Alternatives

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This book was written as the author's platform at the start of a campaign for the U. S. Senate. It was not proofed and is an unedited edition.. Her philosophy is contained in the 43 page Prologue and the 38 page Epilogue. In between you will find proposed alternatives to 151 issues the potential candidate believed needed attention. Each solution starts with one page that states the Goal in one or two lines followed by a paragraph stating How the goal can be reached. The remainder of the introduction page lists the Practical Benefits and Soft Power Benefits that would ensue if their commendations were enacted by the U.S. Congress. What the author calls the Background for each Alternative follows the Goal page and runs from one to four pages. The 150 issues covered include accounting practices on Capitol Hill, politicians approach to spending, use of trust fund money, growth of entitlement programs budget, federal agencies, civil service system, government employee pension system and numerous issues involving education, health care, housing, the homeless, social mobility, transportation systems, government monopolies, foreign investments, our manufacturing base, banking, the underfunded FDIC, expansion of laws, our tort system and 131other issues that can be viewed in the three page Table of Contents.

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Content

This book was written as the author's platform during a campaign for a seat in the United States Senate. This is an unedited first edition.

Alternatives

Other books by the same author Everyone's Guide to Financial Planning Social Security: An Idea Whose Time Has Passed The Election Process: A Grassroots Call for Reform The American Deficit: Fulfillment of a Prophecy? The Deficit: 12 Steps to Ease the Crisis Taking A Stand On Health Care Taking A Stand On Housing Taking A Stand On Civil Rights Taking A Stand On Poverty Taking A Stand On U.S. Competitiveness Taking A Stand On Taxes Taking A Stand On Education Taking A Stand On the Environment Taking A Stand On Banking Taking A Stand On Regulation Taking A Stand On the National Debt

Alternatives
Helen P. Rogers

Wellington Publications Carmel, California

Laws, regulations, economic, and social conditions constantly change: therefore, the reader is urged to use this writing as only a beginning to his own investigation. The information presented is believed to be correct at the time of this writing. The ideas presented do not pretend to be original with the author but are gratefully acknowledged as stemming from many publications, audio and visual news sources as well as discussions with colleagues. Although I may be unaware of the origination of many ideas still I would follow the admonitions of the Talmud which says when a scholar acknowledges all his sources he brings the day of redemption a little closer.

First Edition Copyright © 1992 by Wellington Publications
All rights reserved. However the publisher encourages the reproduction in any form and by any means of all or any information in this book as long as the material is not sold or used for unauthorized gain. Notification of reproduction and any inquiries should be addressed to: Wellington Publications, P.O.Box 223159, Carmel, California 93923. Fax #408-624-7994

Library of Congress Catalog Number: ISBN: 0-915915-26-X

Printed in the USA

/ dedicate this book to my husband, Melvin, who supports, encourages and continually strives to bring out the best in everyone, and to our sons so that they will know we tried desperately to make a difference.

Other books by Helen P. Rogers
Everyone's Guide to Financial Planning Social Security: An Idea Whose Time Has Passed The Election Process: A Grassroots Call for Reform The American Deficit: Fulfillment of a Prophecy? The Deficit: 12 Steps to Ease the Crisis Taking A Stand On Health Care Taking A Stand On Housing Taking A Stand On Civil Rights Taking A Stand On Poverty Taking A Stand On U.S. Competitiveness Taking A Stand On Taxes Taking A Stand On Education Taking A Stand On the Environment Taking A Stand On Banking Taking A Stand On Regulation Taking A Stand On the National Debt

Contents
Prologue .......................................................................................................................................................1 Alternatives ................................................................................................................................................15 1 Alternative to the old way of determine revenue.......................................................................... 17 2 Alternative to obfuscation via smoke and mirrors........................................................................ 20 3 Alternative to the $300 billion a year in interest to carry the federal debt ...................................25 4 Alternative to the prevailing citizen attitude toward the federal deficits......................................27 5 Alternative to politicians' approach to govt spending ..................................................................31 6 Alternative to higher taxes as a means of reduction the national debt ......................................... 34 7 Alternative to asking how government can pay for this ............................................................... 37 8 Alternative to the current use by government of trust fund money.............................................. 40 9 Alternative to legislation which ends up hurting our situation more than it helps .......................44 10 Alternative to entitlement programs which grow automatically ..................................................48 11 Alternative to to stealth budgets of earlier years .......................................................................... 50 12 Alternative to the promise of a peace dividend ............................................................................ 53 13 Alternative to pleading ignorance of the budget process.............................................................. 57 14 Alternative to the federal government's use of cash-basis accounting ......................................... 61 15 Alternative to blaming lack of the line-item-veto for the deficits ................................................ 65 16 Alternative to the ever increasing legislative budget....................................................................67 17 Alternative to the explosion in the number of federal agencies ...................................................70 18 Alternative to the uncontrolled growth and cost of the civil service system................................ 74 19 Alternative to the lavish government employee pension system.................................................. 83 20 Alternative to our constantly growing national debt .................................................................... 86 21 Alternative to taxpayers subsidizing the PMA and the outdated REA......................................... 93 22 Alternative to a socialized postal system...................................................................................... 95 23 Alternative to government operated fire protection......................................................................... 98 24 Alternative to Health Plans being discussed in Congress in 1992 ............................................. 100 25 Alternative to rationing health care services; .............................................................................105 26 Alternative to federal mandates to the states.............................................................................. 108 27 Alternative to the high cost of insurance....................................................................................I l l 28 Alternative to the chilling effect of tort law ............................................................................... 115 29 Alternative to expanding the WIC Program............................................................................... 118 30 Alternative to Medicaid.............................................................................................................. 122 31 Alternative to placing health care burdens on employers.............................................................. 126 32 Alternative to Medicare and its lack of nursing home and long care coverage .................................131 33 Alternative to the way government deals with health care providers ............................................136 34 Alternative to hearing only glowing reports about health care in other countries.........................140 35 Alternative to our current dropout program.......................................................................................144 36 Alternative to lack of parental involvement in education .......................................................... 147 37 Alternative to schools that fail to educate our children.............................................................. 149 38 Alternative to our current lack of character and values ............................................................. 153 39 Alternative to illiteracy .............................................................................................................. 157 40 Alternative to underfunded schools ........................................................................................... 159 41 Alternative to lack of quality teachers and self-esteem among our children ............................. 164 42 Alternative to our current system of education .......................................................................... 167 43 Alternative to a national curriculum .......................................................................................... 170 44 Alternative to mandated testing on a national level ................................................................... 172 45 Alternative to busing and forced integration of schools ............................................................ 174 46 Alternative to the notion that everyone knows Head Start works.............................................. 180 47 Alternative to having government create new apprenticeship programs ................................... 184 48 Alternative to complaining that business does not do enough for education............................. 187

49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101

Alternative to schools that teach creative thinking.................................................................... 191 Alternative to erecting new school buildings ............................................................................ 193 Alternative to emphasizing grants over loans to fund higher education ................................... 197 Alternative to smaller classes .................................................................................................... 199 Alternative to extending the school year ................................................................................... 201 Alternative to the high cost of housing...................................................................................... 203 Alternative to the High Cost of Multi-family Construction ...................................................... 210 Alternative to government subsidized housing.......................................................................... 213 Alternative to rent control.......................................................................................................... 220 Alternative to government rehabilitation of real property......................................................... 223 Alternative to the idea that the government has an obligation to provide housing ................... 226 Alternative to following in the footsteps of other countries ...................................................... 228 Alternative to redistribution of income....................................... ............................................. 231 Alternative to the welfare state .................................................................................................. 237 Alternative to the way we determine property..... .....................................................................241 Alternative to government inducements to remain in poverty .................................................. 245 Alternative to AFDC—Aid to Families with Dependent Children ........................................... 247 Alternative to our current approach to our homeless problem .................................................. 251 Alternative to the attitude of doom and gloom ...........................................................................255 Alternative to the lack of opportunity for advancement of uneducated workers ...................... 257 Alternative to mandates on business which inhibit job creation ............................................... 259 Alternative to unemployment compensation via a government program.................................. 261 Alternative to the imperious hand of unions.............................................................................. 264 Alternative to the sacrifice of jobs to environmental concerns ................................................. 267 Alternative to losing jobs to low-wage low-tax off-shore bases ................................................271 Alternative to being the world's "Sugar Daddy".........................................................................274 Alternative to misconceptions about what constitutes a good job.............................................. 277 Alternative to our treatment of disabled in the workplace .........................................................279 Alternative to the present situation where seniors are penalized for working............................282 Alternative to media stereotypes which suggest that all women are alike .................................284 Alternative to forced morality ....................................................................................................286 Alternative to laws that hurt those they purport to help .............................................................289 Alternative to the inequalities in earning power among the races.............................................. 294 Alternative to the poor role models available to youth............................................................... 298 Alternative to quotas and affirmative action .............................................................................. 301 Alternative to being left out of the political process...................................................................304 Alternative to the 1991 Civil Rights Act ................................................ ...................................307 Alternative to crime-ridden ghettos ............................................................................................ 312 Alternative to oppressing citizens with an inordinate number of regulations ............................ 316 Alternative to burdening business with excessive regulations ................................................... 320 Alternative to obtaining so many permits and licenses. ............................................................. 328 Alternative to uninformed assumptions about practices in other countries................................ 330 Alternative to government looking after citizens "for their own good" .....................................332 Alternative to government subsidized transportation systems ................................................... 334 Alternative to sanctioning taxicab monopole. ............................................................................ 337 Alternative to enduring our current airline problems ................................................................. 339 Alternative to heavily subsidized mass transit systems.............................................................. 342 Alternative to business-academia-government partnerships ...................................................... 345 Alternative to tighter restrictions on immigration ...................................................................... 349 Alternative to protectionist policies............................................................................................ 353 Alternative to tax code manipulations ........................................................................................ 358 Alternative to selected areas for interprise zones ....................................................................... 361 Alternative to our failure to invest in infrastructure ................................................................... 364

102 Alternative to agriculture subsidies ........................................................................................... 368 103 Alternative to bashing Japan...................................................................................................... 371 104 Alternative to whining over our manufacturing base ................................... ............................ 374 105 Alternative to being fearful of foreign investment .................................................................... 377 106 Alternative to moaning about our lack of patents...................................................................... 381 107 Alternative to losing global markets based on new technologies.............................................. 383 108 Alternative to the high cost of capital in this country................................................................ 385 109 Alternative to strict regulation of the banking system............................................................... 388 110 Alternative to having a set ceiling on interest rates ................................................................... 392 111 Alternative to the notion that junk-bonds are evil ..................................................................... 394 112 Alternative to propping up the S&L Industry............................................................................ 396 113 Alternative to the rules governing the sale of RTC property..................................................... 398 114 Alternative to restricting the ability of banks to diversify ......................................................... 402 115 Alternative to geographical restrictions on banks...................................................................... 405 116 Alternative to government insured deposits and an underfunded FDIC ................................... 407 117 Alternative to American banking regulations that benefit foreign competition ........................ 411 118 Alternative to the lack of reciprocal treatment for U.S. banks in foreign markets.................... 416 119 Alternative to the way the Treasury Departments sells U.S. debt ..............................................418 120 Alternative to the lack of uniform capital standards for the worlds banks .................................420 121 Alternative to forcing banks to write down assets to present values ..........................................423 122 Alternative to the/Community investment Act.: ......................................................................427 123 Alternative to the expansion Yort law to include lender liability...............................................429 124 Alternative to the expansion of all laws......................................................................................431 125 Alternative to the restriction of capital .......................................................................................434 126 Alternative to accepting the chill put on business via lawsuits ................................................. 438 127 Alternative to using our courts as scapegoating institutions.......................................................442 128 Alternative to our unwieldy and oppressive internal revenue code............................................445 129 Alternative to a tax code which influences the economy so strongly......................................... 448 130 Alternative to the mistaken idea that the end justifies the means............................................... 453 131 Alternative to further increases in the gasoline tax.....................................................................455 132 Alternative to the high total bite from a combination of taxes ................................................... 457 133 Alternative to the immobilizing by the two major parties over tax policy ................................. 460 134 Alternative to public lands.......................................................................................................... 462 135 Alternative to the way the government currently manages national resources .......................... 468 136 Alternative to the prevailing attitude of cynicism ...................................................................... 473 137 Alternative to blaming mankind ................................................................................................. 477 138 Alternative to established forms of energy .................................................................................482 139 Alternative to forcing heavy burdens on certain industries ........................................................ 487 140 Alternative to costly recycling programs...„„„ ........................................................................... 493 141 Alternative to old ways of doing things...................................................................................... 496 142 Alternative to the theory that less is better ................................................................................. 500 143 Alternative to government boondoggles..................................................................................... 504 144 Alternative to government mandates .......................................................................................... 508 145 Alternative to setting safety standards to the "nth" degree ......................................................... 511 146 Alternative to berating scientists................................................................................................. 519 147 Alternative to hasty and emotional regulations .......................................................................... 523 148 Alternative to micromanagement by government ...................................................................... 526 149 Alternative to the old ways of dealing with garbage .................................................................. 529 150 Alternative to worrisome acts by members of congress ..............................................................531 151 Alternative to exempting congress from laws we must live under..............................................535 Epilogue .................................................................................................................................................. 539 Order Forms ............................................................................................................................................ 578

Prologue
I can condense my message into two words: soft-power and alternatives. They are fundamental to our discussion so let me tell you how I came to them. I went first through a series of questions and I believe most people can identify with the answers. What is special about the United States of America? Of course there are 253 million answers but I am willing to bet "freedom" would play a large part in each of them. What is freedom? We would get another 253 million answers but I believe many would include in their definition: " lack of force, fear and manipulation". Unfortunately most would agree we have too much^force, fear and manipulation in our daily iiye^^^o^marry_o^K haye,acteepted , and adjusted^To get rid of th$n we^e^okW^L^^ /jp*S Where does force, fear and manipulation come from? Again a variety of answers, but most would agree the ultimate source is criminals and government. And4-w^rrttCT^tmjuy_^liscus-swft-kcfeT In the United States, government was to protectee- individual from criminals and the Constitution was to proteqtjth"e individuaJ,from government. What's so-special about the United States might initialy T5e-redtreed-te-the-Statefflcnt that1 government was to act as the servant of individuals and not their ruler. How is it then that so many Americans act and think of government as their ruler? How is it then that so many Americans live in fear of their government? At any time in California, a business of any size— even a one-person home-based enterprise—can be invaded and asked to show their written Injury-and Illnessprevention Program mandated by Labor Code section 6401.7. If they are not forth coming they can be hit with a large fine. Guilty unless proven innocent which requires the accused to invest large amounts of time and money. Administrative law enforcement needs no jury trial by peers—trial and punishment are taken care of by decree. Large employers have to be looking over their shoulders constantly fearing law suits by their employees, members of their own team whom they are paying.

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Lawsuits based on subjective views of their motivation in hiring, promoting and firing, monitoring their compliance with a myraid of rules in the workplace such as the new ADA requirements that mandate listening devices for the deaf on office telephone systems as well as requiring special computer equipment for the disabled, specified chairs, VDT screens, heating and ventalation, for breaks, pay and in some places health coverage and pensions. Farmers, without as much as a by-your-leave, have been subjected to huge fines and court battles over protecting their own land, crops and farm animals, over weland disputes and a variety of environmental mandates. I document may of these widespread abuses in my writings. For example you'll read about a resident of Springfield, Ohio who was ordered by his local government to get rid of the troublesome pigeons that had been congregating on his trees. The poison he laid out in order to comply with the demands of one level of government was determined to have caused the death of a mourning dove and two common grackles. The federal government, represented by the U.S. Attorney's office, prosecuted the hapless citizen under the Migratory Bird Treaty. A sixty year-old California rancher, who had lived in the community of Soledad for fifty-seven years, was fined five hundred dollars for holding an unlawful assembly on his own 117-acre ranch. He had invited prospective buyers to view some thoroughbred horses he wanted to sell and he served a $4 barbecue to the 225 people who showed up. He had advertised the sale on a country-and-western radio station and paid the county planning department a filing fee of $ 1,275 for permits to hold his shindig. Total payments to government amounted to $1,775. Apparently an undercover official was on the premises and the next thing our upstanding citizen knew he had been charged with selling food without a permit, lacking proper hookups for toilets, operating an animal sales yard, illegal horse racing and violating the Agricultural Preserve Act. Now add on his attorney fees and time and distress of the court appearances. The regulations were so vague as to prohibit birthday parties in the homes of private citizens. Another California farmer, irrigated (his land was dry, not wet) and his cattle walked through a narrow gate and dragged mud out on

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their hoofs, which understandably eroded the land in that narrow area. He then, also understandably, brought in a couple yards of dirt to fill the hole under the gate and got cited for filling a wetland. What kind of country are we creating when some farmers are afraid to give their names because fear government retaliation. Farm land comes under the control of four different agencies: the Environmental Protection Agency, the Corp of Engineers, the bureaucracy for Soil Conservation and the Fish And Wildlife Bureau and they all interpret laws differently. Enterprising people on a budget of both time and money are m&/ ytu\rpda*forced to spend both in order to gain permission from their government to pull themselves up by their own bootstraps. Nancy Dukes was unable to sell hotdogs from a pushcart because a New Orleans ordinance arbitrarily limited its pushcart permits to two. Not far from my home Myung Chung and his family had been selling flowers from his gas station for a year and a half without a permit. It seems Myung Chung forgot to ask if he could sell flowers. After all, he might have reasoned, "This is America, the land of the free". When he finally applied for a permit after someone told him he was supposed to get permission to sell flowers, he was turned down by the planning department. A hearing was held and a petition signed by ninety local residents was presented to the board members in Chung's support. With all this pressure the board granted Chung a permit to do what he had successfully and harmlessly been doing for a year and a half. After the expenditure of time and energy by lots of people, Myung Chung finally knows how it works in America today. Alfredo Santos was prohibited from operating a jitney service in Houston by a sixty-eight year old law designed to protect streetcars. A "jitney" is really a van, and the service might be considered a cross between a taxi and a bus line. Mr. Santos had a five mile route through a poor Hispanic area where public transportation was inadequate and many residents didn't have automobiles. For one dollar he would pickup and drop off passengers anywhere along the route. Ego Brown quit his government job to be his own boss and hopefully to enjoy the profits of his labor. He found a need for a good shoeshine and filled it. He was so successful in his approach that he

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ended up training homeless individuals to work additional stands. The D.C. authorities shut down his business, citing a 1905 Jim Crow law forbidding shoeshine stands on public streets even though there was every other conceivable form of economic activity going on. Gas station owners, dry cleaners and other chemical based industries are facing stricter clean up mandates. A system of new permits _andjsqiiiiEmenjjo£a£-£^ As many as 150,000 American businesses, from heavy manufacturing to small print shops will have to secure specific EPA permits for every point source of one or more of 191 pollutants. New permits are required for any change in production processes. New products must pass through EPA filters. Zoning and environmental laws mean some people work in constant fear of discovery by the regulators. It's pure insanity to have members of a city council tell a mechanic he can't pull an engine if his business is located on this street but can if he locates one street over, that a business can't post a sign whose dimensions are l0 x 11 but can if they are 9 x 12, a homeowner that he can't paint his house yellow but grey is just fine, a teenager that in order to get his friends to help wash cars after school and on weekends he must get licenses, conform to zoning ordinance, fill out forms he doesn't understand for payroll taxes and workman's compensation for his friends. That a man who has a privatum for $2,000 must pay the city assessment of $19,000 for curbs and sidewalks. It seems clear that there is little freedom here. It must be understood that people are going to do what they want to do no matter how many obstacles are placed in their path. There are laws and restrictions against using drugs and driving fast. But they don't stop behavior. They only punish it. Regulations establish a parent relationship between government and citizens. Incentives for this and taxes and fees for that in an effort to control citizens. Regulations attempt to harness human energy and succeed in making it less productive than it would otherwise be. Energy is diverted to filling out forms, waiting for permission, being inspected and reinspected and so forth. Already the reviews, proposals studies, and so forth, a builder must go through are estimated to add anywhere from $40,000 to $50,000 to a new home in California. Worst of all these wrong-headed policies encourage dishonesty,

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distrust, dislike and disincentives to investment and work. Asa nation we no longer trust or respect one another nor feel we are working together towards a common mission. We are short on soft power and I want to help change this. What I call hard power has dominated the twentieth century. I'd like to see soft power dominate the twenty-first century. Hard power is found in the might of the military and the force of the police state. Soft power is rooted in the spiritual nature of a people. Soft power springs from inner convictions and has to do with character and values. In the nineteenth century this nation had a much larger share of soft power. Alexis de Tocqueville wrote at length about the character, morality and generosity of simple Americans. He told of their sincerity and strength of feeling and wrote that "In no country is justice administered with more mildness than in the United States." We were a more open and honest people. We were not so adept at pretending. Integrity was reinforced in churches, schools and in the home, and yes, it was even found in business. Soft power comes fro^ri^ititin the individuals in a society and cannot be forced. Regulations imposed" by outside forces always invite rebellion. The Internal Revenue Code, with its thousands of pages of cans and cannots is ready made for cheating. There were fifty warnings counted in one bathroom recently, Would people be so stupid as to drink paint, undercook chicken and use electric hair dryers while sleeping unless warned not to do so? Would manufacturers really put less than 10 ounces in a cereal box marked 10 ounces if there were no government controls? Would neighbors have such little concern for one another that they would build imposing offensive structures if it weren't for zoning laws? Would people act dishonestly, selfishly, irresponsibly if Big Brother weren't there? Some people no doubt would—but a minority. And that's what our courts are for—to redress the occasional wrongs rather than oppress the entire population with excessive regulation in order to keep the few in check. To encourage soft power we must turn away from the power of a police state and towards policies that develop character in citizens. I am against forced participation in programs that certain people have designated as community purposes or declared are in the public

