American Progress Vs. Government Manipulation

by

Ed Dedelow

After WWII Americans turned to the needs of their countrymen to make the United States the most productive and powerful nation on earth. Many GIs took advantage of the GI Bill, received their college educations and took their new found knowledge to our industries. In the 1950 and 60s, US products were the best in the world.

Besides being a post-war period, the Great Depression was still a vivid memory for most Americans. Politicians, workers, and business owners feared the prospect of its return. Unions, supported by politicians, and the public became very strong. Unions imposed wage and benefit demands and enacted rules to prevent work efficiency they believed would cause job losses.

Americans took on other challenges as well. The Cold War lead to fighting in Korea and Vietnam, a space race, the development of a nuclear defense force with rockets in missile silos scattered throughout the land, and a fleet of nuclear-powered submarines and air craft carriers were produced. Progress was made in civil rights and environmental protection as well. The Civil Rights Act of 1964 was passed to ensure rights for minorities and women in the work place and their homes, and there was federally-funded action to clean up the air and water. Legislation was passed to force smoke-spewing and water-polluting utilities and factories to remove pollutants. In the mid 60s, however, the Great Society legislation was enacted, which ultimately pushed otherwise productive Americans onto welfare rolls.

By the mid 70s, taxes had increased by nearly 40% and government on all levels began to look for other ways to increase revenue. These means included: tolls to build roads, admissions to public parks and, of course, gambling. Unfortunately, in a time when manufacturers were most in need of capital to meet the politician's demands, the politicians, with seemingly good intentions, pushed investment in other directions. Government enhanced tax incentives for oil exploration and accelerated real estate depreciation.

The result of all this was increased inflation. Moreover, because of the union-demanded cost of living increases in addition to other wage and benefit allowances, our manufacturers became less and less competitive. Foreign manufacturers, on the other hand, put low cost, low quality goods on the shelves for consumers. To counteract foreign competition, US manufacturers looked for ways to cut their costs. The government-increased taxes, regulation, and labor restrictions had left manufacturers with only one avenue: cut quality. Sales of foreign goods, however, continued to increase as the economies of increasing production allowed them to improve both price and quality.

The upheaval in industry brought recessions. Our politicians discovered that real estate often leads us out of recessions and offered more and more incentives for real estate development. Tax revisions occurred in 1969, 1971, 1975, 1976, 1978, and a last in 1981. These acts made bad real estate investments look good and eventually resulted in excesses in real estate development and the bankruptcy of most savings and loan associations in the early 80s. A banking crisis followed later in the 80s.

Most industries had been starved for capital and labor and from 1966 to 1981, the DJIA increased by only 100 points. Inflation rose to over 15%, interest rates rose to over 21%, and unemployment rose to over 10%. In August of 1981, air traffic controllers, who were government employees, went on strike. This act was illegal and violated their contract. Then, President Reagan ordered them to return to work or be fired. When only a hand full returned, the threat of firing was carried out. A signal was thus given that the federal government would no longer interfere with private industries negotiations with their unions. By 1981, many manufactures had already closed down or were in bankruptcy. Those remaining took a hard line against unions, some even imposing lockouts, and the economy began a recovery.

The computer revolution began and the U.S. led the way. The DJIA began a very slow incline and workers were returning to the workforce. It was not until the Tax Reform Act of 1986 that most tax incentives for real estate and other shelters were eliminated. With the 1986 Act, capital returned to businesses and the stock market soared. Unfortunately, politicians in the early 80s were undaunted by the condition of the economy and knowing they could impose no new taxes, passed laws allowing private citizens to file new types of lawsuits, which placed even more burdens on the private sector. Ironically, certain legislation was passed that allowed citizens to sue over low quality--a problem that was mostly created by the mismanagement of the economy by the government itself. By the end of the 80s, tax revenues had doubled and unfortunately, politicians found new ways to spend.

Despite the added burdens on the private sector, interest rates, inflation, and unemployment all declined in the 80s. Businesses were taking steps to assimilate the growing cost of government. Their only choice, however, was to close down or to reduce labor costs. When it comes right down to the nut, a business has two costs: those imposed by government and the wages and benefits it pays to its employees. Only employee wages are flexible outside of fraud and corruption. The assimilation of government cost and the decline in wages actually began in the late 1960s or early 70s as many non-union workers wages did not keep up with inflation. For the unions the real wage decline didn't take effect until the early 1980s, but then it occurred with a vengeance. The cost of government was thus passed, not to the rich, but to workers in the private workforce.

The only area of the workforce generally not affected was government employees, particularly federal employees, but also some on other levels of government. Politicians noted, in the early 60s, that government employees did not earn wages at the same level as those in the private sector. In response, government established inflation plus wage increases. This resulted in government wages surpassing those in the private sector, which created new demands on the government. Politicians on the federal level responded by shifting its responsibilities to state and local governments and imposing more regulation that was to be enforced through private means. In turn, state and local governments passed these responsibilities onto the private sector by imposing non-tax assessments. Labeled as "revenue enhancements," these revenues are not always defined by government as taxes.

Since the 1960s, nearly every recession, business decline, loss in wage and benefits, and banking crisis can be traced to the mismanagement of our economy by politicians. Despite the disasters created by our politicians, many Americans believe that government is the solution and that politicians are better able to make wise decisions than the individual. This is obviously false as is clearly seen when the history of free market manipulation is examined closely. The free market system is the best judge of the needs of the citizens and any government action to alter ROI calculations should be taken only with great apprehension. So much of the growth in government is built in and given the volume of the economy that it controls, major steps need to be taken to resolve our economic problems.

We must stop this growth; we must reduce government's control on our lives.