now, there are really two economies—two distinct systems of producing and exchanging wealth. Or rather, two systems that purport to do these things, though only one of them really produces anything, and the other is organized by a peculiar form of exchange.
The first is what is called the trade economy—the one summed up in the phrase "the free market." The other might be called "the tax economy."
Has it occurred to many citizens that, for the few blessed days of federal shutdown, the world does not come to an end? That the stars remain in their courses, and everyone goes about their daily life as before?
Riots in the streets; protest against a hated government; cops arresting protesters. A familiar story these days. But suddenly we find that the protests are directed, not against a hated Communist tyranny in Eastern Europe, but against Mrs. Thatcher's regime in Britain, a supposed paragon of liberty and the free market.
One of the ironic but unfortunately enduring legacies of eight years of Reaganism has been the resurrection of Keynesianism. From the late 1930s until the early 1970s, Keynesianism rode high in the economics profession and in the corridors of power in Washington, promising that, so long as Keynesian economists continued at the helm, the blessings of modern macroeconomics would surely bring us permanent prosperity without inflation. Then something happened on the way to Eden: the mighty inflationary recession of 1973–74.
Ronald Reagan's faithful followers claim he has used his skills as the Great Communicator to reverse the growth of Leviathan and inaugurate a new era of liberty and free markets. Reagan himself said, "It is time to check and reverse the growth of government."
Yet after nearly eight years of Reaganism, the clamor for more government intervention in the economy was so formidable that Reagan abandoned the free-market position and acquiesced in further crippling of the economy and our liberties. In fact, the number of free-market achievements by the administration are so few that they can be counted on one hand—with fingers left over.
Modern liberalism works in a simple but effective manner: liberals Find Problems. This is not a difficult task, considering that the world abounds with problems waiting to be discovered. At the heart of these problems is the fact that we do not live in the Garden of Eden: that there is a scarcity of resources available for us to achieve all of our desired goals. Thus: there is the Problem of X number [to be discovered by sociological research] of people over 65 with hangnails; and the Problem that there are over 200 million Americans who cannot afford the BMW of their dreams. Having Found the problem, the liberal researcher examines it and worries it until it becomes a full-fledged Crisis.
Hosannas have poured in from all parts of the academic spectrum — left, right, and center — hailing the Treasury's draft plan as an approach to the ideal of the "flat tax." (Since the plan calls for three classes of income tax rates, it has been called a "flat tax with bumps.") This near-unanimity should not be surprising, because a flat tax appeals to the sort of academic who, regardless of ideology, likes to push people around like pawns on a chessboard.