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interest. Elitists, under the guise of being communitarians, seem to be most interested in suppressing the decision-making power of individuals. Communities are not homogeneous, they are made up of individuals with countless ideas, needs and objectives, many of which are not shared by even the majority within the group. Our Constitution recognizes that we are all human beings, with the right to live in liberty (which I interpret as free from coercion) and to pursue our own version of happiness. N©>on«--aeriieves Morality ^Dy%«dBgrorce^!7tare responsible. In fact forcing robs an individual of the opportunity to be moral. Naturally, in any society, some persons are not responsible for their own misfortunes, but it is a mistake to excuse resppr^ibilit because of poor environment, drug addiction and'^srth; those who have managed to overcome the same temptations to involuntarily support the weakness of others. There is no need to resort to force. Americans are among the most generous people in the world, and most do not care whether a person is in distress because of his own weakness and lack of effort or because of circumstances which would have been beyond anyone's control. The mere fact that a need exists is reason enough for many Americans to take action. Citizens in America, in larger percentages than anywhere else in the world, help their fellows, but the results are better if the motivation is desire rather than obligation. This unprecedented generosity is part and parcel of our political system. The American ideal sparks in a peculiar brand of freedom; a freedom that entails risk. The American political system anticipated citizens living with uncertainty. Because America's political structure was not a planned economy where security was offered in exchange for regulation, ordinary Americans often found themselves living on the brink of disaster. This bred sympathy for one's fellows; a sympathy unparalleled in the history of mankind. But that was before the emergence of the now co-existent welfare state and its "goodwill by mandate". The old American goodwill cannot be mandated. It is the natural outpouring of sympathy by those who have themselves lived with insecurity and can appreciate its peaks and valleys. But leaders have given in over the years to the temptation to buy

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votes with promises to provide security and to relieve these once unique and self-sufficient Americans from their cares. But as de Tocqueville said, "A government that provides total security for its people, foresees and supplies their necessities, manages their principal concerns, directs their industry, regulates the descent of property and subdivides their inheritiance—what remains but to spare them all the care of thinking, and all the trouble of living." Government programs mean increased government spending and of course this throws supply and demand out of whack; the overhead goes up and the effective use of human energy goes down and so does the nation's standard of living. A free market exists only on paper and perhaps in the hearts and minds of those new converts to capitalism living on the other side of the globe, eager to embrace something we have all but lost. They know full well that money cannot buy wealth that is not produced. People cannot be supported by the government; government must derive its support from the people. The socialists countries have proven this beyond a shadow of a doubt. The current swing away from socialism and towards capitalism that is taking place in Western and Eastern Europe and throughout the old Soviet empire, attests to the inferiority of state-run institutions. Why then is the United States considering the expansion of government as provider of housing, health care, child care, education and retirement security? I believe unless someone argues from principle we will soon embrace universal health care, but I'm afraid the quality of that care will be inferior. There may be long waiting lists for state provided treatment, impersonal services and shortages of medicine, equipment and care providers. Sure, it may work to a certain degree in other countries, but then they have the United States as a last resort. They benefit from our technology. Who will the world turn to for medical advances when we socialize our system? Socialists could not make socialism work and neither can capitalists. No central planners—not even members of our own Congress and all the commissions they can muster, can anticipate the reactions of 250 million individuals to changes in the economy and their environment. I sense we are losing something that I believe it has taken mankind

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thousands of years to attain. Soft power. A precious idea. Soft power. A revolutionary idea. Soft power. The idea that man is self-control-ling and capable of influencing his own existence—the idea that his acts have consequences; the idea that what he does matters; the idea that he has control over his own destiny. This spark—this idea—this soft power—was, I believe, the highest evolution of mankind. But we neglected it—we failed to recognize its worth, we didn't cherish or nourish it and it is slipping away ----------- at least from this nation ---------- and those of us who care should not let it happen without a fight. For centuries it was assumed that an individual lacked power. Unlike most other animals, humans begin life helpless— dependent for years on others for warmth, food and shelter. As new infants they are even powerless to turn over without help. They soon come to realize their nourishment, comfort and happiness come from an all powerful being outside themselves. It was only natural --------------------is natural—to submit to outside control. For our ancestors to sacrifice their healthiest infants, their fairest young maidens and their strongest young men for the good of the tribe, was a natural response to outside control. For thousands of years men were controlled thus by witch doctors, parades of gods and goddesses or divine all powerful rulers. They were dependent and manipulated through fear and superstition. Without awareness of how unique and how precious the idea of responsibility and self-determination really is and without conscious effort to keep it, we too will slip back into dependency, we too will sacrifice as we come to see powers outside ourselves as our only means to attain security and protection. It's not easy to be an American. The hold of the tribe is still strong. Of course there is a matter of degree, but can't you recognize the same philosophy between a family being asked to sacrifice their infant on a burning pyre to placate Molak so that the village would have a good harvest and the many restrictions and demands that are made today on American citizens for the good of the whole? I believe too many people today are feeling helpless. They know they have no input—no power to make a difference—even in their own lives. They see themselves slipping back and begin to imagine that others are getting their share of everything. I'm convinced our huge tax revenue, now over a trillion dollars a

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year—is at the root of our problems. Government is trying to do things that should be left to the people. Americans are paying more now and getting far less. The harder people work the more their bills pile up; the more tolerant they become, the more violent society becomes; the more jails they build, the more prisoners fill them; the more they pump money into social programs, the more the needs increase; the more they spend on health care, the faster costs rise; the more dollars flow to education, the less educated the children; the more birth control information, the more unwed mothers; the easier they make divorce the fewer lasting marriages; the city where the most money and effort per capital is put into the WIC program has the highest infant mortality; no matter how many givers, there are always more takers. We continually pay and pay to have our social ills taken care of. Unfortunately by paying, we put them out of our minds. We also kill the sense of brotherly love we might otherwise feel towards our troubled neighbors. We pay and pay and instead of merely being denied the warmth and satisfaction of interacting with the people that need our help, we see many of our social institutions crumbling around us. I believe the wrong questions are being asked in Washington. Not how should this be done, but should government do it. Not larger or smaller government but is there a different way to govern. Not how much power we should wield around the world but what kind of power. Not how to provide cradle to the grave security but how to boost personal and national potential. Not how to redistribute the economic pie but how to increase it. Not how to make sure results are equal but how to provide opportunity. Not how to care for citizens but how to encourage citizens to care for themselves and each other. Not how to use self-sacrifice but how to use self-control. We are in a new age. The wealth of a nation is no longer based on the extraction and distribution of natural resources. Forty years ago

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seventy percent of the labor force worked primarily with their hands, now seventy percent of the labor force work primarily with their minds. Carnegie and Rockefeller got rich cornering the steel and oil markets whereas Sam Walton and Bill Gates got rich by providing service and new products that didn't exist earlier. In today's world, it is not enough to find a need and fill it ------------------ today's entrepreneur creates a demand by developing something new and better. I mowed lawns by using metal, wood and elbow grease. My kids mowed lawns using gasoline and a little light direction on the power mower. My grandchildren will most likely plant seed that is genetically engineered to grow to a certain height and then stop. Knowledge and technology is the name of the game. The microchip has changed the world. Scarcity today leads to a combination of conservation, substitution or improved productivity. When faced with a shortage of resources, people create more and different resources. We should celebrate our humanity and not apologize for it as so many environmentalists suggest. We alone of all the species on this earth have the ability and have used that ability to develop technology to cure disease, build and create wondrous things. Man has made mistakes, but overall, by using his brain and his innate impulse for good he has made the world a better place. In the 1600s the English feared the forests would disappear because people were consuming too much firewood and so they substituted coal. In the 1800s they worried about a coal shortage and the British economist, William Stanley Jevons, discounted oil as unlikely to have much of an impact on energy. But profit-minded people developed oil into a more desirable fuel than wood or coal ever was. We have 13 years worth of known oil reserves for the world and we've had that amount for the last 100 years. But there will always be those who prefer to scoff at and denigrate man's achievements. The Royal Society of London, the world's most prestigious body of scientists at the time, scoffed at electricity when the idea was first introduced. They claimed it wouldn't work and then feared if it did it was too much power for mankind to handle. Electricity was brought to rural America in the 1930s and relieved the farmer and his family of much manual labor and gave us a new

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problem—an over abundance of food. During the 6,000 years of recorded human history food surpluses were unheard of until recently. In 1910 25 percent of a farmer's land went to feed farm animals—one farmer could only feed 7 people Today one farmer feeds 59 people. At present we have only 4 million horses and mules and it would take 20 years to breed the 61 million that would be required to farm without electricity. A team of horses could plow one acre of land a day, today a tractor plows 35. In 1910 that acre yielded 26 bushels of corn, today the same acre yields 97 bushels. Without modern technology, instead of the four million fanners that grow our food we would need 31 million. Today, using contour plowing, better soil management and windbreaks, we are able to control soil erosion and avoid experiences like the dust bowl of the 1930s. Twenty years ago old carburetors cost $300 and got 12 mpg, whereas new computerized fuel injectors cost $25 and get 22 mpg. A calculator weighed 20 pounds and today it weighs less than an ounce and does more. It used to take 165 pounds of aluminum to produce one thousand cans and now it takes only 35 pounds. The United States produces one third more GNP today than ten years ago with the same amount of energy. My point? It was individual entrepreneurs, not governments, who developed new technology in the United States of America. Entrepreneurs seized the opportunity, made mistakes and many risked and lost their capital on unprofitable attempts. Tens of thousands of hopeful optimistic men and women were free to create without government mandate direction or subsidy. But since enough of them were investigating and risking some of them came upon sound and workable methods and produced what was needed by the public in all kinds of areas. Just before WW II an article was written about inventors and how so many inventions came about accidently and spontaneously. But the author ended by categorizing inventions into useful and non-essential gadgets. He put automatic transmissions, which were seen as a novelty with little purpose, into the later category and chastised the automobile industry for wasting time and energy on foolishness when there were serious things to be done. About a year later, when the U.S. was in the war we were taking a beating in the air and the experts

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agreed that what was needed was a hydraulic clutch in order to beat our enemies in altitude flying. The Germans had tried to use a hydraulic clutch in their altitude engine but gave up the idea, never being able to get them to work properly. Hydraulic cluthches, frivolously perfected in American automobile factories made it possible for our pilots to outfly our enemies. The clutches were also installed in tanks, making it possible to train the operator in hours instead of weeks. Tank operators no longer had to be muscular giants, and could even divide their attention between driving and fighting in emergency situations. More importantly the new tanks didn't have to stop when gears were shifted so were less of a target. The story illustrates how hopeless it is to choose what invention is essential and what non-essential. In the automatic transmission story, mass production of hydraulic clutches could never have gotten beyond the experimental stage or even gotten started except for an open-minded dreamer-type American consumer always on the look out for progress, new products—a consumer that fails to draw lines between necessities and luxuries. About a half a million of these hydraulic clutches had been built before we even entered the war. The difference between here and Germany was that Americans did not have to invent on demand. Americans built those clutches for peacetime use. In America the experimentors and innovators are not confined to the research labs, the proving grounds and the factories. Everyone plays a part and everyone has a chance. It is impossible to draw any hard and fast boundary lines between the top flight inventors, the runners up the amateurs and the everyday users. No such boundary lines have a chance of staying put in America. They are continually shifting back and forth. Today individuals are working on new steel-making techniques which promise to use less energy and emit fewer pollutants than conventional methods. General Electric has a recyclable replacement for metal, wood, ceramics, glass and traditional plastics in the works which can be used for floors, roof tiles, kitchen sinks and other plumbing fixtures. A form of cold fusion—energy that is non-polluting and self-perpetuating is just around the corner. Our future is bright with unlimited promise, if only government will step back and allow people the freedom to create.

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We are now living in a global community where labor and capital are highly mobile. They will seek out their highest and best use—they will go where they are well treated. That's why tax policy is an important determinant of a country's competitiveness. Equally important is brain power. From here on, the wealth of any nation will be closely correlated to the capacity of its men and women to think and the freedom afforded those thinkers by their government. Then it's up to the people to control their behavior and that must come from within. The nation that dominates in the 21st century will be the nation that wields soft power. That is the only way America will or should be #1. The United States of America must first be dominant in soft power. In order for soft power to thrive in this country once again many changes will have to be made in our public policy. Too many of our current policies actually encourage dependence and deceit. It's time for you to decide which vehicle you prefer to get things done. To my way of thinking, by choosing to allow individuals to work on problems you will get the greatest choice of cost effective solutions. But there's an even better reason for preferring private over government solutions. Government must resort to force to get things done. I would rather see persuasion and generosity used to right the wrongs of our society. People who claim volunteerism cannot possibly handle all our problems, fail to recognize the amount of goodwill and the public spirit that is out there; enough to more than makes up for the selfishness of free loaders. I've written about communities where people have come together to clean up parks, beaches, highways, to provide food and shelter and even to pave roads when government funds won't stretch. In the last mentioned instance, of the 408 property owners affected, only 120 contributed. Some genuinely couldn't afford to chip in and of course there were the expected number of free loaders. But others were able to do more than a proportional share and so the road was paved for less money, and quicker than with government. Best of all they created a place where people voluntarily came together to tackle problems in a spirit of community, and such a place is a wonderful place to live. We started asking what is so special about America. I believe

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America is special because of her original emphasis on freedom and the soft power it fosters. I need to find out what you value most. What are your priorities? Freedom is on the top of my list. But freedom entails responsibility and risk. Do you want this? This is the hard question. Would you rather be in charge or do you think government can do a better job taking care of you? Which do you prefer? What do you want? Because as a nation we can go either way. At the moment we are pulling in several directions and going nowhere. There's no sense talking about how we can go about changing things unless there is a consensus on the direction of the change and the reasons for it. That has been lacking in recent years and is, in my opinion, lacking in the programs set forth by some of our current leaders. Some, of course, have articulated their vision and direction for change quite clearly. They think because they advocate cutting the defense budget and bringing troops home, we will see this as a renunciation of hard power. They hope we will not notice that while they weaken the might of the military with one hand, they strengthen the power of the police state with the other. Government is police power— raw force— hard power—and that power is wielded outside the protection of the Constitution at the national level by agencies with alphabet titles like the IRS, EPA, EEOC, NLRB, SEC, FDA,OSHA and on and on at the local level by commissions, panels, supervisors all issuing mandates and imposing penalties for noncompliance. I want no part of their vision of America. It has been tried and failed in other parts of the world. That is why I am so insistent on bringing the debate around to first principles. If you share my vision, if you recognize freedom as the hallmark of this nation and wish to foster its natural consequence ----------------------- soft power-------- then I invite you to continue with the following pages which delineate possible alternatives to our current government policies which, if unchecked will continue to take us further from the American mission. We can check these policies—we can turn them around. The alternatives I suggest will make us #1 in the world of the twenty-first century. We will assume our role as the beacon for the world, the role that has always been the mission of the United States of America.

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Alternatives

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Alternative #1
Alternative to the old way of determining revenue.
Goal: To collect a smaller portion of every citizen's earnings in order to allow
him or her to spend, spread and invest more of it according to individual priorities.

How: By deciding the amount of revenue citizens are willing to allow
government to "play with" and then making government "make do". A change from basing the amount of revenue on "needs" which are limitless and have led to our enormous deficits. A budget might allocate resources to investment, including education and provisions for the poor, without interfering with incentives to efficient production.

Practical Benefits:
1 - We will trim government by trimming revenue. 2 - We will find more cost efficient and less wasteful ways to do what has to be done for the collective good. 3 - More things will be done by individuals, families, and neighborhoods—providing a more personal and caring environment.

Soft Power Benefits:
1 - People will be more in control of their own lives and communities. 2 - People will be able to do more of what they want with more of their earnings to prioritize. 3 - Will encourage responsibility, caring, self-determination.

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Background for Alternative #1
In recent years the proper amount of revenue has been determined by need. However the definition of need is dependent on the legitimate function of government which has been debated for over two hundred years. Taxpayers should decide this is the amount of dollars they are willing to pay for collective purposes—into the kitty: so much to A so much to B so much to C and bureaucrats will have to make do just as wage earners must do. This is not an easy lesson for legislators to learn. In the 1800s Davey Crockett was Tennessee's representative to Congress. One day a bill was presented calling for an appropriation of money for the widow of a distinguished naval officer. The speaker was about to put the bill to a vote when Davey Crockett stood up and said "I have respect for the deceased and sympathy for the widow, but we must not collect money from the taxpayers, one group of people, to give to others to whom it does not belong. This would be an abuse of our power." He then offered to give a week of his pay to the widow if the other congressmen would do the same. Today we have to watch more than members of congress. We have a new entity spending our money. I'm referring to the courts. In Missouri v Lenkins April, 1990 the Supreme Court ruled unanimously that a federal court may order a governmental body to levy whatever taxes may be required to fulfill a constitutional obligation. But congress hasn't reformed. They still haven't learned whose money they are "playing with". Spending choices must be clear. For instance, before spending a million dollars on a bicycle and walking study, what if that sum were equated with something tangible. Ask the taxpayers if they want the study badly enough to take a $50 coat from each of 20,000 Americans. Explain that spending $ 10 million for a highway improvement project is like confiscating an automobile worth $10,000 from 1,000 Americans. Which would they prefer? Get taxpayers to realize that a $110 million loan by the World Bank is the equivalent of taking the homes of 1,000 Americans and handing them to foreign governments. The federal government has been taxing pretty consistently in the 20 percent range and spending in the 21 percent to 23 percent range. Although the federal budget has shown a deficit 30 out of the last 51 years, we thought the widest disparity between revenue and spending had been reached in fiscal year 1986 when that year's deficit weighed in at over $221 billion. Think again! The 1993 budget deficit has been projected to be over $400 billion. It took 204 years to accumulate the nation's first one trillion of debt but

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only 4 years to accumulate the second trillion. The debt ceiling was raised in 1985 to 1.823 trillion and then again in 1986 to 2.3 trillion. But, as was so often said during the eighties, "You, ain't seen nothing yet! " With nobody seeming to care, our elected officials kept spending. In 1990 the ceiling had to be raised to $3.5 trillion but the spending continued so that in 1991 the debt ceiling quietly passed the $4 trillion mark. Our forefathers realized every government is tempted to spend money, but thought the congress would be more likely than the executive branch to keep taxes low. Congress was to give the executive a specific amount of money and the executive was to decide how to allocate those funds. Congress is the body that initiates the law-making process by passing legislation and also has the last word with its power to override any presidential veto. The presidential veto provides an opportunity for a second look and, in keeping with the spirit of checks and balances, was intended as a curb on hasty legislation. Federal tax receipts climbed by 36.8 percent just between FY1983 and FY1989. Compare that with the 19.2 percent rise in real after-tax income per person from 1980 through the first quarter of 1990. It's simply not true that lower tax rates starved the federal government. And as for state and local governments, purchases grew by 30.2 percent nationwide. Members of congress should be encouraged to ask each year if we really need this particular program and if it is vital to the national interest. Government programs should have sunset provisions—no program should be more than five years in length. Maybe it's time to consider what Thomas Jefferson urged in a letter to James Madison on September 6, 1789:
With respect to future debts, would it not be wise and just for that nation to declare in the constitution they are forming that neither the legislature nor the nation itself can validly contract more debt than they may pay within their own age, or within the term of thirty-four years? And that all future contracts shall be deemed void, as to what shall remain unpaid at the end of thirty-four years from their date?.. .We may consider each generation as a distinct nation, with a right, by the will of its majority, to bind themselves, but not to bind the succeeding generation, more than the inhabitants of another country.

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Alternative #2
Alternative to obfuscation via smoke and mirrors
Goal: To be able to see more clearly the true financial situation of the federal
government.

How: Redefine the base line, redefine the definition of "an increase", institute a
capital budget so that government assets and capital spending is taken into account, devise ways to obtain more accurate information.

Practical Benefits:
With a more accurate picture it will be possible to do needed long range planning.

Soft Power Benefits:
When the people and their political leaders have a more accurate picture it will encourage a more responsible attitude.

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Background for Alternative #2
I have a cartoon on my wall showing the "chief statistician" sitting at her computer surrounded by volumes of books and charts and reading a document. The caption reads, "37% of all statistics are wrong." That sums up my feeling as far as statistics go. I use them, because that's the name of the game, but I'm swayed by ideology, never numbers. Many people believe the current accounting practices of the federal government are indeed deceitful. Accounting gimmicks have been used in attempts to meet the targets mandated by the Gramm-Rudman legislation. The push to take social security and other trust funds off budget came to a head at the end of 1990 and the social security trust funds were not used to mask the deficit in the FY 1992 budget proposals. The build up of social security reserves and interest accrual accounted for a phony $70 billion on the plus side of the accounting ledger during FY 1989. If one were to count the Highway and other trust funds over the past 10 years there would be a minimum of $170 billion in concealed debt. This would show more accurately the amount by which our deficit is increasing. Even if each year's budget deficit is smaller— meaning the amount of government spending in relation to government revenue is narrowing every year, still the overall debt owed by future taxpayers continues to increase because of the compounding of interest owed on the national debt, which grows with the addition of any deficit, no matter how small. One Senator made an interesting suggestion which would make the budget process more truthful. He would like to see the term "deficit" redefined as "any increase in the debt." On November 29, 1989 Charles Bowsher, Comptroller General, appeared before John Glenn's Senate Committee investigating fraud in federal government. He recommended that agencies have their own CFOs (Chief Financial Officers), and submit annual financial statements audited by independent auditors. As an example of budget gimmickry he brought up the refinancing of the REA which went on the books as a savings although it actually cost the taxpayers an additional $14-$ 15 billion. There is intentional obfuscation. There are baseline deficits, policy deficits, on-budget deficits, off-budget deficits, deficits which compare last year's spending with this years, deficits that count any increase less than the rate of inflation as a cut, deficits that count any spending less than last year's as a cut, deficits that count the social security trust fund surplus and

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deficits that do not, deficits that include the cost of the war in the Gulf and the savings and loan bail out and deficits that don't, deficits that include government liabilities (in the form of guaranties— loan, deposits, mortgages—and promises which must be kept to pay health and retirement benefits to federal employees or veterans or other entitled beneficiaries) and deficits that don't. And then there is the debt—the accumulation of annual deficits. If you were to count future liabilities of the federal government as debt, you'd get another and even more astronomical figure. The government pays interest which of course means the taxpayers for the use of the social security trust fund. This raises the question of whether those dollars should be treated as income or out go by the government. If the trust funds were kept in a private bank, for instance, of course the interest paid by the government would be entered as a government liability. But since, in effect, the government is paying itself, the interest earned by the social security trust funds is treated as income under intra-government transfers. Of course it skews the deficit figures. The 1990 budget compromise which changed the process for fixing the FY 1991 budgets and beyond, also raised taxes by a minimum of $170 billion and allowed spending to increase by at least $245 billion. Entitlement spending was projected to grow by over $200 billion over the next five years. We got real spending and phony cuts! Budget Director Darman counted the transfer of $5.6 billion of revenue from the Postal Service to the general budget as an entitlement cut. Increasing taxes on banks was also counted as an entitlement cut, as was the provision shifting the time when certain retirement benefits are paid to federal employees. Delaying some student-loan payments was considered an entitlement cut, while agricultural savings were made contingent on the increasingly unlikely completion of international trade negotiations. There's discretionary spending which requires annual approval and nondiscretionary spending which does not require annual approval. People or departments are entitled to the non-discretionary benefits if they fall within the guidelines written into the legislation. Mr. Darman considered the failure to change the 75 percent premium-subsidy in the Part B portion of medicare to be an entitlement cut. Ronald Reagan backed down from his own proposal to lower that 75 percent subsidy by a measly ten percent, making it a 65 percent subsidy. Almost ten years later, when an attempt to lower the subsidy by a whopping 50 percent for beneficiaries with incomes above $125,000—asking them to pay 75 percent of the real cost instead of only 25 percent—going from $31.80 a month to $63.60 a month—how, when that attempt failed, can Richard Darman possibly get away with calling no change an entitlement cut"?

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Mr. Darman is a professional numbers cruncher—his job is to make things tidy—to make them fit and come out on paper "as promised". The elected officials should be the real object of our wrath. Provisions changing direct-loan programs into guaranteed-loan programs are counted as entitlement savings, demonstrating that politicians have failed to learn, even with the on-going savings and loan fiasco, that off-budget spending still costs real money. This latest budget-process reform, by effectively trashing Gramm-Rudman, actually makes it easier for Congress to spend other people's money. Paul Craig Roberts, claimed in a Wall Street Journal article written July 30,1991 that, "Before the budget agreement was reached, the government knew that its claims for deficit reduction would not be achieved. It withheld revised economic assumptions..." I also knew those claims wouldn't materialize; but not because of predigested figures from any budget cruncher's office but because of the nature of the beast—or should I say beasts ------------- our spineless, avoid-the-truth, duck-responsibility members of congress—the ones that unfortunately make up the majority. I've watched them for seven years now and they are pretty darn predictable. The revised forecast was published in the October 3,1990issue of the Wall Street Journal. The "fraud" was praised as realism. Co-mingling the savings and loan bail-out with the operational budget inflated assets as they came under the governments control as "S&L takeovers". Of course their sale counted as negative spending on the books and is not something Mr. Darman is anxious to record. Again, according to Dr. Roberts, Mr. Darman was able "to project federal outlays in 1994 $50 billion below the 1992 level, thus giving the appearance of expenditure reduction. Mr. Darman has managed to produce a larger deficit with a tax increase and a defense build-down than Mr. Reagan achieved with a tax cut and defense buildup." Forget the entitlements for a minute. The October 1990 agreement divided all discretionary (over which they had some choices) spending into three areas; defense, foreign aid and domestic spending. The pay-as-you-go idea was if you wanted to increase children's benefits, for example, you would have to take from workers training or something else within the domestic budget--------you were not allowed to cut aid to Egypt because that would be interfering with the foreign aid budget, nor could you kill a weapon system because the defense budget was to be kept separate. This was to be for the first three years of the five year plan—beginning in FY 1994 congress could transfer goodies from one "cookie jar" to another. Spending is only supposed to increase by 2.6 percent in 1992. The

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FY1992 budget complies with spending limits contained in the Oct 1990 budget accord of $290.8 billion on military spending authority, $21.8 billion on foreign aid and $200 billion on domestic spending programs that are authorized annually. The remainder of the budget goes to interest payments and spending on programs that are distributed by formula, such as social security and farm subsidies. Facts show there has been an 12 percent spending increase in the FY 1991 over the FY 1990 budgets and another 7.4 percent increase FY 1992 over FY 1991. George Bush will have spent in his first term, $667 billion above the Reagan growth rate (if all goes well!). The $189 billion deficit run up in Reagan's last year was considered a catastrophe at the time. Like seeing violence night after night on the television screen, the public has become numb. Everyone on capitol hill is playing what journalists have been referring to as "spend it but don't count it". This time they use "reserve trust funds" because spending out of "reserves" only requires a simple majority vote in the Senate. Any spending not declared in the 1992 budget is supposed to be subject to a point of order. An objection raised in that manner can only be overcome by sixty votes. t doesn't seem fair, but you can see the attraction of the "reserves". Herbert Stein claimed in his 1989 book, Governing the $5 Trillion Economy, that our present budget process fails to allocate the nation's resources well because there is not enough accurate information readily available. Most Americans would agree that allocations are best made by individuals in the marketplace rather than by government. At least that is what other nations, many of whom are now asking for our leadership and advice in this area, have heard us advocate for two hundred years. Hopefully Mr. Stein was not advocating a "planned economy" but that our politicians should take a more long range attitude when dealing with our federal budgets and policy decisions that affect millions of people and perhaps generations.

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Alternative #3
Alternative to the more than '$300 billion a year we're now paying in interest to carry the massive federal debt.
Goal: To use the dollars collected from workers wisely------------------- getting
value rather than throwing tax dollars down the black hole of interest where nothing tangible is received in return.

How:
1 - Start reducing the debt which will reduce the interest. Realize that when we run an annual deficit that overrun adds to the overall debt of the nation. 2 - Prioritize. 3 - Change our representatives who have proved their inability and unwillingness to tackle this problem honestly.

Practical Benefits:
By reducing government spending we will be allowing individual citizens to decide what they want to do with more of their earnings. The greater the variety of ideas and experiments going on in a society the more likely we are to get those tides that raise everyone's ship.

Soft Power Benefits:
It is good and right that people acquire more responsibility for their own lives and for those things that affect their families and neighbors. As we become more accountable we become more caring ---------and creative. We have a chance to excel.

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Background for Alternative #3
The federal government is paying compound interest on the national debt. During WW II interest was below two percent. Now the interest averages three to four times that amount! Richard Darman, direct of the Office of Management and Budget testified before a congressional committee in the summer of 1991 and reported a rise in the national debt for FY1992 "from $3,545 to $4,012 trillion"— an increase of $467 billion in a single year! The increase in interest expense was determined to be $45 billion a year. The projected increased interest on the national debt was greater than the increase in projected revenue. The interest on our national debt, is the second largest item in the budget. Interest is a cost to the taxpayer for which no return is even figured. Interest payments must be made as long as there is any debt. A balanced budget means one year's outgo didn't exceed its revenue and doesn't add anything that year to the national debt. But the interest continues. According to the Congressional Budget Office, the 1976 deficit was 4.3 percent of GNP and in 1989 it was only 2.9 of GNP. So far that has been the highlight of our debt reduction efforts. But every year the debt increases, and the interest compound. That interest now is over $300 billion annually. In the 1980s the Organization for Economic Cooperation and Development (OECD) showed the USA deficit as a share of GNP, below the OECD average. Today among major industrial nations, our deficit as a share of the GNP is smaller only than Italy's. A study of 115 nations, done by economist Gerald Scully, found that a one percent increase in spending by any government resulted in a . 1 percent reduction in economic growth. If you relate these findings to the U.S. economy with a current GNP of over $5 trillion, a one percent increase in spending is equal to a reduction in growth of about $9 billion a year---------- not a trivial sum. But it shrinks in importance when compared with the $250 billion we are now paying every year in interest costs. In fact some people have the annual cost of carrying our gigantic national debt at $300 billion. Interest costs are certainly headed in that direction. Now that foreigners purchase so much of our treasury debt a lot of that interest is no longer being paid back to American citizens and recycled in our economy. If we continue on our present course we will add another $2.1 trillion to the national debt by 1997, crippling this country's future.

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Alterative #4
Alternative to the prevailingJ^ltizen attitude toward the federal deficits.
Goal: To get people to understand the relevance of the federal deficits to
themselves and their children.

How: To provide information on the subject and urge people to become better
informed.

Practical Benefits:
The politicians are both unable and unwilling to tackle the debt, and will be until they realize the people understand the situation, care about the problem and are going to force them to take action.

Soft Power Benefits:
A sense of control and self-respect the comes with taking the time and using the discipline necessary to become informed.

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Background for Alternative #4
The general public can't seem to get excited about a balanced budget— they see no relevance to their own personal lives. Perhaps they'd feel differently if they had seen the study which appeared in the December 1989 Fortune magazine showing a balanced budget would raise the income of citizens by eleven percent in less than a decade. Taxes will grow faster than the income of the average American worker if current law remains unchanged. It is unconscionable to think of increasing taxes on incomes that are stagnant or shrinking! Some economists insist that excessive government spending encourages demand which reduces savings, drives up interest rates and inhibits investment and economic growth. Not long ago congressman Dan Rostenkowski gave the same old rhetoric about leaving the burden for future generations and said that repaying our debt will hurt their standard of living and taunted the "ridiculous economists" who insist deficits don't matter. He was correct in pointing out that deficits do matter in two very important areas: first they affect the cost of capital and therefore our competitiveness and secondly they cripple government's ability to respond to pressing social needs. Representative Billy Tauzin of Louisiana said that it was only in 1986 that congress appropriated more than the president requested. In every other year during the Reagan administration, the congress managed to pass a budget less than the President requested. Neither Ronald Reagan nor George Bush ever submitted a balanced budget. The Federal Reserve Bank of St. Louis published statistics showing the Group of Seven industrialized countries all experienced comparable debt growth in the 1980s. From 1980-1987 Germany's debt almost doubled and the debt of Canada, Japan, England, France and Italy more than doubled! The mystery is who was financing their debt when it is commonly known that the rest of the world was financing Reagan's splurges. Our debt more than doubled during the 1970s and during WW II our debt rose five-fold and we grew our way out after the war with a huge labor force and low interest rates. The average citizen is not serious about reducing the deficit. That' s why education and leadership are needed. What we need today is a public servant like Charles Dawes, first director of the Budget Bureau, who in 1921 ordered every bureau chief in government to save a minimum of 25 percent of his annual budget allocation even if it meant dismissing employees.

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Figures on government spending vary depending on what is included. In the 1950s and 1960s spending by the federal government averaged close to 19% of GNP (gross national product). Starting in 1970 federal outlays rose consistently at a rate of about 1.8 percent per year. Then suddenly in 1979 the spending rate skyrocketed 4.6 percent in one year to 23 percent of GNP. Themid-1991 projection shows we 're now spending in the 25 percent range. People voted for Ronald Reagan in 1980 because he promised to curtail government spending, to bring spending down to the 19 percent range again. But instead spending climbed to 25 percent of GNP and is still higher than federal revenue. We naturally get a deficit when spending is higher than revenue, as it has been at many times in our history. Of course during WW II the government was forced to spend a far greater percentage of the national income. 1945 spending amounted to 42.7 percent of the nation's GNP. In 1940, just prior to WW II, the federal government was spending only 10 percent of GNP. But we can go back even further to a time when the government spent only 3 percent of GNP. In the summer of 1991 former U.S. Senator, William Proxmire told the International Platform Association audience that he put the comparison at a thousand to one for the people appearing before his committee seeking more money and those asking that spending be cut. I've followed this government spending issue closely for several years now and I have no hesitation in stating that over and over the Democrats have initiated costly new programs and overridden Republican opposition to more and more spending. Some Democrats sometimes were willing to raise taxes (also unpopular) to pay for the spending, and in this they were constantly blocked by the Republicans. American voters played one party against the other and got what they asked for—expanded programs without the pain of paying for them— in other words the national deficit. Promises have been made far in excess of assets, which means we are simply deferring the costs to future generations. To begin paying the full costs of government we would have to assess every man, woman and child at least $10,000 in new taxes immediately or begin to to cut back on the public-sector work force. In fact I've heard that assessment put at $20,000. I used to be shocked when I heard such vastly different claims, but not any more. Anyway I know that even if I were to say each person's share was $20 million, and if I were to present statistical proof, it wouldn't phase anyone. Somehow our very real problem has to be brought home to ordinary persons in a meaningful way. Ronald Reagan ran dollar bills from earth to the moon and back. I've heard of advocates who make their point by referring to the number of toilet

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flushes or the number of times it takes to say uh, uh, uh, beginning at the time of Christ. My favorite is to start by getting people to visualize a million dollars— one thousand tightly stacked and rubber-banded one thousand dollar bills which make a stack four inches high. Then on to a billion dollars with those same neatly stacked bills extending 300 feet this time. And a trillion? They don't make rubber bands large enough to wrap around the stack of bills that is now 63 miles high. In July 1990 Representative Joe Barton of Texas tried to make the facts meaningful the day before the House voted on a balanced budget amendment with analogies like: one trillion = 1,000 billion; one billion = 1,000 million; one million = 1,000 thousands. He warned us that every American's share of the debt was $12,000 and that figure has been increasing by $750 every year for the past several years. He claimed the balanced budget amendment would help solve the problem or at least prevent it from happening again in the future. He advised us that the then current $3 trillion debt ceiling was to be raised in August, 1990 to $3.5 trillion; that the debt is increasing at about $150 billion a year, or $12 billion a month or $3 billion a week or $500 million day or $18 million an hour or almost $300,000 a minute or $4,000 per second! Did anyone heed the warning? Did anyone care? Were any steps taken to check this precipitous dash to our own destruction? But we weren't scared and we've managed to exceed all Mr. Barton's direst predictions. A year later we raised the debt ceiling to $4.1 trillion and that debt is now costing close to $6,000 a second. The buck stops here---------- with us ------- with "We the people". And there's no getting around it unless you don't mind passing to your children a country very different than the one you inherited. The point is, none of the illustrations have done any good—debt keeps marching on. On second thought, make that sprinting on! Maybe it's time to put the blame where it belongs. The congress will have an incentive to trim budgets only when the public is ready to take the deficit seriously.

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Alter&ive #5

Alternative to business as usual by our politicians and their approach to government spending.

Goal: Reduced spending by government.

How: Freeze the outgo to the previous year' s budget, increase trade, decrease
regulation, reduce taxes and require a super majority in order to spend.

Practical Benefits:
If the economy grows even with a reduction in the number or rates of taxes, revenue will increase and with pressure from taxpayers our representatives may be willing to retire some of the debt. This would save interest costs. Business as usual would mean spending any new revenue --------------- and then some!

Soft Power Benefits:
If our representatives set an example of accountability and prudence it can be copied by the average citizen and especially our youth who desperately need good role models.

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Background for Alternative #5
A lot of things, including a freeze—keeping government spending down to the rate of inflation—would have cured our deficit problem a few years ago. Our national debt and our spending habit have now gotten too far out of hand for any simple cure. Higher taxes, expanding government, more borrowing are all part of the problem. Any politician who is not all talk, but is serious about the unemployment problem, will cut, not expand government. Why can't congress simply collect a set amount of the national income each year? Many people actually believe that giving the government a set sum and making our elected representatives tailor needs to that sum, as private citizens must do with personal budgets, is the correct way to proceed. Communism failed when it attempted to fill everyone's needs. We're bound to run into problems if we allow taxes to be based on infinite needs instead of on finite revenue. Even if we could limit and define needs, the revenue could not be accurately determined in advance because so much depends on guess-timates of future unemployment, economic growth, interest rates, inflation and so forth. We're a capitalist country which means private consumption has a built-in priority and public needs are restricted and dependent upon their ability to appeal to the private sector producers. Government does not support people after all, people support government. Of course other countries do it differently but where public needs are placed first empty shelves and long lines prevail. Just remember, in a capitalist economy public services are restricted to claims against the private sector. Some legislators believe our economic ills should be tackled through manipulation of our fiscal and monetary policy, increasing trade and decreasing unnecessary regulation. But pro-growth fiscal policy is not controlled by the government and monetary policy is in the hands of the Federal Reserve, which is independent of all control. It was bad enough when government was screwing things up with high taxes and too much regulation but with the deficit, government is now out in the market competing for funds with every single American. What can be done? Congressman Dannemeyer has been saying for years that if we adopted the idea of gold-backed bonds we could save a great deal in interest expense which would take a big whack out of the deficit. Another solution might be an across the board freeze, "pay-as-you-go", caps on spending, automatic sequesters, or the super-majorities now required in the senate to increase spending.

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For too long now our representatives have relied on taxpayers to absorb the cost of providing for one need after another. Politicians seldom ask for restraint. They never seem to consider the possibility that a majority of citizens, if asked, might just care enough about the deficit to take some initiative and begin to prioritize. Responsible people do it all the time when it comes to their own money. People shouldn't forget that the only way government can be "provider" is with their own money. In the past figuring in the state and local government debt has made the total government debt picture look rosier. Now, since local governments must balance their budgets and are raising taxes to cover their deficits, and since local taxes are deducted from federal taxes, the federal government is getting less revenue. That is less revenue than anticipated but more revenue than ever before. Domestic spending rose under Ronald Reagan from $313 billion to $533 billion. If you eliminate debt and defense expenses, total domestic spending for all levels of government, local, state and federal, equaled twenty-five percent of GNP or over $1.3 trillion just in 1989. In 1981 non-defense discretionary spending was 25 percent of the budget and entitlements accounted for 32 percent. Over ten years, defense came down a smidgen to 23 percent of the budget and entitlements at 48 percent now occupy almost half the budget. In the FY 1991 budget, non-defense discretionary spending accounted for 16 percent, and the other 13 percent was earmarked for interest expense. If entitlements are left unchecked they may reach 70 percent of the budget by 1996. Take a budget of $ 1.5 trillion and divide by 300 days and the government spends about $5 billion every working day. For eight years Ronald Reagan tried to kill a number of programs, pointing out that no government program should become immortal. To cut a program in order to trim the deficit just didn't sell. George Bush has added a twist—trim an existing program in order to shift funds to another. The spending caps written into the October 1991 compromise makes this the only way to fund new programs. Barney Frank spoke of Houdini, the famous magician who specialized in breaking out of the bonds others put on him. He told his colleagues that by voting to keep the firewalls in the current budget accord they would be doing a "reverse Houdini"—placing bonds on themselves and then saying, I'd love to fund education, Headstart, the WIC program, the NIH, Health Care and so forth but I'm sorry, I'm all tied up. If we let them burst those bonds the country will suffer for generations to come.

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Alternative #6
Alternative to higher taxes as a means of reducing the national debt.
Goal: Reduce debt, reduce spending, reduce government control over the lives
of citizens.

How: Honoring directive A-76, by privatizing and contracting out, cutting cost
of living increases and reducing department staff. Tax limits and program-spending ceilings could be imposed on all levels of government.

Practical Benefits:
Less money will be needed for interest expense which gives taxpayers nothing tangible for their money. More efficiency in government and more money for citizens to use could result in the expansion of business, more jobs and more prosperity.

Soft Power Benefits:
People will gain more control over their own lives.

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Background for Alternative #6
I'm convinced we've got a problem with government controlling too much of the nation's resources. Besides working for a balanced budget amendment, I'd work at cutting spending, and begin by freezing all expenditures at current levels in real dollars. (Except debt service, of course.) No more colas—cost of living adjustments and if that's too simple and leaves politicians with nothing to do, they could cut 25 percent from each department's budget and return it to a general pool for reallocation according to shifting priorities and emergency demands. Anyone outside the beltway can readily see that turning off the spigot (interest cost) would be the best way to get dollars that are needed in other areas. Cutting spending goes hand in hand with cutting government's control over our lives, and that is what I really want to get at. Next I would look for alternatives to the present way we do things. Contracting-out almost always results in better service at lower costs but does not automatically guarantee lower taxes or smaller government. Without tax limitations or program-spending ceilings, what's to prevent groups from lobbying even private providers? There has to be a well thought out bidding process along with a concerted effort to distribute tax dollars as widely as possible in order to minimize the influence of lobbyists. The tax code and deregulation could be used as an incentive to induce private bidders to provide the services formerly offered by government. In October, 1990 House Minority Whip Newt Gingrich spoke of a poll which showed that 76 percent of the people were opposed to a tax increase and 83 percent favored spending cuts as a way to cut the deficit. I've heard economists worry that the shortfall in state and local revenues will add to the federal deficit. Because states and local governments must balance their budgets they will likely increase their own income and property taxes. These taxes are deducted from federal taxes and so will further decrease federal revenue. Another standby for reducing the debt is a surtax on millionaires. Redistribution of wealth is a game other nations have stopped playing. The focus should be on expanding the pie—not redistributing it. In March Senator Dole told TV personality, Larry King that taxing the top 1% an additional 1% would not help our budget woes much at all. It would net somewhere around $50 billion dollars, or as Peter Grace is so fond of pointing out, would run the country for about ten days. The Senator's objection seemed to be purely pragmatic. To my mind, even if the revenue generated would erase most of the deficit and, as Larry King maintained, would hardly be missed by the very wealthy, still the principle is wrong. Just

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because it would be nice and it works is no reason to "take" from a targeted group. I can not believe it is constitutional, but even more important, I know it is not right! To solve our budget deficits what is the best tax—the tax that would have the least adverse effect on the economy? Friedman refused to speculate, saying all taxes would have bad effects and it is not a profitable use of our time to ask "what's the best way for our opponents to destroy us?" Dan Rostenkowski, the powerful Chairman of the House Ways and Means Committee which writes tax law, says: "Those who say tax increases are unnecessary are the economic equivalent of the flat earth society. They may be as entertaining as Groucho Marx, but they're as irrelevant as Karl Marx. They are simply wrong!" Sadly, many people equate spending with caring and compassion.

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ays

m

Alternative #7 Alternative to asking
how government can pay for this.
Goal: Less bureaucratic red tape and waste, less government involvement in
our lives, freer markets and greater choices.

How: To ask not how government can pay, but rather should government pay.
By encouraging people to lobby their representatives and tell them to adhere to directive A-76. More tax dollars staying in earners pockets.

Practical Benefits:
We will find not only the cost for services will be less but they will inevitably be more efficient if they are brought out into the open. The disbandment of the detailed, oppressive civil service empire and the waste and expensive involved with it.

Soft Power Benefits:
More power, self-control and ability to set our own course. More control by local communities and government as they either take on or hire much of what had previously been bungled by the expensive federal government. More accountability from workers and ability for them to institute many of the reforms they were precluded from attempting by excessive civil service regulations.

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Background for Alternative #7
The problem is not only efficiency, but whether government should be undertaking the broad range of services it now provides via tax dollars in the first place. The question I would like to see asked initially, is whether this is government's role, and then if it is, consideration should be given to ways to have the private sector provide the service. For example government should not be in the business of printing and distributing newsletters. There is no reason whatsoever that the private sector should not handle such a job. Smaller government, free markets and greater choices are important goals to foster, and coincidentally, they are almost inevitably more efficient if government can be made to show its true cost. Government revenues grew from $517.1 billion in FY 1980 to $ 1,091.4 billion in FY 1991. The answer to "Can you top this?" is yes. Government spending climbed from $590.9 billion to $1,445.9 billion. And every tax hike was accompanied by new promises to cut spending. Members of congress vote on every appropriation and the president signs them—they don't "just happen". Members of congress claim their constituents want them to spend. Maybe but not on items like the following: 1) $84,000 study on why people fall in love. 2) $ 1 million to study bicycling and walking and $50,000 for a staffer to oversee the project. 3) $103,000 to see if sunfish that drink tequila are more aggressive than sunfish that drink gin. 4) Half a million dollars for a tribute to Lawrence Welk. 5) $100,000 for research on soybean-based ink. 6) $100,000 to study the sand on Waikiki Beach. 7) $3.6 million on urban-gardening. 8) $205,000 for a theater in Cleveland. 9) $50,000 for seedless grape research in Arkansas. 10) $2.2 million to renovate an officers' club in Midenhall, England which included gold-plated chandeliers, marble fireplaces and solid oak paneling. 11) $23 million spent by the Air Force to develop a fax machine for its special requirements; $33.2 million for the basic contract and $37.9 million for spare parts They were outdated by the time the production decision was made according to Sen Carl Levin of Michigan. 12) GAO says Air Force spent almost $2 billion on sophisticated electronic equipment to protect its fighter planes, only to find that

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most of it doesn't work and has been grounded or left unused in storage bins. 13) $4 million was spent to promote lead based paint. 14) $20 million went to the International fund for Ireland. 15) The National Endowment for the Arts paid to the Downtown Art Company of New York City, $21,000 to put on a show about vampires and female sexuality. One congressman opted for a flight between Detroit and Washington D.C. in a government T-39 which cost $1,578 instead of taking a commercial airline which would have cost $95. All too often transportation has been via military aircraft and when documented, is generally the most expensive item of any trip. In 1985 three out of five House members traveled abroad at least once. The tab amounted to over $4 million, not including transportation. But the trip which triggered a series of publicized investigations was made by a State Department employee and his family who returned to Iowa from an assignment in Uruguay via a 600 mile twelve day luxury steamboat trip up the Mississippi River! There is no doubt in my mind that the spending will end only when we the people decide that it will end. So it's time for action—time to tell congress that we've had enough. It is time to be responsible and take charge of our own destinies and live up to the intentions of the self-reliant people who founded this nation.

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Alternative #8
Alternative to the current Use of trust fund money collected by the federal government.
Goal: To have trust funds used productively to expand the economic pie rather
than financing every day operations of government.

How: The federal government could give trustees authority to invest in state
and local government bonds, especially those earmarked for capital investment like schools, police stations, libraries, drug treatment centers and shelter for the homeless.

Practical Benefits:
The savings would be actually "saved"—that is invested with real payoff realized over an extended period. Using funds for these infrastructure and education projects, as well as research and development, would create and expand jobs.

Soft Power Benefits:
Investments would be closer to the people and they would have more control over their retirement savings and a real sense of empowerment and knowledge that their dollars were actually making a difference that they know about and can see and monitor. We would see a renewed feeling of pride and involvement.

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Background for Alternative #8
As young Americans pay into the social security system the government accrues stupendous liabilities against the day when they will retire and collect the promised benefits. This claim against future taxpayers, according to the Department of Treasury, passed the eleven trillion dollar mark back in 1987 five years ago. Surplus contributions that are paid via the payroll tax are not actually invested as you and I would think of it. By current law the government is restricted to investing in treasury bonds, which in effect means loaning the trust funds to the government to be used for its current expenses. Pay-back day, when those I.O.Us. become due, will be a huge problem. The government will not renege on its commitment but will have to either raise taxes or borrow more — issue even more bonds—to fulfill its obligations to future retirees. I think we should get working on the problem today and not wait until our kids are ready to retire. My first choice would be for the government to trust citizens to keep those payroll taxes in their own hands and invest them for their own future. Another proposal making the rounds is for the government to invest prudently and become a coupon clipper for its retirees. Instead of spending the payroll taxes of workers to run its day to day operations, the government could invest the trust funds in productive America------- company stocks, research and development facilities, manufacturing plants etc. Of course that would amount to socializing the country. The government would soon own or control what was once private property. A third alternative is to have Uncle Sam invest in its own capital projects. Of course this would involve separating the government's capital spending from its current spending. We would have to institute a capital budget. A budget that considers outlays for capital assets as long-term investments and labels them accordingly. I favor a capital budget but government would still confiscate the nation's wealth and Washington D.C. bureaucrats would still decide how to spend it. A fourth choice would be for the federal government to give trustees authority to invest in state and local government bonds, especially those earmarked for capital investment like schools, police stations, libraries, drug treatment centers and shelters for the homeless. The huge amounts of cash could command large discounts. Investments would be closer to the people and they would sense more control over their retirement savings. Those savings would actually be saved—invested with real pay-offs realized over an extended period. The trust funds would be tied to a tangible

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and independent source of funding. The bonds would be secure because of the local government's ability to charge tolls and user fees and its ability to appeal to a local tax base independent of the federal government. Funding would be according to the people's priorities. It would also eliminate the approximately $2.5 billion provided by the federal government as grants to aid local and state programs and most importantly in 1992 ---------------- provide meaningful jobs. Politicians of all stripes should jump at the chance to finance the needs they keep talking about. And baby boomers should see it as the best hope of having something in the kitty when they retire. The opposition would come mainly from those with plans for the trillions that are currently building up in the trust funds. All those grandiose plans ------------- nationalized health programs, subsidized housing, federal welfare and new educational bureaucracies all controlled and funded on a national level—would have to go by the board. The 1983 social security reform raised the payroll taxes significantly, precisely to avoid placing a gigantic burden on future workers. Unfortunately, as it stands now the system is destined to collapse of its own weight. Those widely touted surpluses will be exhausted quickly around 2020 and young workers can reasonably be expected to rebel. Whenever people talk about putting burdens on future generations they are really referring to the social security system. Social security and medicare saddle future generations with unconscionable liabilities. The Democrats are vulnerable because the programs about to cause our children so much hardship are programs Democrats are used to touting as special feathers in their cap. The Republicans can (but they don't dare because it would be unpopular) point to their own warnings over the years that the programs would become too large, too costly and even unconstitutional in the promises they make to be kept by future generations. The more the federal government borrows, the lower the national savings which generally means less capital, less investment, slower growth and a decline in living standards. From July 1990 to July 1991 government, business and individual debt jumped from $4 trillion to $11 trillion—close to $43,000 for every man, woman and child in this country—1.9 times the GNP up from 1.7 times in the mid 1980s and 1.2 to 1.4 times in the fifties, sixties and seventies. Since 1989 the debt load has increased by $2 trillion. The ratio of private nonfinancial debt outstanding to GNP is more than 1.4 to 1—the highest in the postwar period though lower than in 1929 when

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it was 1.58 to 1. On top of that, profits in the private sector are down thanks to the high level of interest payments relative to cash flow which can be traced to the huge volume of borrowing which went to finance LBOs in the 1980s. Corporations increased their borrowing in the eighties and debt went from thirty-four percent to forty-seven percent of corporate capital. Remember the quality of capital equipment cannot be measured by the number of dollars spent. Replacing a typewriter with a computer of the same price may generate more value in services. We should call to task those who talk about any increase in debt without mentioning the offsetting increase in assets. USA production of business equipment in September 1990 was almost seventy-six percent higher than in 1983 and imports of capital goods have exceeded imports of consumer goods since 1987. In the seventies any personal debt incurred to buy property netted handsome results. Unfortunately that experience left the general public with the idea that the purchase of a home should be considered an investment. Personal debt, including home mortgages, rose from sixty-five percent to eighty-four percent of annual after-tax income in the eighties. Homes should not be bought as investments, especially in the nineties. If the borrowing by government is to finance public investments it need not be a sign of trouble. Deficit financing is common and although many government investments may prove worthless, synfuel as an example, most become assets, like highways. Deficit financing shifts the cost of paying for highways to future taxpayers who benefit from the roads when they are completed and in use. Over-indebtedness makes the 1991-1992 recession unique and keeps interest rates high relative to the federal-funds rate. Even though the Fed eased the supply of money, credit doesn't expand unless the banks do their part. Banks have created reserves in an amount not seen since the 1930s. So far the huge volume of unproductive federal borrowing has resulted in deadweight public debt.

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Alternative #9
Alternative to legislation which continually ends up hurting our budget situation more than it helps.
Goal: Reduction in government spending.

How: Balance Budget Amendment with a ceiling on the taxes government at all
levels can take from citizens.

Practical Benefits:
1 - Less intrusive government. 2 - More control by individuals of their own earnings. 3 - Greater choice of solutions to our problems—more likely to find the ones that work the best.

Soft Power Benefits:
1 - Empowerment of individuals 2 - More freedom—less oppression. 3 - Optimism as people feel they count—they can make a difference.

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Background for Alternative #9
According to the National Taxpayers Union, three bills were introduced in the Senate during 1991 advocating spending cuts and three hundred and fifty bills were introduced requiring that more money be spent. Supply-siders have always said that income expands fastest where least taxed. This is borne out by the figures that show earnings above the social security tax cap are growing more rapidly than below. Unfortunately more and more people are expressing a desire to lift the cap entirely and make 100 percent of everyone's income subject to the payroll tax. That ranks right up there in the category of wrongheaded actions along with talk to disallow the deduction of state and local taxes from federal filings. Talk about faulty predictions—in the summer of 1982 TEFRA (tax equity and fiscal responsibility act) was estimated to produce $229 billion which would reduce the deficit to $407 billion, but by December of 1982 that estimate was in a shambles and the projected estimate for the four year period grew by 240% to $976 billion. Anyone who has followed these tries at budget reduction knows that tax hikes and budget accords always lead to larger deficits. The 1990 budget accord which saw Bush go back on his "no new taxes" promise, was supposed to lead to a $500 billion reduction over five years and instead we had the largest annual budget deficit in history with a projected increase in the deficit for FY 1995 of $803 billion. The 5 year deficit projection was $802.8 billion higher in January 1991 than what was projected for those same five years back in January 1990, ten months before the budget accord. The projections were issued at the beginning of 1990 and 1991 and they have changed mightily in a year. In January of 1990 the administration projected a deficit for FY 1991 (ending September, 30 1991 remember) of $3.1 billion, forFY1992of $25.1 billion, and a surplus at the end of FY 1993 of $5.7 billion, a FY1994 surplus of $10.7 billion, and a FY 1995 surplus of $9.4 billion with a total deficit over the entire five years of $62.4 billion. After the October 1990 accord, which got rid of the social security surplus, and the implementation of the new budget process, the following projections were issued by the administration in January, 1991 for those same five years: FY1991 (again—ending September 30,1991) the largest deficit projection ever recorded up to that time of $318.1 billion, of $280.9 billion, another record in FY1992, of $201.5 in FY1993 instead of the surplus predicted in January 1990 for this time period, continued deficit of $61.8 billion in FY 1994 and a $2.9 billion deficit at the end of FY 1995 leaving a total deficit for those five years of $865.2 billion—over $800

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billion more than the five year deficit total first projected. Why does this happen? One reason is that tax hikes slow economic activity and thereby reduce the revenue base. Secondly, when public officials know a tax hike is coming, they make plans to spend it and new and better programs are enacted which generally prove to be more expensive than estimated, resulting in higher debt than ever before. It happens to everyone—it happened to Reagan. In 1981 revenue grew to $82.2 billion but the '82-'83 recession brought zero growth and added to the deficit as did the Fed's tight money policies in 1989 and 1990. The worst thing one can do in a recession is raise taxes! A couple years ago "black box" was D.C. lingo for unspecified but necessary cuts. There was a lot of speculation about the black box used in coming to terms with the FY1990 budget. Twelve percent of the budget and sixty percent of all programs were in that black box. It was rumored to provide revenue from cuts in either agriculture, the administration of medicare or from postal reforms with some people betting on all three. That was the year everyone was watching two minute segments about the budget process on the nightly news as deadlines came and went. There was finally a 2,000 page reconciliation bill accompanied by report of 15,500 pages. Too many irrelevancies and hitchhikers making the bill hardly recognizable The budget compromise for FY 1991 allowed for an 11 percent hike in discretionary spending—twice the rate of inflation. A typical DC cut was illustrated by the so-called medicare cut. Instead of increasing by 11.2 percent the FY 1991 budget settled on a 10 percent increase. Discretionary spending would have grown at a rate of 3.5 percent and thanks to the great budget compromise it would only be allowed to rise 2 percent. Congress has been kicking around a balanced budget amendment since 1936. Such an amendment was attempted in 1982 and failed by 45 votes. It was tried again on July 17, 1990. One hundred fifty-five organizations worked calling the fifty members of congress who were waivering. Representative Larry Craig of Idaho claimed to have 270 of the 290 votes needed to pass the amendment—two-thirds if every congress person showed up for the vote! Actually only 286 "yes" votes were needed because of absences, but even so proponents were only able to muster 279 in favor of the amendment—only 7 votes short! Two thirds of the members have to vote for the amendment for it then to be ready to take to the states for their

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vote. If adopted, the balanced-budget amendment will no longer allow a "voice vote" for spending measures. Article V of our Constitution allows for amending by either congress, with a two-thirds vote of membership which then must be ratified by three-quarters (38) states or state legislatures can petition congress for a change. Over the years there have only been sixteen amendments, in addition to the ten in the bill of rights, that have made it all the way through the process. Thirtytwo states had expressed a desire for a balanced budget amendment, but some have dropped out of that push as of 1990. However, polls show between 70 to 80 percent of the public favors such an amendment. A balanced budget was taken for granted years ago before the 16th amendment allowed the imposition of the income tax. An income tax that was expressly prohibited in the U.S. Constitution prior to 1913. Provision for a balanced budget should have been part of the 16th amendment. There was no need to specify a balanced budget earlier. There were several versions of the balanced amendment presented in 1990. The Barton Amendment was supported by my mentor Milton Friedman. Section I of the Barton Amendment required congress and the executive branch to agree on an estimate of receipts and outlays. Section II capped the debt as of the first day of the second year after the amendment is made part of the Constitution. Section III mandated that the President submit a balanced budget. Section IV said the estimates reached and referred to in Section I cannot increase at a rate faster than national income increases. In other words it prohibits taxes from rising at a faster rate of growth than national income. Section V said Section IV can be waived under declaration of war. Section VI said all items currently known as off-budget expenses must be included in these determinations. Section VII gave Congress the authority to implement the legislation and Section VIII set 1995 as a starting date. Sec. VIII received a lot of criticism from opponents but it made sense because 1995 was the date that budget summiteers targeted for a zero deficit. In July 1991 the Senate Judiciary Committee issued a report recommending a constitutional amendment to compel a balanced budget. Senator Biden wrote, "...the spree of deficit spending by our federal government must be curbed. We cannot continue to run staggering deficits year after year. . . Congress does not have the will to balance the budget."

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Alterative #10
Alternative to entitlement programs which grow automatically by law and currently take 52% of the budget.
Goal: To slowly phase out all government entitlement programs without hurting
anyone who has already come to depend upon them. (For instance, disabled, retired or soon to be.)

How:
1 - Let no new people into the system. Attrition and allowing people to opt out if they wish, will accomplish the phase out. Social security could be funded if the surplus in the current trust fund were invested instead of "used" for the daily operation of government. There is an alternative to the overwhelmed Medicare-Medicaid program which does not even provide for long term and catastrophic care—the most needed and desired aspects of any health proposal. (See pp ) 2 - Let local governments work with private sector groups to focus on those who are incapable of taking care of themselves. 3 - Private sector groups can provide assistance to those who are down on their luck temporarily. 4 - When people realize Uncle Sam is not going to serve as nurse maid those capable but unwilling will be forced to grow up and assume responsibility for their own lives.

Practical Benefits:
1 - Control of the budget again. 2 - A chance to save the country from runaway spending. 3 - Opportunity for our children to work for themselves and their children instead of for us—the generation that went before.

Soft Power Benefits:
People who care will provide focused help without the alienation, impersonal paper work and lines inherent in a large bureaucracy.

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Background for Alternative #10
Mr. Darman pointed to a thirty year trend where the growth has been in mandatory programs which now account for 5 2 percent of the budget. Mr. Darman told senators the new term refers to automatic spending not subject to annual appropriations and consists mainly of direct spending, generally payments to individuals. Mr. Darman showed with charts, the dispersal of all revenue after money has been taken out for defense and interest expenses. Another set of charts showed how core spending (what the founding fathers would have considered to be a legitimate role of government) stayed level over thirty years- how long term investments like spending on infrastructure, capital, both physical and human capital and prevention programs all declined— and how short term investment, like transfer payments or current consumption increased. The Bush Administration made a conscious effort to slant the FY 1992 budget towards long term investments. Congress can't stop spending. It mandates services but makes someone else pick up the tab—in this case the states, but ultimately the taxpayers. States are required to pick up premiums, co-payments and deductibles for Medicare beneficiaries below the poverty line beginning in 1991. By 1995 they will have to pick up the premiums of those living on income up to 120 percent of the poverty line. The 1991 budget compromise provided mammography screening for 18.7 women on medicare (additional estimated 5-year cost of $1.25 billion), regulated medigap insurance polices (added federal penalties up to $25,000) and regulated the prices medicaid pays for prescription drugs (it hurt drug companies but is supposed to save the government $1.9 billion over 5 years), provided more home-care service for low-income frail and elderly (authorizes $580 million for program over 5 years) and expanded help for low-income people in general, all to the tune of $22 billion (supposedly over 5 years).

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Alternative #11
Alternative to stealth budgets of earlier years.
Goal: To get ordinary citizens to recognize who is trying to cut spending and
who keeps putting barriers in the way.

How: Watch C-SPAN and read excerpts from some "in your face"—
"out in the open" ---------- "no holes barred" budget debates.

Practical Benefits:
Maybe citizens will elect helpers for the brave souls who keep getting thwarted in their attempts to cut spending and throw the saboteurs out.

Soft Power Benefits:
Knowledge is power and power is responsibility.

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Background for Alternative #11
Obviously the 1991 budget agreement was a disaster for the economy. The deficit for FY 1992 was to have been $229 billion. A few months later the estimate had risen to $348 billion—that's $119 billion more. We raised taxes by $160 billion over five years but got no debt relief for our dollars. In the spring of 1992 it was estimated that the recession would increase the national debt by another unbelievable $2.1 trillion by 1997. At the hearing in the summer of 1991 everyone expressed disbelief that the debt would have risen $1.5 trillion without the 1990 budget compromise instead of the $1 trillion Mr. Darman predicted at that time. Congressman Panetta, Chairman of the House Budget Committee and came to Mr. Darman's defense admitting he was not alone in pushing for that budget compromise On being reminded that 73 percent of the Republicans voted against it, Mr. Panetta replied (and I quote) "Well that was regrettable, because that's about the only damn good thing we've done in budgeting for a long time." (Scary, isn't it!) The task is straight forward—you have to cut spending; something the Republican leaders on the Budget Committee, Willis Gradison and Bill Frenzel before him, have seen, while Leon Panetta looks concerned, and laments the "hard choices" and finds himself in "dilemmas". He saw pressure growing before the end of 1993 to take defense allocations and spend them on our rapidly multiplying domestic needs. Chairman Panetta freely admitted to a $348 billion deficit anticipated for FY1992, the results of the first year of this new budget accord, and then he assured Dick Cheney that the deficit would be in excess of $300 billion in FY1994. That year is significant as the next time it is possible for domestic spenders to dip their fingers into the military till instead of making those "hard choices" Leon Panetta wrings his hands over but never does. What compromise was there between the Republican administration and the House Democrats in the fall of 1990? There was no reduction of the capitalgains tax, no call for limiting taxes, no call for a balanced budget amendment, and no call for a line-item-veto. Instead there were deficit targets and caps on domestic, defense, and foreign-aid spending, all automatically adjusted upward whenever economic and technical assumptions are found to have been too optimistic. This is a giant loophole and so is the provision that caps can be adjusted upward in an emergency. It would have been far better to adopt the threatened sequester which would have been automatic. All the President had to do was fail to accept the budget compromise advanced by Congress.

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George Bush did say no once, but Congress gave itself enough time to come up with another compromise budget and the president caved in. If only he had had the guts to force a sequester he could have achieved some real spending reductions. President Bush broke his "no-new-taxes" promise in order to cut the deficit. The idea was to trade $ 165 billion of taxes for $500 billion deficit reduction over five years. Mid-way into the first year the forecast for the cumulative deficits through FY1995 doubled to over a trillion dollars. Bush's FY1992 Budget was presented on February 4, 1991 and was greeted more favorably than any budget in recent memory although it called for a 2.6 percent increase over the FY 1991 budget and showed no serious intentions to curb federal spending. It included $22 billion in new spending for social service programs over five years. It slated 250 programs for an increase of $17.8 billion, 109 programs for a decrease of $8.3 billion and expressed an interest in terminating 238 programs along with their3,591 specific projects for a savings of $4.6 billion. Passing the buck to states is just one more variation of the budget shell game. In the battle to pass the FY 1990 budget Bill Alexander of Arkansas wanted to submit a bill to redefine the meaning of the term "deficit". He wanted it to include the federal deficit-not camouflaged by the social security trust fund surpluses. Harold Rogers of Kentucky listed as gimmickry, "complex baseline projections, pay-day shifts, rosy economic forecasts, off-budget accounting tricks, trust fund surpluses to mask the true deficit and so on." Our members of congress talked about medicare payments to health care providers which were delayed two days to produce a paper savings of $500 million. Then payments were suspended at the end of FY1990 for an additional five days and another paper-savings of $2 billion. And those agriculture deficiency payments were moved back to FY1989. Off-budget postal service payments to the Department of Labor for the workers compensation fund were speeded up a few days so that they fell in FY 1990 rather than FY1989. William Ford of Michigan is chairman of the Education and Labor committee which deals with civil service and has, he said, saved $1.7 billion by taking post office off-budget and restricting lumpsum withdrawal of retirement benefits. There were other bookkeeping gimmicks such as moving $850 million in agricultural subsidies into 1989 to dress up the 1990 ledger, cancelling $500 million worth of lost or damaged food stamps and moving the Post Office off budget. Do you get the impression that maybe our elected officials don't give us credit for knowing enough to come in out of the rain. .......................

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Alternative #12
Alternative to the promise of a peace dividend.

Goal: To have citizens recognize the current status of our defense spending.

How: Read pp

Practical Benefits:
People won't be fooled be phony numbers, rosy projections and lulled by false excuses.

Soft Power Benefits:
Understanding should contribute to sound solutions, patience and prudence.

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Background for Alternative #12
With the collapse of the Soviet empire everyone agrees we don't need a massive build up in the area of defense anymore. But the truth is we haven't been building up for years. Defense will definitely be the main whipping boy in all budget disputes from here on, if the congressional hearing held by the House Budget committee on July 31, 1991 is any indication. According to the budget agreement reached in the fall of 1990, for the first three years of the five year plan the three categories—defense, discretionary domestic and entitlements—are required to meet certain targets on their own without dipping into another category. The savings must occur in all three categories separately and individually. But to reach the targets for FY1995 and FY1996, appropriators already have their eye on the defense budget, hoping to cut a little more there to keep from trimming their own areas any further. After FY 1993 the categories can be mixed. Secretary of Defense Dick Cheney testified saying that already 25 percent reductions have been scheduled for the restructuring of our defenses. He reiterated a statement made by Chief of Staff Colin Powell, that we are prepared to take the armed forces down to whatever the American people decree. Dick Cheney told the Budget Committee the plan was to muster out 521,000 military personnel and to put that in prospective he reminded the panel that 540,000 were deployed in the recent Gulf conflict. It's no secret that many people go into the military, or any kind of government service because of the retirement benefits. A lot of people forced to retire early aren't going to be very happy about being pushed out. Even though many of these "volunteers" won't reach their twenty years of service, the Secretary wanted to make sure they are treated well as far as benefits go when they are released over the next five years. That will not be cheap. Pay levels had already fallen eleven percent behind comparable pay scales in the civilian sector. He also wanted to make certain the smaller force that is left is a quality force with good training, good facilities, good equipment, plenty of spare parts, better pay and benefits and with a high morale. About sixty percent of the volunteer force is married which means housing and facilities for children is an expense that can't be short-changed. Secretary Cheney was pretty incensed that congress wouldn't allow any cuts in the Guard and Reserve while taking down one-third of active forces. He had some good points about how they interacted. Besides savings on personnel, instead of going ahead with 23 Trident submarines the defense department is stopping with 18; they're going with

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fewer ships and aircraft carriers than previously proposed—and tanks. They had an inventory of 8,000 Abrams tanks and only lost 18 in the Gulf. I guess they can make do with 7,982 without building more. Cheney tried to hold out for 75 B-2 bombers as planned and I don't see how you can argue with his reasoning. We've invested ten years and $35 billion in developing the B-2 and have 15 aircraft to show for it now. If we spend the other half of the money we get 60 more aircraft. That's like getting a 75 percent discount or getting the first dozen for one price and getting an additional four dozen for the same price. It's like saying buy your first 15 for $35 billion and with the second purchase of 15 they'll throw in an additional 45 B-2s for free! But for better or worse the cutters prevailed. Secretary Cheney had some interesting charts. One looked like a pitch fork leaning against a wall. The handle represented the decline of defense with one prong rising from that decline representing the projected appropriations for ongoing defense technology in outlaying years before the 1990 budget agreement and the downward prong represented the trimming in the outlying years required to meet the targets mandated by that agreement. Another chart showed the decline in defense as a percentage of the national budget from 57 percent in the early 1950s to 18 percent slated for 1997. You'd have to go back to the 1930s to find defense as a percentage of the overall budget that low. As a percentage of our GNP (gross national product) defense took 12 percent during the Korean war, 9.1 percent during the Viet Nam conflict, 6 percent during the Reagan years and is slated to be down to 3.6 percent by 1995-1996. Another chart showed clearly defense spending in relation to other government spending. Over the past ten years defense spending rose 13 percent, domestic discretionary spending rose 187 percent and entitlements rose 448 percent. Another chart showed a rising base line representing the defense budget adjusted for inflation and another almost level line showing what actually was allocated for defense. There was a $410 billion difference between the two lines. There was some discussion about the $4.6 billion requested for SDI~$5.3 billion was requested last year and the administration only received about $3 billion, otherwise the discussion centered on burden sharing by other countries and their contributions to the Gulf War. The Warsaw Pact had 115 Soviet divisions on the German border poised to strike Western Europe which required us to have four and two-thirds divisions in Europe at all times with another five and one-third divisions ready to immediately join them. Now we can get along with half the divisions we felt we needed when the Warsaw Pact was active. We're talking about going from 300,000 military people down to 150,000. When President Bush was asked about a peace dividend in February,

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1991 at an appearance before the Economic Club of New York, he said , "I thought dividends were given when there were profits. We have a deficit of over $300 billion" As to his "new world order", he described it as a revitalized U. N. with tougher peace keeping functions. He explained that the use of the veto by the Soviets in the past has been one reason the peace keeping functions have been so impotent. In the FY 1991 budget proposed by the Bush administration, there was a 22 percent increase for SDI over the previous year which amounted to, as these things go, a mere $4.6 million. The argument used at the time was that we spend $300 billion to defend our interests around the world, but we spend nothing to shield our own land. SDI was considered top priority. It's possible to cut more out of the defense budget but members of congress cry bloody murder when Secretary Cheney tries to close bases, shut down manufacturing facilities and reduce troops in their areas. Congresswoman Pat Schroeder addressed the AFL-CIO at the end of July 1991 and made a big deal about base closings in this country. She won the hearts of the working men and women in her audience when she claimed military base closings were decimating our communities and putting people out of work. She got all kinds of applause and cheering when she asked, instead of closing bases at home, why don't we close bases overseas. Serving on the Armed Services committee in the House, as she does, could Patricia Schroeder really be unaware that 275 overseas facilities have been slated for closure?. In fact 14 percent of our overseas bases are being closed as opposed to the 9 percent slated for closure at home as of July 25,1991 when she was giving her address. The Government Accounting Office has the power to audit the Pentagon but not the CIA. In the Pentagon it found potential savings of $2.9 billion in military intelligence, $1.3 billion in overspending by the Air Force, $1.2 billion in the Navy and $582 million of potential waste in the Army. Congress should realize it doesn't have time and certainly doesn't have the knowledge or even the facts to micromanage everyone else's department.

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Alterative #13
Alternative to pleading ignorance of the budget process.
Goal: To have intelligent informed citizens who will force their representatives
to do what is right. To have a wider choice of solutions because more people understand the problem.

How: Read pp

Practical Benefits:
Maybe will people will become indignant enough to demand change!

Soft Power Benefits:
Forcing accountability on our leaders will provide a good example for our youth.

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Background for Alternative #13
There are probably not more than a dozen people in the House of Representatives that really understand the budget process. The problem is twofold: (1) no one wants to work at anything and (2) in a government where ordinary people are at the helm, no process should be as complicated as both the current budget process and our tax code have become. From George Washington until Richard Nixon's last year in office, presidents had the power to impound i.e. the power to refuse to spend appropriations. The president's power to impound monies was the only way, aside from a presidential veto, that the executive branch could check the otherwise unbridled spending power of the legislative branch. In 1974 congress reformed the budget process and destroyed the impoundment power of the executive. Congress had been trying to weaken the president's authority over budgeted spending for years and years and it succeeded in doing just that with the passage of the Impoundment and Budget Control Act of 1974 when President Nixon was stuck in the mire of Watergate. The legislation was ostensibly to bring expenditures into line with revenue. It established the current budget process by creating the budget committees, the Congressional Budget Office, budget resolutions and the reconciliation process. The Act called for Congress to pass each year 13 different appropriation bills by specific deadlines. Many people say the 1974 Impoundment and Budget Control Act was a power play between congress and the executive. Congress was the clear victor when that legislation passed without a whimper from the mortally wounded Richard Nixon. But if Congress was the victor, the American people were the losers. Our debt has been spiraling out of control ever since. Although cause and effect are not clear it seems plausible that there is more than a coincidence here. Let's get the vocabulary straight. Omnibus refers to the practice of including many smaller bills in one as opposed to debating and passing them one at a time on their individual merits. Omnibus spending practically eliminates the executive role in the budget process. It is the function of a continuing resolution (C.R.) to authorize ongoing programs at old funding levels until new appropriations can be approved. Congress uses C.R.s as a way to give the executive all or nothing choices with no chance to negotiate and compromise as most people believe the framers of our government intended. A continuing resolution (C.R.) assures that there is no cut in programs as you and I know "cut". That is what George Bush meant in his campaign when he told voters that the government tends to make its programs immortal.

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The economy has been growing and adding between $70 to $80 billion to federal revenue annually. If Congress had refrained from additional spending— just frozen its budgets to last year's spending—the deficit would have shrunk by a goodly amount each year during the eighties without increasing income tax rates. Even with slower growth the government collected $53 billion more in 1990 than in 1989. Congress never likes the way the executive decides to divide the money it has authorized. When the press talks about "dead on arrival budgets" it means the congress wants major changes in the president's spending plans and will most likely return a budget of its own design to the president. The Gramm-Rudman-Hollings legislation (named for its sponsors, Senator Phil Gramm of Texas, Senator Warren Rudman of New Hampshire and Senator Fritz Hollings of South Carolina and passed in 1987) refers to an amendment to a measure raising the ceiling on the national debt which called for the reduction of annual federal deficits in stages until no deficit exists. G-R-H targets were never met but each year congress simply amended the law. Every piece of legislation has its loopholes and G-R is no exception. By the terms of GrammRudman, congress was not required to reduce the deficit to a specific level, only to cut its spending by a certain amount. This technicality meant Congress must reduce spending in the fall, but could, by supplemental appropriations, simply spend when it returns in January, what it cut in November. Sequester refers to automatic cuts in the budget mandated by the GrammRudman legislation. The automatic cuts weren't supposed to take effect until October 16th. A $10 billion cushion was allowed on the target amount. Of course the Gramm-Rudman sequester was superseded by the October 1990 budget accord with its three separate categories and their caps on spending. The government shut down because an agreement on the budget was slow in coming in November 1981 at a cost of approximately $65 million in paper work and time lost. It shut down again in October 1984 sending 500,000 federal employees home. During the first two weeks of FY 1986 there were two stopgap measures and on October 17, 1986 as FY 1987 began, the government shut down once again and this time 400,000 government workers were sent home. In 1987, shortly after the 500+ drop in the stock market on October 19th., President Reagan met with congressional leaders in what has come to be known as the budget summit which reversed the sequester in late November. The deadline was met in 1988. Reconciliation is the enforcement procedure of the budget process which enables Congress to enforce the spending and tax priority totals of a budget resolution. In the House ten committees meet separately in an attempt to prioritize and adjust specific programs to budget targets. The vast

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majority of that trillion dollars goes to non-discretionary spending—things that aren't allocated on an annual basis—things that are distributed by the terms of past legislation, and in that group we should include defense spending and the interest on the national debt. The ten committees try and agree on spending cuts in the relatively small discretionary areas. The House had to pass a continuing resolution on September 27,1989 to keep the government running until Oct 25th —one month. That was what most people saw on the TV screens during the nightly newscasts. If President Bush had vetoed the continuing resolutions Gramm-Rudman's often threatened sequester would have kicked in. But instead we had a dreadful display of irresponsibility. It reminded congressman Fred Upton of the 1986 omnibus bill in which members of the House had one hour to look over that gigantic tax bill before voting—a bill that was to affect the lives of millions of citizens. The bill was brought into the House in a box used for xerox paper with the papers held together by rubber bands and string—one pile for the Republicans and another for the Democrats. He remembers (and I do too) how House members came up and riffled through the pages to make certain their special pork was included and that was all the perusal the bill got. Not one person could say he was familiar with everything that was in that bill, but that didn't stop them from voting for it so they could leave town. If the committees couldn't meet their goals and the process had to go to sequester that would have meant dividing what turned out to be a $16.1 billion cut equally between defense and non-defense discretionary spending. In effect that would have meant a five percent cut in all proposed increases in nondefense discretionary spending (remember the previous years' spending heights are always guaranteed again by the continuing resolution) and because of the larger base of defense, a four percent cut in defense. Defense was not due for any increases anyway. "Non-defense discretionary", also called "domestic discretionary", refers to non-defense programs that require annual approval by Congress. The FY 1990 budget contained almost $200 billion worth of non-defense spending which legislation directed Congress to cut back until the FY 1990 Gramm-Rudman targets were met; i.e. reduce by $8.5 billion. Entitlement programs such as social security, government pension payments and safety nets for the poor are not discretionary (do not require annual approval )and were exempted from cuts. That accounted for the relatively small portion of the more than $1.2 trillion budget which was left to the discretion of Congress. Because Congress failed to exercise its discretion in a timely fashion over the entire budget, much of that discretion was lost.

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Alter^ve #14 Alternative #14
Alternative to the use of cash-basis accounting. federal government's

Goal: Shift to a capital budget and generally accepted accounting principles
(GAAP).

How:
1 - Elect people to congress who understand the problem. 2 - Lobby your already elected representatives.

Practical Benefits:
At least it will provide a clear picture of the problem.

Soft Power Benefits:
It will give those who are battling the chronic spenders some hope and encouragement.

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Background for Alternative #14
We'd like to think if the general public had all the facts it would act rationally and preserve the politicians (and the nation) from both themselves and the influence of powerful groups vying for an ever bigger piece of the economic pie. Unfortunately we can't test this premise because there are presently no accounting and reporting systems in place to accurately inform the public, or the politicians for that matter, about the financial health of the nation. That's where a capital budget comes in. The idea is to separate the federal budget into two components; an operation budget, much like a private firm's profit and loss statement, and a capital budget, similar to private industry's balance sheets. This would give a much clearer picture of the true budget (and deficit). Borrowing to finance investments would be out in the open where it could be fairly considered. Right now the federal government doesn't follow generally accepted accounting principles (GAAP); it uses cash-basis accounting although it prohibits publicly traded corporations from doing so. In 1975 the federal government even predicated bail-out loans to New York City on that City's changing to accrual-basis accounting (GAAP). The 1988 reconciliation bill even barred large farms from using the cash method of accounting. Things look a lot different if we used GAAP. For one thing GAAP would show that in some instances the Reagan administration deficits were lower than those of the Carter administration. According to New York Congressman Joseph DioGuardi the cash basis deficit of President Carter's last year (1980) totaled $93.5 billion, whereas the estimated GAAP deficit for that same year was a whopping $408.3 billion. Ronald Reagan "took the heat", as the Congressman put it, for the rise in the cash basis deficit from $93.5 billion to $185.3 billion whereas under GAAP the deficit actually declined by almost $75 billion, from $408.3 billion to $333.4 billion. Mr. Carter's total estimated GAAP deficits over the 1977-80 period were $56.5 billion higher than Mr. Reagan's total for 1981-84... .A significant portion of Mr. Reagan's cash-basis deficits were actually the liquidation of liabilities incurred by the Carter administration, but whose costs were not recorded at that time because of the cash-basis system. President Reagan spent more on capital items whose cost should be amortized over a period of years than did his predecessor. Under accrual accounting (GAAP), used by all publicly-held companies, revenues and liabilities are put on the books as they are earned or incurred, rather than when the cash actually changes hands. A properly implemented capital budget would transform the budget process and

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officials would have a very much improved accounting, reporting, prioritysetting and fiscal-policy tool providing a more accurate reflection of all government liabilities. Cash-basis accounting treats huge investment expenditures whose value is in the future as current expenses. It then disregards anticipated loan defaults, recording only net-losses on loans, ignores accounts receivable and accounts payable, provides no reserves for bad debt, treats the sale of assets as income and fails to depreciate capital assets entirely. Of course it is difficult and results are at best highly speculative when it comes to evaluating assets and calculating future liabilities. It is impossible to plan intelligently under a cash-basis system. Everything may look like it is in tiptop shape because future liabilities are ignored. One accounting firm estimated by failing to use GAAP sixty percent of the true 1984 deficit was hidden because unfunded Social Security liabilities were excluded. Senator John Danforth admitted publicly that the Senate in 1986 had been looking at "phony numbers"—andknew it! Senator James Exon told his colleagues in March 1987 that "We knew last year's numbers were phony...Let's get honest with ourselves." If honesty is what they're after you might think that the good Senators would be in favor of a capital budget (GAAP — accrual accounting) but that is not necessarily true. Senator Paul Simon joined with Senator Exon at the Budget Mark-Up Committee (March 1987) to vigorously denounce accrual accounting. The argument was that since the system is already prone to vast overspending, cashbasis budgets allow more control. If accrual accounting was adopted, the determination of whether outlays are placed on the capital or operating budget would be based on political considerations. Imagine, if you will, politicians falling over one another in an attempt to have their pet projects classified as capital outlays so they will not have to be paid for by current taxes and would not ostentatiously add to the deficit. Such a classification could mean the difference between acceptance or rejection of a program. One could easily argue that more spending on education is an investment in the future; that agricultural subsidies are a long-term investment in a way of life and certainly environmental issues fit the bill. Under cash-basis accounting no financial statements are available for citizens to judge the actions of officials and under accrual accounting an official may have been replaced by the time his deeds are discovered. But as Senator Paul Simon said so often during the 1988 presidential campaigns, I know we can do better than this! We need uniformity and more openness so that better informed choices can be made. Although special Analysis D of the federal budget separates

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investment and operating outlays, it is only used as information, having no policy significance of its own. We have nonsense like oil and gas leases, categorized as "offsetting receipts" and treated as outlays instead of revenue. We can't expect miracles from accounting and procedural changes in the law, but changes may make costs more visible and thereby provide an opportunity for more effective management of federal budgeting. Cash-basis reporting and budgeting largely ignore depreciation, accounts payable and other long-term costs making it easier for officials to adopt programs that provide benefits up front without providing funding until years later when the appropriating official is long since gone. The Reagan administration should have push harder for the enactment of accrual accounting (GAAP). But no elected official is anxious to have American citizens, let alone the rest of the world, take a look at what would be at least a doubling of our debt in one fell swoop through a change in accounting methods.

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Alterative #15

Alternative to the President blaming congress or blaming the absence of a line-item-veto for the deficits.
Goal: Cut spending and trim unnecessary pork.

How: Rely on Article 1, Section 7, Clause 3 of the United States Constitution.

Practical Benefits:
1 - The courts may rule that this is a viable alternative to a line item veto. 2 - At least the problem will get some attention in the media. 3 - The president can be said to have made an effort in the right direction and may get more people to climb on the band wagon if they think the executive branch of government is finally serious.

Soft Power Benefits:
The country is yearning for leadership. Leaders who say one thing and do another disillusions people—especially young, impressionable and naturally idealistic people. Putting hypocrisy aside would be a step towards inspiring the best this nation has to offer to realize their potential—strive for their dreams.

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Background for Alternative #15
Ronald Reagan talked a good game but he used the veto less than any president, at least in recent history. There is reason to believe that when writing the Constitution, Madison was aware that congress might try to escape a presidential veto by the use of omnibus legislation, as they are doing today, and he provided a remedy in Article I, Section 7, Clause 3. There the President is given the power to veto "orders, resolutions and votes" which have already been approved by both the House and Senate. In his first 16 months President Bush vetoed eleven bills. But no president has ever used the veto power except on bills. Even though he was constantly urged to do so, Ronald Reagan never launched a test case, and although George Bush has seemed ready for the challenge on several occasions he still hasn't made a move. . Because of conservative learnings of the current high court there will probably never be a better time for a test case as far as the executive branch is concerned. In 1988 Senate Minority Leader, Bob Dole wrote a letter to the Wall Street Journal saying how at the beginning of every congress since 1977 he had introduced a bill giving the president the line-item veto—to no avail. In 1988 he decided to go along with those constitutional scholars who have been urging presidents to act as if they have line item vetoing power and force the congress to test the constitutionality of the action in court.
"We have a budget disaster on our hands. From 1980 to 1988 the federal debt has grown from $9085 billion to $2.6 trillion. Americans now realize that time is of the essence in solving the budget mess.. .The spectacle of the president having to veto hundreds of pages of good legislation to eliminate a few unwise provisions is an exercise in poor government and, if the Constitution is to be believed, totally unnecessary. . .let the courts help blow the whistle on the congressional pork-barrel game."

Senator Dole saw "disaster" in a debt which rose a little over one and a half trillion over eight years and four years later we've added another one and a half trillion. $2.6 trillion to a debt ceiling currently of $4.1 trillion looks like we're accelerating the debt spiral at double the previous rate. We're spinning out of control twice as fast as when one of our most powerful senators called the debt a disaster. I see why you're so frustrated—no one's listening—no one seems to be out there. H-E-L-P! This should make you sit up and take notice: Debt grows at $6,000 per second! Now tell a friend and ask him to repeat it and maybe we can do something about this mess before it's too late.

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Alternative #16
Alternative to the ever increasing legislative budget. Goal:
reduce the money spent by congress.

To

How:
1 - Reduce staff, reduce perks, reduce salaries, reduce pensions, reduce the number of committees and overseas fact-finding junkets. 2 - Cut back on the amount of paper work and research that is so nonchalantly requested and which everyone knows no member of congress is capable of digesting. 3 - Be innovative and use technology. 4 - Staff should not be used to keep constituents warmed up with re-election in mind. 5 - Staff should not be used to generate work which the member of congress does not have time to tackle on his own. We elected a representative and not myriads of hired unaccountable hands.

Practical Benefits:
The national debt will not grow quite as quickly. The congressional image may start to heal.

Soft Power Benefits:
Tolerance, forbearance, hope and generosity may be strengthened in ordinary citizens. As for members of congress we would hope to see renewed determination, accountability and honesty.

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Background for Alternative #16
Since 1946 the legislative budget has ballooned by 3,000 percent. The CPI —consumer price index, better known as the rate of inflation—in contrast, increased by 500 percent. What was $ 131 million in 1960 became $2.24 billion by 1990—an increase of 1,709 percent. Estimated budgets for 1991-1992 are even higher—$2.55 billion and $3 billion which is the equivalent of $5.6 million per each congress member per year. There are cooks for subsidized cafeterias, beauticians for subsidized beauty parlors and barber shops, technicians for personal recording studios, travel agents for congressional trips, mail carriers to deliver taxpayer-funded mail as well as the usual support and committee staff. In the FY 1992 budget the congressional leaders asked for a 28 percent increase in their legislative budget or $500 million more than last year. The executive branch has only a ministerial role, with no discretion over the funds slated for congress. Nevertheless Mr. Darman gave a courtesy phone call to the leaders and asked if the congress wished to go on record in this time of belttightening and sacrifices, as appropriating a 28 percent increase for themselves. He reminded them the rest of the budget was only getting a 2.6 percent hike. They trimmed the request to a 20 percent increase. A lot of legislation is drafted by unelected staff, supported by a network of lobbyists. Members of congress get re-elected by performing services for their constituents, or having their staff perform the required service. Staff plays a huge roll in their re-election campaigns. Staff also writes letters, makes phone calls and does the work and pressuring of the executive branch of government. The Pentagon receives 2,500 phone calls every working day and 100,000 letters per year from the offices of members of congress. HUD—the Department of Housing and Urban Development—in 1986 and 1987 received an average 2,425 phone calls per month. Most calls were by staff applying pressure to benefit the constituencies of a specific member. Federal tax revenues grew 3.3 percent annually above inflation. This additional revenue amounted to $254 billion— after inflation— but even that was not enough for our spendaholic congress. The November 1990 budget accord asked for $165 billion more from tax payers despite the fact that the federal government was already receiving $85 billion more than the year before. Congress boosted spending by $96 billion and then the Bush administration wanted to increase domestic spending 3.9 percent above the rate of inflation. More spending means larger staffs, more prestige, more power, more benefits and higher pay for bureaucrats. Altogether congress added $14 million to congressional committee coffers and added even more employees to the 37,388 staff already on

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capitol hill. 81 staff members were making more than Senators before the Senate voted itself a pay raise in the summer of 1991. As for the 46 senators who opposed the $23,000 pay raise, only ten had definite plans to return it to the treasury or donate it to charity. Why should they? I don't think it is hypocritical for members who voted against the pay hike to now accept it. In fact I doubt the motives of those who ostentatiously go "above and beyond" often hoping their virtue finds its way to the media's ear come election time. Congress has been busy boosting its own operating budget. For instance, Senator Claiborne Pell, chairman of the Senate Foreign Relations Committee budget managed to finagle $345,000, up seventeen percent in one year for his committee and added eight members to the existing staff of fifty-nine. His committee brought non-recurring funds already approved so actually the increase amounted to seventeen percent even though on paper it looked like a two percent increase. On February 22,1991, Senator Nunn's committee requested increases beyond the normal cola (cost of living increases) amounting to 14.2%. Senator Reigle's committee wanted an increase of 34%, Lloyd Bentsen went on record for a 25.3% hike and Hawaii's Senator Innouye asked for 37% or $372,000 for the committee on Indian Affairs. They actually received 2%, 8.6%, 24.4%, and 21.4% respectively. Henry Gonzalez in the House asked for 25%, John Dingell for 14%, Morris Udall for 34%, Robert Row for 21%, Les Aspin for 33.5%—7.2%, 14.5%, 17%, 10% and 19% is what they got. Representative Dingell already had 142 staff people on his Energy and Commerce committee. These increases came after the budget accord which was billed as the mother of all agreements to slash spending and control the deficit. It didn't slash anything but it did raise taxes. What kind of message is this after a major tax increase? On February 21,1991 Senate committees received increases of $5 million above the already appropriated $53.4 million. The House, not to be outdone, on March 20, 1991, increased its budget by 10.8 percent to $55.1 million plus an additional $ 5.7 million for House information systems. Perhaps significantly, Ethics and Intelligence were the only committees not to get an increase.

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Alter^ve #17 Alternat^^^ #17
Alternative to the number of federal agencies. explosion in the

Goal: To cut sending and bureaucracy while improving the quality of government services.

How:
1 - Institute a hiring freeze. As current employees leave the agencies will contract naturally. 2 - Make projected 5 & 10 year budgets showing $$ will decrease each year so administrators can plan accordingly. 3 - Change funding to reward thrift by allowing savings from one year's budget to be carried over to the next to be used for special projects or short falls. 4 - Encourage and help the private industries served by these government bureaucracies to assume many government function, to police themselves and provide to their members services formerly provided by government. 5 - Duplicate many of the successful examples originated by efficiency experts and now being used by local governments around the country.

Practical Benefits:
1 - Allow dollars and people to find more productive uses. 2 - Lower the national debt and "black hole" interest expense. 3 - Generate greater appreciation for government employees.

Soft Power Benefits:
1 2 3 4 5 - Lessen the immoral debt one generation is passing on to another. - Encourage more self-regulation and trust. - Foster responsibility. - Lessen paranoia. - Promote a sense of freedom and self-determination. People will feel less like they are being abused by government and will be more likely to take an optimistic and constructive supporting role.

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Background for Alternative #17
Government provides incentives for its own expansion. Public employees receive big boosts in both pay and prestige when their budgets and staffs increase. And voters don't protest because they benefit from the public trough when it is filled with funds plundered from others. The Center for the Study of American Business at Washington University in St, Louis found that the federal regulatory staffing for FY 1992 w4U-surpassone high-water mark set by President Carter's administration in 1980. More than 122,000 people are watching over us. The FDA has been zealous about turning grocery labels into lectures on good eating habits and slow to approve drugs for life-threatening diseases. The EPA now taj±Bi38% of the entire regulatory budget up from 15% of an immensely smaller total in 1970—included in the increase is a 70% increase in the Army Corps of engineers since 1985. Finance and banking also gets a larger share of the regulatory budget than it had in 1970. Staffing at the Farm Credit Administration, the agency that cost taxpayers $4 billion to bail out in 1985 is back with twice the number of staff. The SEC has increased its staff by 25% although the number of industry workers it seeks to oversee has decreased dramatically. The Commodity Futures Trading Commission only gained an 18% increase in staff. RE A still spends $2 billion a year even though most of the country has been electrified. The SBA costs $467 million per year—even though 99.8 percent of small businesses do not use it. Rarely is a program eliminated. Federal employees increased from 2.77 million in 1982 to 3.09 million in 1990, up twelve percent, with 100,000 added in the last year alone! If you wonder where the extra gas tax dollars are going—regulatory personnel at the Federal Highway Administration increased 170% just since 1985! When the Republican's briefly had control of the Senate they may a bold bid to get rid of 13 agencies and cut everything in government five percent across the board. The vote was close ----------- 50-49 with Pete Wilson being wheeled in on a gurney to cast the deciding vote. But Ronald Reagan failed to back up the Republican Senators and six of them were not returned to office for their bold stand. Opponents told the voters "This is the slob who wanted to take your social security. Medicare was set to increase by 11 percent in one year and the Republicans tried to contain the increase to 10 percent and they were accused of being hard-hearted. As Wyoming's Senator Alan Simpson likes t tell it: seniors were interviewed on TV by sympathetic reporters and asked "What's going to happen to you now, sir?" and they replied, "Oh I don't know. I guess I'm going to die." "Oh, well sir,

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thank you very much and God bless you." When a ten percent increase is called a cut we're all in trouble. The ordinary citizen is constantly being duped. Bureaucrats seem unable to make intelligent decisions. Few would disagree that the federal government is downright inept at management. Many programs are duplicated, many are not jobs for government and may even stand in the way of private solutions. The Grace Commission discovered that none of the 2,000 Veterans Administration employees could be dismissed without first obtaining congressional approv Bureaucrats mismanaged Indian trust funds to the tune of $2 billion, deducting $1.2 million just for accounting mistakes. The Bureau of Indian Affairs has little idea where its money comes from or where it goes. The Grace Commission discovered back in 1983 that there are few if any inventory controls (useless spare parts and secondary parts tripled in the 1980s to $29 billion), little internal controls (HCFA pays $1 billion a year erroneously for medicare expenses) the government can't monitor its loans (default rates at FHA alone were over $4 billion in just FY1988!) and the IRS has $57 billion in delinquent taxes it can't collect. Overall the government has $316 billion in receivables with one quarter delinquent. The government has trouble paying its own bills on time and has racked up $300,000 or $400,000 in late penalties annually. Many government agencies don't have a prayer of balancing their books. Washington requires auditing of publicly traded companies but exempts itself. Representative John Conyers of Michigan (Chair of the Government Operations Committee) sponsored a law which would give each of the 23 major government agencies its own CFO—chief financial officer. Jamie Whitten of Mississippi led a faction of House Democrats in opposition to the CFO with the intention of denying them the $100 million in needed funding. The General Accounting Office costs over $350 million and has 5,620 employees with all but 800 dedicated only to investigations and audits. Their reports become part of the public's data base. Employees are loaned out to the Congressional Budget Office and Joint. Tax Committee and at the equest of any committee chairman. Because for over thirty years all the chairman in the House have been Democrats, it has been suggested that the GAO has become partisan. In the summer of 1991 congressman Dingell claimed the GAO was saving the taxpayers $14.5 billion and was incensed that the Republicans should challenge its integrity. * ~ The Culture of Spending, written by Jim Payne claims that since the r^y beginning of our government the executive has been required to report

r

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administrative actions, implementation of laws and national problems to congress. Of course the number of reports grew over the years. In 1963 600 reports were required; in 1980 that number had risen to 1,400. We' re talking about reports required on a repeat basis—annually, quarterly, etc. In a typical year 500 to 1,500 specific one time reports are also produced. This led to the passage of the Congressional Reports Elimination Act of 1980 and the Congressional Reports Elimination Act of 1982. Instead of reducing the number of reports as hoped, in 1985 2,800 reports were filed. So in 1986 another reduction act was passed and as a result by 1990 congress was requiring 3,000 recurring reports a year at an estimated cost of $350 million. Then something untoward occurred. In an attempt to get serious and mandate just what reports would be abolished, members of congress actually began to read the reports. Amazingly they discovered these reports had value. Now they're requesting more than can possibly be read. Reports were submitted as early as 1981 which told of over-charging, fraud and unsound loans and detailed ways to prevent the documented abuses. But because there were thousands of other reports to read, congress didn't pay any attention. Newspapers led the way with the reported scandal eight years later. One senator said, "When you're working with a trillion-dollar budget, with 100 different agencies and cabinets, (you) can't overview each of these agencies." That is my point exactly! What better argument can be made for less government. That was what was wrong with Michael Dukakis—his penchant for micromanaging. It wasn't the Willie Horton ads that did him in, it was his efficient conscientious accountant approach to government. We—the American people--------- know better. Senator Rockefeller is going to take a few more years to get all the details correct so he can present a masterplan for managing the country when he tries for the presidency a few years down the road—the road to the White House. How can one person successfully manage the affairs of 253 million people? How can 535people successfully manage the affairs of253 million people! The answer is clear. They can't!

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Alternative #18
Alternative to the uncontrolled growth and cost of the civil service system.
Goal: To trim the number of government employees and reduce the burden on
taxpayers, especially future generations.

How:
1 - Abide by directive A-76 which says federal agencies must contract out everything "that can be procured more economically from a commercial source." 2 - Encourage honest evaluations of private sector bids.

Practical Benefits:
1 - Taxpayers will win as savings are realized in the operation of government. 2 - More of the revenue collected from taxpayers can be put towards reduction of the deficit rather than going to prop up inefficient government bureaucracies that have no legitimate reason to compete with the private sector in the first place. 3 - The private sector will benefit as they are able to eliminate government as an illegitimate competitor. 4 - Former government employees will be able to bid on the same jobs they held earlier only now they will be free to put in place the reforms that only they know need to be enacted. 5 - Privatizing and contracting out have historically led to greater efficiency and better service. 6 - When services are contracted out tax revenue is generated. 7 - More people would be freed to add their skills to productive endeavors in the private sector. 8 - Contracting out means more private investment and jobs.

Soft Power Benefits:
1 - Empowerment of the private sector as against bureaucrats. 2 - Re-establishment of a sense of self-reliance throughout society as government is relegated a smaller role in the lives of citizens. 3 - Freedom and optimism will get a push in the right direction. 4 - Creativity and accountability will be encouraged.

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Background for Alternative #18
In 1955 President Eisenhower endorsed contracting-out, known as A-76, a directive to federal agencies to contract everything "that can be procured more economically from a commercial source." Ronald Reagan was determined to use this dormant directive when he took office. Remember he promised to privatize everything from government printing operations to custodial and maintenance work in federal buildings. If directive A-76 had been followed since 1955 it would have kept federal agencies pretty trim. Unfortunately it has been ignored. In the eighties, despite A-76, there were 10,000 painters and paperhangers, 20,000 food preparers, 30,000 supply clerks and 10,000 librarians on the federal payroll. Not only would contracting out these skills save taxpayers over $3 billion a year, there would be millions of new tax revenue dollars coming from the private contractors that would have taken their place. In 1967 approximately 60 percent of the goods and services used by the federal government came from private providers. Twenty years later private sector participation had fallen to 40 percent. I can see why government employees would want to thwart A-76—it puts their jobs in jeopardy. In Washington DC public employees increased as the population decreased.

Did you know there are in 4.3 million state government jobs and 13 million jobs connected with local government. Over 17 million non-federal government employees? I checked in the BOOK of Knowledge, 1968 edition and found that 24 years ago it says on page 317 Vol. 3 that, "More civil servants work for state and local governments than work for the federal government. They number about 3,500,000 (not counting teachers)."

That's some explosion in civil servants--------- even without the teachers. And I will be the first to admit that a lot of state and local government employment is in schools and depends on the birth rates and demographics of school age kids. Since-1980 state and local govt employment grew by 20% ---------- - twice as fast as population grew and cost now $360 billion a year. In Washington DC public employees increased as population decreased. In FY 1991 states laid off 15,000 workers out of 4.5 million = one thirtieth of one percent of total state employees throughout the country. In California with about 20 million population in 1970 state employees numbered 195,000 or 98 per 10,000 in 1990 our population was almost 30 million and employees per 10,000 residents grew to 109. If the state had

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kept state employees even with population growth California would have saved $385 million--------a lot of money but nothing to the savings New York would have seen—$2.7 billion of savings if it had kept its employees constant at 101 per 10,000 in 1970 instead of the 158 per 10,000 it pays for today. That's the state. The city payroll is even more bloated. New York City has 540 employees per 10,000 residents and to put that in prospective Los Angeles has 146 (down from 149 in 1970) and San Diego has only 90 city employees per 10,000 population. Managers in government have grown twice as fast as the number of frontline service-delivering employees. It's hard to gauge waste in government because there is no product other than service. Bloat is more than too many people, it is stifling administrative procedure. For instance in DC schools it took as many as 90 days to get supplies which were routed through a myriad of offices and administrators not unlike the Soviet bureaucracy that we used to be the brunt of so many jokes. Too many people is one thing but too many people doing their jobs makes for a vast unresponsive and impenetrable bureaucracy which stops productivity in its tracks. The much maligned Governor of New Jersey, James Florio, found that to fire one percent of his civil service employees he would have to send notices to twenty percent because any dismissal would set off a chain of civil service bumping—down grading as positions were eliminated. Civil service rules are a big part of the problem. New York has 7,3000 different job titles and even Iowas has 1,254 titles for 44,000 employees and it was found that 364 titles applied to one person! NYC has one administrator for every 150 students whereas NYC parochial schools get along with one administrator for every 4,000 kids. NYC libraries number the same for the past 40 years and whereas front-line staff decreased from 1,700 to 1,500 top management mushroomed. Everyone wants the $100,000 a year assistant! To get more money in civil service everyone needs promotions to higher levels so new layers have to be created to accommodate career and salary ambitions. DC has two full time window shade repairmen—with a combined salary of over $100,000 but their position is distinguished from the regular custodian. Cuts are always made where users will notice—the Washington Monument syndrome. Federal mandates also encourage the hiring of new employees. NYC had to comply with court-mandated staffing ratios. Federal and state mandates cover everything from the number of special education teachers to the number of prison guards per win to how many police officers must ride in each squad care. Only hope of solving the problem is to get the employees on your side—

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talk to them and get to know them. No one knows better than those on the job what the problems are and how to solve them. Forget the unions, they have their own agendas but the workers know what's what and most want to and are capable of doing a fine job. The United Federation of Teachers ordered its representatives not to cooperate with the NY Board of Education when they asked for help in saving the schools money. In his highly recommended 1988 book When Government Goes Private, Randall Fitzgerald hits the nail on the head: But there are understandable forces propelling the explosion of civil servants. A civil service employee is rated on the number of employees he has under him and contracting out would reduce his rating and take home pay. The larger the department or agency's budget, and the more employees, the greater the manager's salary*.---------------- — Congress is pressured by public-employee unions and has even passed legislation in recent years preventing contracting out in several areas, even though using the private sector represents the least possible distortion of the economy, stimulates private investment, creates jobs and generates tax revenue. The following will illustrate how they actually go about thwarting directive A76: (1) A private contractor must allocate full overhead costs in a bid, while government agency estimates usually include minimal overhead costs. (2) A private contractor must include the full cost of social security, retirement and unemployment in bids, while government agencies routinely understate civil-service retirement costs. (3) Most importantly, under current interpretation of A-76 rules, private contractors must demonstrate that they can do a job at least 10% cheaper than the government agency can before a contract can be awarded. Any potential savings less than ten percent are lost. It seems backwards— like "guilty until proven innocent"! Government should not even be competing against the private sector, that is the intent of A-76. Using the private sector represents the least possible distortion of the economy, stimulates private investment, creates jobs and generates tax revenue. The agencies, not the private sector, should have to prove they can do these commercial jobs ten percent cheaper! A GAO (government accounting office) study in the eighties showed it costs the GSA (general services administration) at least fifty percent more to clean offices using its own custodians than using outside contractors. The tab was almost twice as high as private-sector landlords pay to have their

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federally leased space cleaned. But when GSA tried to hire private custodians, guards, elevator operators and messengers in some of its buildings certain congressmen went crazy and Senator Dale Bumpers of Arkansas even pushed through a ban on studies. Local politicians respond more readily to the needs of their constituents because they are in closer touch with them. For instance, Phoenix, Arizona allows private companies to bid against the city's public works department. The last I knew, Phoenix was using private custodial services for 63 city facilities for a savings of $800,000/ year In this case there was no bidding process because the city didn't believe it could possibly win against the private sector. The Phoenix Public Works Dept lost the bidding for trash collection, but with new management techniques, new technology and reduced employees (through attrition and transfer) the city became competitive. In 1984 the city of Phoenix successfully outbid five private companies, beating its nearest competitor by $1 million to secure the contract to collect garbage in one area. In its first seven years of contracting, the city won 15 bids and private firms won 28. Overall the bidding procedure has been a success because there has been no detrimental effect on the morale of public employees, and it has certainly helped increase their productivity. The Department of Housing and Urban Development came up with a comparison study of cities in California back in 1984. It compared eight services provided in ten cities by public employees and in ten cities by private sector employees; all in Southern California. The differences in service were minor, but in cost were staggering. Asphalt paving cost 95 percent more provided "in house" and janitorial services cost 73 percent more. Traffic signal maintenance, street cleaning, and lawn and street-tree maintenance and garbage collection were more expensive "in-house" but in varying degrees, with the exception of payroll preparation, which was about even. It was found that private contractors paid workers an average of $106 a month more in salary and benefits than municipal agencies paid their employees. Take asphalt workers for example; private firms paid them an average of $2,421 a month and municipal governments paid them $1,532. It costs private firms $42.85 per ton of asphalt laid compared to $83.99 per ton for the municipalities. The lower costs for the private firms are due to incentive programs, responsibility for equipment maintenance, fewer managers and using more advanced technology, rewarding employees based on performance and structuring performance incentives by use of profit-sharing and stock ownership, spreading equipment costs over many jobs and renting other equipment quickly as needed. Finally, private firms are willing to take risks for innovation that municipal governments have neither the incentive nor

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the flexibility to pursue. No one can argue the fact that pension benefits are much better for public than private employees, but that's hardly a justification for keeping all the other inefficiencies in the system and making taxpayers working in the private sector foot the bill for the waste. The National Science Foundation in the 1970s compiled data on solid-waste collection in 2,200 U.S. cities and found that municipal provisions of this service cost from 29 percent to 37 percent more than private delivery. If one factored in the amount of taxes the private delivery firms pay in the communities they service, along with pension-fund and other costs cities typically exclude from departmental operating budgets, it was discovered that private delivery becomes more than 60 percent cheaper for taxpayers than garbage collection by municipal sanitation departments. There are lots of areas where government competes against private entrepreneurs. Scuba and skin-diving instruction, whale-watching cruise, charter sportfishing trips (boat refurbished with $80,000 of military funds) were all offered for sale to all comers at the Camp Pendleton Marine Corps Base in Southern California. Private companies offering similar services in the area suffered. The U.S. Forest Service operates 13 nurseries nationwide, producing 150 million tree seedlings a year for reforestation. Add state and local government nurseries and the seedlings double to 300 million a year. Why can't this service be privatized as directed by A-76? The American Association of Nurserymen has not been a large enough lobby but this private sector needs relief. The federal government is also in the grocery business. 247 domestic and 100 overseas military-linked stores use $ 1 billion of taxpayer subsidies a year. Someone figured the taxpayer subsidy to each commissary shopper at about $244 a year and suggested salaries be raised by that amount and the commissaries be closed. Some of the commissaries exist to serve military retirees. Commissaries may have been necessary when bases were located far from any commercial centers, but that is seldom, if ever the case today. For instance there are six commissaries in the D.C. area competing with one hundred major private-sector grocery outlets. To overcome resistance from government employees to attempts to contract out, in 1986 Constance Horner, then director of the Office of Personnel Management, came up with a plan called Fed Co-Op. The idea was to move government services, like agency cafeterias, data processing, maintenance and so forth into the private sector under joint-venture arrangements with private businesses. The federal employees would keep their present jobs, with the same salaries and benefits and also get an ownership percentage in the private companies. These private firms would

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have the exclusive contract for three years and would, at the end of that time, have to compete with other private sector firms for the government contracts. That should have won the old employees over. There's no doubt in my mind that many federal service employees perform vital functions with serious consequences for the nation but drastically limiting the size of government would do wonders for our economy. And many former government employees could do wonders for themselves and the nation if freed from excessive restrictions and regulations. I remember in the late 1980s Philadelphia's public-employee unions called a strike of 13,000 to protest that city's right to hire private contractors. (Nationwide, AFSCME boasts one million members.) They had all sorts of examples showing private contractors did poor jobs and charged more. However their figures were distorted because cities do not reveal all their costs as private firms are required to do. To be fair in stating their costs, cities should factor into the equation insurance, overhead, fringe benefits, pensions and taxes (local, state and federal). Public agencies routinely exclude expenses usually found on the books of sister agencies in the same municipality. Expenses like equipment maintenance, capital expenditures, fuel, utilities, debt retirement, pension costs and other fringe benefits. Governments too often show service prices as if they were actual costs. This practice is misleading and should be stopped. Because they aren't forced to face competition and don't have truthful accounting practices, most government entities haven't the faintest idea what it actually costs them to do anything!

Examples:
New Orleans cut its employees in half over ten years and privatized and prospered. That city and the New York Health Department were featured in a recent issue of Governing magazine to show that even with civil service it is possible to trim and win. A quote which stuck (by Richard Nathan at Rockefeller College in Albany NY) reads. "There's a little bit of good in austerity in that it makes it possible to do hard things that you can't do in good times." The overwhelming evidence is that unless the flow of money is cut off, bloat is inevitable. Ninety year old efficiency guru, Edward Deming made quality and productivity a by-word in city government. His most publicized reforms occurred in Madison Wisconsin. Just by extending the hours centers are open residents are able to get drivers licenses in 15 minutes or less and

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employees spend less time processing papers. University students can register for classes by phone instead of waiting in line for hours. Sandra Hale, one-time commissioner of administration in Minnesota, showed bureaucrats how to improve services and cut costs. Now she advises the federal government on how to make their employees more efficient and creative. She gets "civil servants to come up with their own ideas for change. . . ideagenerating program called STEP, for Strive Toward Excellence in Performance." Among the results, the finance department earned $1 million a year in interest by processing transactions faster, and a regional medical center paid for $500,000 in new laundry equipment by taking in the wash of other organizations. In 1986 STEP won an award for innovative government from the Ford Foundation and the JFK School of Government. A Chicago neighborhood group asked its low-income residents about their skills rather than inquiring as to their needs in a variation of the quotation JFK made famous: "Ask not what your country can do for you but what you can do for your country." Only in this case the idea was to get "your country" and its excessive government out of the picture entirely by emphasizing the potentially profit-making skills of the residents rather than the services they might need. It was found that the most common work experience of residents was in the area of health care. With that bit of information the organization was successful in placing fifty of the unemployed in jobs within a few blocks of their homes. In Rhode Island, Opportunities Industrialization Center had been working with federal money since 1967 in an attempt to find jobs for minority and disadvantaged people. When funds dried up in 1980, in order to achieve selfsufficiency OIC decided to train clients to work in their own workplaces. It was able to gain ownership of half a machine-metal company and a company to produce high-protein fish products. The ventures are used to provide skills, and jobs and generate taxes instead of absorb them. OIC's director, Michael Van Leesten is a firm believer that the only way to gain economic power is through your own efforts. Newark, New Jersey became a contract city in the late 1970s. Between 1975 and 1985 Newark reduced its department of engineering from 1,052 to 600 employees via contracting out solid-waste collection, street sweeping, snow plowing, sewer reconstruction and cleaning, water-line connections, street resurfacing and street-sign installation. Comparisons of gar

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bage collection showed the city was 21 percent higher than a private contractor, and that didn't even include all of the cities overhead expenses. The city saved $5 million over a 3 year period by that one contract alone. The private contractor collected 5.7 tons per man-day compared to only 3.2 tons per manday for the city department. Higher productivity was due to more efficient routes, better-conditioned, newer, larger trucks and a younger, more energetic work force. The private contractor also employed considerably more black workers than the city sanitation department. In 1987 Walter Bainbridge, a private individual challenged a government monopoly and offered to perform the same service better and at less cost. He attached a snowplow to his pickup truck and plowed three streets near his home in Fairfax Virginia so he and his neighbors could get to work—something the county was unable to do. Police made use of the newly ploughed roads and arrived at his door and charged him with "unauthorized work on a public highway without a valid permit". A system that works best for everyone is a free and competitive market and that is something we should be working towards because it has never really been achieved. In fact we have been going farther down the path which leads away from free competition.

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Alternative #19

Alternative to the lavish government employee pension system.
Goal: To bring promises more in line with reality. To make citizens aware of
the liability they are loading on the backs of their children.

How: By slowing the rate at which benefits accrue, reducing the cola (cost of
living adjustments) and adding penalties for non-disability retirement prior to age 62.

Practical Benefits:
Reduction of the unconscionable load we would otherwise leave our children in uncounted liabilities—far larger than the savings and loan liabilities that came down on our generation. Elimination of the annual federal deficit and gradual reduction of our national debt.

Soft Power Benefits:
More awareness accountability and hope for the future in the decision to live more nearly within our means.

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Background for Alternative #19
The congressional pension tab has been running about $13 million a year with an average payout of between $35,000 and $40,000. The National Taxpayers Union figured that the 1991 pay hike of 28.6 percent is expected to add an additional $424,000 in lifetime pension benefits to a typical House member elected before 1985 and an initial annuity of $49,125 after the current term. Members of congress get back in just their very first year of retirement just about everything they contributed to their pension fund over their active years. It pays to make your own rules! Some former members of congress have pensions in the $100,000 range. Former Senator Mike Mansfield of Montana is the most famous with a pension of more than $150,000 a year, which includes an ambassador's pension in addition to his Senate pension. Former House Speaker, Carl Albert of Oklahoma tops $100,000 and former Senator Al Gore, Sr. is mighty close to it. Former President Nixon receives $38,615 a year from his congressional pension in addition to the $ 138,900 presidential pension. Two congressmen that were actually convicted of extortion receive pensions. Senator Harrison Williams gets $53,765 a year even though he was convicted in connection with ABSCAM, and Congressman Mario Biaggi will receive more than $40,000 even while he is serving a prison sentence. Apparently congressional pensions can only be withheld if a someone is convicted of treason. The civil service pension system provides benefits which in the private sector would only be reserved for top executives. In 1984 the Congressional Budget Office (CBO) estimated that $5.2 billion in outlays could be saved over the next five years (1984-1989) by slowing the rate at which benefits accrue, reducing the COLA escalator (cost of living increases) and adding penalties for non-disability retirement prior to age 62. But no one was listening. Every year the Treasury must supplement the pension contributions made by federal employees and the agencies for which they work because in order to achieve such generous retirement benefits the contributions would otherwise be too onerous. These supplements are estimated to cost close to $30 billion this year. Several years ago the Office of Personnel Management (OPM) estimated that the federal government's total liability to current and future retirees totaled $514 billion and was rising at the rate of $100 million a day, not counting the military retirement system, which could mean a rise in

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pension costs of $1 trillion over the next 30 years. According to the same CBO report, big savings could also have been achieved by making changes in the military retirement system. It was estimated that between 1984-1989 $2.6 billion could have been saved by making employees who retire after 20 years of service wait until they reach age 62 before granting full benefits. It was also suggested that military retirees, still of working age, be given only half the normal COLA. In addition to the $24 billion that could be cut from pensions, $12.4 billion more could be saved over five years by bringing benefits more into line with those afforded private sector employees. For instance, comparable private sector employees get an average annual vacation of nine days as opposed to the thirteen days allotted government employees. Little wonder between 1946 and 1984 the number of government employees increased from 1.5 million to 2.1 million. American workers recognize a deal when they see it. More than 6,000 state and local retirement programs cover about 12 million public employees. The unfunded liability of state pension debt has been estimated at more than $1,000 for every American adult. New York City has a liability exceeding $3 billion and Bostons' liability comes close. Every citizen in those cities is liable for almost $2,000 in pension promises. The trouble with politicians acting as agents on behalf of taxpayers is that they are not using their own money. They acquiesce to terms where public employees are allowed to keep their jobs indefinitely without threat of dismissal and collect close to full salary, indexed to cost of living when they retire, with the cost to be born by citizens in the future. Most private sector pensions are not fully indexed to the cost of living as are public plans. There are real accountability and generational equity questions here.

Example:
In the mid eighties a community outside Detroit with a population of about 30,000 was channeling 99 percent of the city-property-tax revenue into the retirement funds of the police and fire fighters. Time magazine reported that one city employee had only contributed $35 to his retirement plan but was able to collect $250,000 in benefits after retiring.

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Alterna^^^ #20
Alternative to our constantly growing national debt.
Goal: To reduce the national debt by privatizing.

How: Sell government assets in addition to recommendations made elsewhere
to cut government spending by restricting the role of government in the lives of American citizens.

Practical Benefits:
As we pay down the debt, less money will be needed for interest expense which gives taxpayers nothing tangible for their money. More efficiency in government and more money for citizens to use could result in the expansion of business, more jobs and more prosperity.

Soft Power Benefits:
Citizens will gain greater control over their lives and a feeling of empowerment and energizing hope.

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Background for Alternative #20
When the government pays but the service is provided by the private sector, it is called contracting out. When government neither pays nor provides, but only regulates, oversees, or stays completely out of the picture (which is highly unlikely today) then we have a privatized system. Privatization means nongovernment entities contract directly with other nongovernment entities and exchange service for pay. Privatization transfers power and wealth from bureaucrats to consumers. Individual citizens, if left to their own devices, can come up with many more creative ways to do things than any commission or panel ever could. Peter Drucker in The Age of Discontinuity, advocated the privatization of government-provided services. He claimed privatizing would reduce costs, improve efficiencies and offer more choice to taxpaying consumers. Throughout the 1970s observers in diverse places were coming to the same conclusion. The editor of the London based Economist even envisioned a city where the inhabitants were stockholders entitled to annual dividends. Ronald Reagan gave the concept of privatization high visibility. Then there were a series of antitrust suits against local governments, accusing them of restricting competition in areas like water and sewage systems, utility services and waste collection. The tax-limitation measures and budget cutbacks set the stage for an alternative to government services and the Reagan administration added incentives such as new twists to industrial-development bonds, accelerated depreciation and investment tax credits in the hope of luring the private sector into taking an active role in the financing, construction and management of capital projects. We have a long and successful history of privatization in order to reduce debt. To retire the debt accumulated from the Revolutionary War and the War of 1812, Treasury Secretary Albert Gallatin devised a plan. A sinking fund was started in 1817 to retire the debt through land and other asset sales. A "sinking fund" refers to assets and their earnings which are earmarked for the retirement of bonds or other long-term obligations. By 1835 the entire federal debt had been paid off. In 1986, the Office of Management and Budget, headed by James Miller III, proposed eliminating the federal deficit by selling major federal dams and power systems, privatizing the postal system, the FHA and other functions that government does not do well and has no business performing in the first place. Forgetting the deficit and even putting aside ideology for a minute, the sale of federal assets makes sense because these assets require subsidies which drain taxpayers. Additionally government owned and subsidized entities end up competing against unsubsidized private citizens.

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When opponents suggest that privatization is selling our "legacy" they should remember that they are referring to not only the blessings, but also the burdens of public ownership. Privatizing the Naval Petroleum Reserves, which consist of oil fields in Elk Hills, California and Teapot Dome, Wyoming has been tried. The oil produced there is currently sold to private buyers for half the actual market price. The government doesn't need it as there is already emergency oil stored in the salt domes in the Gulf Coast. If the oil had been sold for its true worth on the open market it would have reduced our national debt and saved some interest expense over the years. The Carter administration suggested selling the four federal weather satellites, an idea which was picked up by the Reagan Administration. But congress stood in the way. Taxpayers spend a billion dollars to gather, analyze and disseminate weather information every year, information that is freely given to media customers like newspapers, radio and TV stations who retail it to the public. COMSTAT (Communications Satellite Corp.), a federally chartered, stockholder-owned company, offered to purchase the weather satellites along with Landsat, remote-sensing satellites that produce photos of crop and geological formations. The government would buy data under prearranged prices. The taxpayers would have benefited first because money would have been saved by the efficiencies of consolidating the ground-sensing and weather stations and developing dual-purpose satellites, secondly by shedding the $150 million annual it cost government to operate the satellites and third, having a tax-paying private company provide the $1 billion needed for technological improvements. Any sale would have provided for priority use by the Defense Department. To further counter any argument that the Pentagon needed access, the Navy was already using COMSTAT satellites. As for those who claimed the sale to COMSTAT would create a monopoly , already numerous companies are competing in satellite communications. There would be several competitors in the space launch field if government would only step aside. In late 1986, congress voted to lease the two airports servicing the nation's capitol to a regional authority formed by the State of Virginia for $47 million to be paid over 50 years. This despite offers of $2 billion by private groups to purchase the airports outright. The lease simply transferred the burden from one set of taxpayers to another---------------and for what reason? Virginia's taxpayers had to come up with $700 million in needed improvements and what did they get for it? When attempts were made to privatize FHA the Mortgage Bankers Association lobbied against the idea because that government agency was willing to take insurer risks that the private sector was anxious to avoid.

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FHA was continued as a responsibility of taxpayers despite evidence of fraud, including the issuance of loans to people whose incomes were too low to qualify for insurance from private mortgage companies. There are over 350 federal loan programs which are subsidized by taxpayers via low interest rates and long repayment periods not to mention the cost of defaults. Under the present federal government accounting system the $40 billion in new loans that the federal agencies make each year are counted as outlays for that year. There are more than 350 federal loan programs of one sort or another, all laudable and sound when enacted but many long since transformed by the need and greed of competing groups. Most of them do not show up "on budget" as normal credit activity because many federal agencies can make, even direct loans, completely "off budget". The millions of loans made by private lenders and guaranteed by the federal government represent a contingent liability and one more burden for future taxpayers. The federal government insures not only bank and thrift deposits (FDIC & FSLIC) but also private pension plans (PBGC). The federal government is the country's largest insurer guaranteeing loans to home buyers, veterans, farmers, students, small business people and a multitude of other groups. It has been suggested that such loan guarantees be redesigned to require current-cash outlays thereby putting the subsidy explicitly on budget. Better still the federal government should be directed to purchase private loan insurance for borrowers rather than guaranteeing loans itself, on behalf of all taxpayers. Best of all, the federal government should clear out of the loan business and leave it to the private sector. Judging by default rates, the government hasn't been very selective lately anyway. Besides there are many organizations that would step in to take care of those who would not qualify for commercial banks loans. Even now religious, cultural or work-related organizations offer free (no interest) or low interest loans to members or act as guarantor in many instances. Senator Moynihan wanted the federal government to sell off its nearly $1 trillion loan portfolio, which he estimated would save taxpayers about $200 billion over a seven year period, when the avoidance of future debt service was considered. The sale would have also drawn attention to the mismanagement of all government lending programs, showing more clearly the extent of taxpayer subsidies hidden in many loans. As a side benefit, privatization would have removed government as a competitor with the private sector. Amazingly, the Senator, a Democrat, was voted down by a Republican controlled Senate Budget Committee. Their excuse: loan sales would postpone the day of reckoning! In 1982 the Philadelphia Inquirer spent months looking into the federal

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government's management of property and stated, "The U. S. government has cost the taxpayers billions of dollars by acquiring land it does not need, by holding on to property it does not use, by delaying for years the disposal of land when it finally decides to let go, and by giving away thousands of valuable properties it could sell." The General Services Administration has the authority to dispose of surplus property—on paper—but Congress has erected road blocks along every step of the way. Under a 1949 directive, GSA must first offer surplus property to all other federal agencies and if there are no takers the property is next offered to state or local governments or nonprofit groups. Only if they all decline can the property be offered for sale and even then any revenue collected must go into a special fund so federal agencies will have the means to purchase still more privately held properties. Uncle Sam's extensive land holdings are six times the size of France, or to put it another way, the federal government owns 27,688 separate properties covering 727 million acres equivalent to about 42 percent of all the land in the United States of America. What about the principle of private property on which this nation was founded? More than 95 percent of Alaska is owned by the government, in fact it has been pointed out that even before Gorbachev came onto the scene more land was devoted to private property in the Soviet Union than in Alaska! Almost all the land in Western Europe is in private hands, which makes one wonder about who is the more socialistic? Actually no one really knows the total inventory of federal property or its true worth. The property is carried on the books at its original cost to the government. For instance the government owns 109 acres of land declared surplus in 1975 and valued by appraiser then at $20 million and yet on the books the land is valued at $14,465, the 1917 value. In 1982 the Reagan Administration wanted to sell at least part of the land and other under-utilized or unneeded federal property to raise anywhere from $15 to $20 billion which would go to reduce the national debt and streamline government and help cut the annual deficit. When cities found themselves strapped for funds they sold some of their under-utilized land. There's no reason the federal government shouldn't do the same and many reasons it should. Aside from the practical economic principle involved, there is a broader issue to be faced and that is whether or not government should be in the real estate business in the first place. I realize that's a position poles apart from the position taken by several environmental groups who in the beginning of 1991 were urging congress to agree to commit $1 billion a year to purchase land for the government. No one knows how much it cost taxpayers to maintain surplus real estate, but it is not cheap. Agencies are very uncooperative when it comes

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to giving up their assets, which they equate with power, and they are good at stalling when it comes to information. In 1973 the GSA recommended disposing of 27 acres of surplus Navy property in Contra Costa County, across the bay from San Francisco. In 1985,12 years later, ongoing studies as to the best way to dispose of the property were still going on. Congressman Ken Kramer from Colorado proposed legislation to streamline the property-disposal process and insure that proceeds go to debt reduction in 1983. The House Government Operations Committee, chaired at that time by Jack Brooks, a Texas Democrat, refused to act on the reforms. If that wasn't bad enough, when Kramer was running for re-election his opponent accused him of wanting to sell off the national treasure. Kramer won but you can bet he, or any other politician, was not about to open that can of worms again. It got Kramer nothing but problems. There are untold examples. Politicians simply have to realize that pleasing government employees who fear being uprooted is not their only job. They should consider the interest of all taxpayers. It may be up to you and me and other citizens to run for office and to put new people in office who won't give up; who will go to Washington with a mission, rather than a career in mind, and hammer away until that mission is accomplished. It's up to us—the public—to help them and assure them they have our support and maybe shame opponents, like Mr. Brooks into giving way. The trouble is citizens usually protest government-asset sales, mistakenly thinking someone is robbing them or their children of a heritage. It may not be logical but its effective. Actually by not selling unneeded government assets we're piling up a nasty heritage for our children in the form of debt which must be serviced at an annual charge which now tops $300 billion and will continue to rise unless something is done to reduce the hemorrhaging.

Examples:
The federal government owns surplus and under-utilized land,in places like Beverly Hills. The Veterans Administration Medical Center, a442 acre property close to Beverly Hills is valued at over $2 billion. The V A building may not be surplus, but it is under-utilized, meaning its functions could be carried on at a less valuable site and the profits from its sale could help reduce the federal debt. The same is true of a building 50 miles south of Los Angeles which was designed for 7,500office workers in 1974 and has never had more than 500 employees work there. Obviously a building that size is not needed and its value was placed in the $20 million range a few years ago. A smaller less expensive building could be bought with just a portion of the sale proceeds and the rest be used to reduce the nation's debt.

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There is the twelve mile stretch of ocean frontage at Camp Pendleton California that is hardly ever used by the government as well as the 1,500 acres of beach-front property only 15 miles from Waikiki Beach in Hawaii —even more valuable and less useful. It is the site of a deserted Air Force base which has been closed for almost 35 years. Then there is the already mentioned San Francisco Presidio, 1,774 acres of some of the most beautiful real estate in the world, situated at the entrance to the Golden Gate Bridge. With its breath taking panoramic views in a free market it would command a price that would make every taxpayer in America dance with joy. Historic sites could be preserved and development could be designed around them. In 1983, Senator Moynihan and Congressman James Scheuer, both of New York, introduced legislation to force GSA to donate old Fort Totten to their state instead of selling approximately 20 percent of it to bring a minimum of $22 million into the Treasury. At that time at least 20,000 New York residents wrote letters against the sale because they wanted to use the land for recreation. They might have felt differently if they were forced to pay $22 million for it plus their share of the interest on the portion of the national debt that wasn't reduced by the sale. In 1978 twenty three representatives from Illinois protested the Pentagon's decision to shut down Fort Sheridan whose 695 acres are situated 28 miles north of Chicago and include a renowned 18-hole golf course and two beautiful beaches. After many studies and interminable delays, closure was finally set for the end of September, 1985. This brought about a brand new flurry of protests which wore down both President Reagan and the Pentagon and the subject was finally dropped. The White House Property Board, GSA's effort to sell surplus federal properties, was killed by the two Senators from Hawaii after an effort was made to sell 35 acres with a 416-room luxury hotel and 17 acres of beachfront used by military personnel and their families. The beachfront alone was valued at more than $220 million as it adjoins world famous Waikiki Beach. GSA argued if the property were owned and operated by the private sector military families would still be able to enjoy the resort because most Hawaiian hotels offer reduced rates to military families and retirees. Nevertheless legislation was passed preventing the sale. Not

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Alternative #21
Alternative to taxpayers subsidizing the Power Marketing Authority (PMA) and the outdated REA
Goal: To reduce our national debt and prioritize the use of precious taxpayer
dollars by getting rid of boondoggles like the REA and privatizing the PMAs.

How: One idea is to incorporate each PMA and offer shares on the stock
market. That would get the federal government out of the business of producing electricity, where it had no business being in the first place.

Practical Benefits:
We would get new revenue from the private corporations which would be subject to taxation where the government-owned and operated utilities were not.

Soft Power Benefits:
1 - Sense of fairness is reestablished when the government stops competing against the private sector. 2 - People regain enthusiasm for saving and carefully managing their own assets when the government doesn't throw their tax dollars around so carelessly. 3 - People have some hope of getting ahead and a greater sense of empowerment when government is less intrusive.

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Background for Alternative #21
Power Marketing Administrations—government power plants, first started during the New Deal with the Tennessee Valley Authority and the Bonneville Power Administration in the Pacific Northwest. Rural electrification programs (REAs) began as unemployment relief in the Depression, when very few farms had electricity. By the 1960s virtually all farms had electricity and that should have been the end of the subsidies but today 25 percent of the American population, mostly in northwestern states, gets cheap power subsidized by the other 75 percent of the population. There are now six PMAs that operate 174 hydroelectric plants. The power generated by these plants is priced, on average, one-third less than what privatepower companies must charge. The PMAs were, by law, supposed to repay the cost of their facilities and investments to the U.S. Treasury within fifty years of being established. Today they are charging far less than market rates despite owing the Treasury money. Five of the PMAs have repaid almost twenty percent of the $16 billion lent them by the federal government. The sixth, PMA, Bonneville, instead of paying $1 billion as scheduled, came up with only $2 million and then in 1985 borrowed an additional $394 million from federal taxpayers. Experts estimate revenue of $70 billion from privatizing the PMAs. If the Tennessee Valley Authority were included the revenue could top $100 billion. But it's not easy to break up a thirty year old bureaucracy. The REAs took on the mission of granting low-interest loans for the construction of new generatingplants. Of course as market interest rates soared in the seventies demand for REA lending rose by 760 percent. The REAs loaned out close to $10 billion in tax money and collected only $5.2 billion in principal and interest during the seventies. The borrowers were smart business people. Maybe they didn't need the subsidized interest rates any more than the next guy, but if the REA managed to keep itself on the taxpayer dole by handing out such nifty loans, anyone who knew about them would have to be stupid to pass up the opportunity. Co-ops were formed which were in better financial shape than were private-sector municipal or privately owned utilities that had to make do with unsubsidized loans. Those responsible for giving wrong signals and distorting the marketplace are the first to cry that the free market doesn't work. Not only that, we've got the familiar problem of government not following its own mandates. One study found the TVA in compliance with EPA pollution standards at only 16 percent of its facilities, compared to about 74 percent compliance among privately owned electric utilities.

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Alternative #22
Alternative to a socialized postal system
Goal: To have the most efficient mail delivery at the lowest cost while also
abiding by directive A-76 within a free enterprise capitalist country.

How:
1 - Rural carrier routes could be put out to bid over a period of years as a first step. 2 - Contract out retail functions such as stamp sales and window services 3 - Allow nonprofit groups to deliver their own mail. 4 - Give utility companies the authority to use mail boxes for on-thespot billing. 5 - Turn over processing and pre-sorting of mail to private contractors on a bid basis. 6 - The Heritage Foundation has suggested breaking up the system into private companies on a regional basis. Milton Friedman has suggested giving each citizen one or more shares of stock in a new private corporation. He says "It should not be a federal crime to provide better service than the government."

Practical Benefits:
1 - Privatizing rural delivery and nothing else could save $6 billion/yr. 2 - Citizens for a Sound Economy figures a minimum or $1 billion could be saved annually from contracting-out retail functions. 3 - Money could be saved by non-profit groups. 4 - Money could be saved on utility bills. 5 - Pensions and salaries based on the market would save even more taxpayer dollars needed elsewhere.

Soft Power Benefits:
1 - Sense of fairness is reestablished when the government stops competing against the private sector. 2 - People regain enthusiasm for saving and carefully managing their own assets when the government doesn't throw their tax dollars around so carelessly. 3 - People have some hope of getting ahead and a greater sense of empowerment when government is less intrusive.

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Background for Alternative #22
If you asked the man-on-the-street what large government agency competes unfairly against preferred private-sector providers he would answer the post office. In 1845 private express statutes prohibited persons or businesses from carrying letters for hire. In 1860 the monopoly was extended and the law was tightened to get rid of the Pony Express and other private delivery alternatives that had wormed their way through loopholes in the original law. Then United Parcel Service—UPS— came on the scene. When the postal service lost half its parcel volume to UPS it spent $1 billion on twenty-one centralized bulk-mail centers around the country in an attempt to defeat a private company. UPS survived because it incurs less damage, makes faster more reliable deliveries and charges less. It still makes a profit while the government service looses money. And now the postal service is competing with your local florists. I just picked up a colored brochure at my local post office showing a variety of floral arrangements that can be sent as gifts just by calling their 800 number. Between 1981-85 postal employees won $3 billion in new wage concessions, stamp prices were raised 12 percent a year while the consumer price index was rising at a 4 percent rate. In 1986 postal employees became the highest paid semi-skilled workers in the history of the world and salaries accounted for 84 percent of the agency's $26 billion annual budget In that same year, postal employees increased from 702,000 to 746,000, postage went from 20 cents to 22 cents and loses were $251 million. The next year postage went up another 5 cents to 27 cents in order to fund a new federal retirement program for postal workers costing $1 billion a year. Not long ago the top postal service brass took bonuses totaling $20 million while the agency was floundering in $1.5 billion debt and consequently was forced to raise postage rates on its employer—the American citizen. I understand that on average, postal service compensation is one-third higher than for comparable jobs in the private sector. Postal Service janitors were making $10.89 an hour at a time when privately contracted janitors used in other federalagency offices were making $4.44 an hour. Why? Unions hold the threat of slowing down the mail. Generous wages are supposed to ensure efficiency. There is strong opposition aside from the three-quarters of a million employees themselves. Also opponents believe that if the system were privatized, rural routes would receive reduced service, even though those are discredited fears. Rural services were served just fine by the new providers that emerged in the wake or airline and trucking deregulation.

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Telephone service, and truck and bus lines, before deregulation, were all cartelized for reasons now given in defense of the postal monopoly. If we started with the rural areas maybe that would dispel old fears, then processing, delivery and retail functions could slowly be contracted out. But members of congress have prevented legislation to privatize the post office. Representative Phil Crane from Illinois has tried for years to make private mail delivery legal, with no success. I believe using public money to compete with private firms is absolutely no-holes barred wrong! I also have a hard time knowing why a monopoly needs to take out full page ads and advertise on television.

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Alternative #23
Alternative to government operated fire protection. Goal: To
have the most efficient fire protection at the lowest cost.

How: Taxpayers would still support the service but fire fighting would be
contracted out on a bid basis to private firms.

Practical Benefits:
Greater efficiency at lower cost.

Soft Power Benefits:
1 - Sense of fairness is reestablished when the government stops competing against the private sector. 2 - People regain enthusiasm for saving and carefully managing their own assets when the government doesn't throw their tax dollars around so carelessly. 3 - People have some hope of getting ahead and a greater sense of empowerment when government is less intrusive.

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Background for Alternative #23
Where private firms have taken over fire protection they really have done so with cost savings. Publicly operated firefighters find little incentive to reduce fire runs and department costs. Unused budgeted amounts are seen as allocation mistakes and are quickly dispersed elsewhere. On top of that, unionized municipal fire departments show an average of 12 strikes a year nationwide whereas no private fire department has ever experienced a strike. The biggest obstacle to privatization is the unions. Politicians who have suggested privatization have been recalled or defeated. To prevent the antagonism of municipal employees some communities simply require contractors to offer jobs to any city employee displaced by contracting. Of course the other alternative is to have public employees form their own company and bid against other private contractors and get their old jobs back, sometimes with better salaries and conditions. These former government employees would be free to do what they always knew should be done. They could institute efficiencies they couldn't get through the restrictive bureaucracy before. Inefficiency is not due to bad officials or workers or even labor leaders and unions; it is simply one of the consequences of a monopoly system. Scottsdale, Arizona has been served by Rural-Metro, an employee-owned company, since 1948 with a cost of about half what most cities its size pay for protection. A study found that in comparing dollar loss from fires, response times, firefighter salaries, (with nearby towns with similar residential patterns and with public fire departments) Scottsdale had the fastest fire response times, and the lowest dollar loss per capita from fires. Not only that, they paid on average $ 1,500 more for a starting firefighter and $1,100 more for a captain. The company has come up with numerous innovations, including a fire fighting robot. It is a $25 million business with 400 vehicles, 1,600 employees and a few years ago was found to have contracts with 16 communities in five states providing ambulance, forestry-fire suppression and fire-code enforcement as well as the standard fire-protection services. With money to be made you can bet it has competitors-"that's the essence of a free market system. And you can bet there would be a lot more competition if citizens would demand it.

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Alternative #24
Alternative to Health Plans being discussed in Congress in 1992. Goal:
To find the plan most in keeping with this nation's political system and ideals

How: Compare health-care proposals now before congress with free market
proposals. A proposal was made by the advisory council on social security in 1990, which would shift basic medicare coverage to private insurance and have the government pick up the tab for lifetime care after a spending ceiling has been reached for each person. The concept is on the right track, but the mistake is in mandating what is to be covered. The problem arises in deciding the level of services the government would provide. Any free market plan would replace Medicare and Medicaid with a high deductible catastrophic health insurance coverage shopped for and purchased by the individual family. Proof of purchase would have to be submitted for government approval. This would be the transitional phase until the people are willing to become emancipated and government is willing to admit that American citizens are responsible self-controlling individuals. To be worked out is how and who would pay the premiums. If it is agreed that government should redistribute tax dollars to ensure every citizen health care, then I would suggest proposal A in the following pages. If the government is to have no role other than changing tax law to make employer provided health care taxable to the employee and allowing deductions—or better still—credits— for the premiums paid by individuals for their own health care plans, then I would recommend variation B.

Practical Benefits:
Get out from under a system that is careening towards bankruptcy. Access to care for everyone. The consumer in the marketplace is the only proven means of effective cost control. Care providers will no longer have to deal with a government bureaucracy in order to be paid (if we set this thing up correctly!)

Soft Power Benefits:
Release from the fear that grips all Americans—fear that a health related catastrophe could lead to bankruptcy.

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Background for Alternative #24 Proposal A
Citizens would receive an annual MRI Card (Medical Risk Insurance) based on their household tax return. The card would show two numbers. The first number would represent the percentage of every medical bill a family would be expected to pay until an income-related ceiling is reached which would be represented by the second number. There are problems. Deciding how to define family is one. Should a household include anyone other than husband, wife and children on the basis that the old nuclear family is a unit we want to reinforce? We are not in danger of extinction as a species so why shouldn't we chose to reinforce another societal unit? Another issue is a rationing mechanism. Ideally this would no longer be a government decision as it is now with medicare and medicaid. Supposedly the consumer would decide the rationing when he shops for his insurance coverage. However government would be certain to come up with even more mandates as a condition of its approval of any insurance package. That could put us right back where we started with no real consumer induced control over health care cost. On the other hand there is a chance that rationing would not be needed. I have seen figures that show that catastrophic type problems are quite small—major illness is surprisingly rare. And just as surprising the major cost is attributable to ordinary health care. Just as fortunes are made by people who sell pins, or coat hangers, it is the volume of small costs that add up to towering costs in health care. Only the market and its tried and true incentive—self-interest—has a prayer of bringing these costs in line. Rationing by pocket book works ---------- it may not sound nice, but it works! In proposal A, insurance is paid out of general revenue. Even though the consumer may chose the policy that suits him or her best, all incentive for either side to control cost disappears when Uncle Money Bags enters the picture. There are other flaws. Under catastrophic coverage after the consumer has reached his payment ceiling, how high can the tab go? How expensive the technology? Organ transplants? Mechanical life support for years? It could be that for herori c either sustaining efforts a person would have to buy additional "excess coverage" to complement the "government approved" brand—and here we go again! Custodial care would be provided but what about high tech procedures for people over a certain age ? How and who decides?

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Bureaucrats and philosopher kings should not decide these problems for us. That is why Plan B is more desirable in a capitalist country like ours. Proposal A is only a temporary weaning away from the old welfare solutions that we have had for the last thirty years which have proven to be so disastrous to the finances and spirit of the American consumer.

Proposal B
Plan B is similar to Plan A. Neither pay the least expensive commonly incurred bills, like those for office visits, x-rays, eye-glasses and the like— things that most people can handle. A & B coverage would pay the catastrophic expenses that can ruin a family financially, including long term nursing home care. This fend-for-yourself- solution, as it has been called, relies on the market to bring the costs of health care into line. But Plan B introduces a new element. For the first time in a long time the person receiving the care will be shopping and paying for it with his own money. This is the main and crucial difference between A & B. To discourage overconsumption one might link a tax credit to a high deductible and allow the tax code to blunt catastrophic expenses but not basic health care expenses. This would certainly be an improvement over the present system which shifts the responsibility and costs of health care onto third parties and is a breeding ground for excesses. Of course the government would have to help families who, because they don't pay taxes, would not have tax credits to pay health care premiums. There is no doubt that facilities for subsidized care would be different—hopefully dependent on non-profit facilities and volunteer providers. Quality of care in a capitalist nation cannot be equal. Care was not equal in the communist nations either, even though that was the ideal. Just ask the average man or woman who lived behind the old iron curtain. We realize shelter (everyone is not entitled to a million dollar home, but some have them) clothing (a few people have $5,000 gowns, but come on now!) and food, (most people eat more hot dogs than lobster but lobster is available——and possible for anyone to order in this marvelous capitalist country.) Where equal access to goods is advertised there are no goods! In the business world we know that sometimes people make offers or loan commitments or even sign leases that are terrific—over market. Why? Having been in business for thirty years I can tell you it is because they have no intention of living up to the commitment. As consumers of political leaders it is time for us to wise up! The USA is not a communist nation or even a socialist nation, although we finally have one avowed socialist in the Congress. (Barney Sanders-VT)

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The USA does not have equal distribution as a goal. Access to almost everything is based on work, ambition, luck and personal priorities. Everyone can have a lot ------- a lot more than in countries where private property and private effort is not recognized. As strange as it may sound an American solution, and the solution I am suggesting is to encourage people to value things other than money. There are many pursuits that bring satisfaction and have rewards that may not be monetary. So far I have presented what you won't find readily elsewhere. Many health plan proposals have gotten considerable coverage in the popular media— especially those supported by the 1992 presidential candidates. Only a rough sampling follows and on pages (old health #11 & old health #8). Estimates of government projects are always low. I remember government actuaries in the early sixties had predicted that by 1983 the new hospital insurance program would be costing the nation $8. 2 billion. The actual cost in 1983 was $38.2 billion—$30 billion off—and it has about doubled since then! Americans now (1992) pay about $800 billion annually or over thirteen percent of the gross national product (GNP). Of the total spent on health care in 1989, 21 percent came from consumers, 37 percent was paid by private insurance and other private sources and 42 percent was picked up by government programs. Hospitals took 39 cents of every dollar, 19 cents went to physicians, 8 cents to nursing homes and 22 cents to dental, professional services, home health care, drugs and vision products, and 12 cents was used for administration, research and construction. The GNP rose only 6.7 percent from 1988 to 1989 but health care spending rose 11.1 percent. The 1992 Bush health care proposal would give tax credits of $1,250 per individual and $3,750 per family to some people. 1 - "Fee for service" gives a perverse incentive—do more rather than less and get paid more. 2- Risk of suit is the other perverse incentive = costly defensive medicine. 3- No insurance means emergency room, the most expensive care, Taxpayers get the bill. California congressman Pete Stark, said on July 18,1990 "Through the use of a single national plan, operated by the federal government, it will be possible to bring the same kind of fiscal discipline to "mediplan" as we have already achieved in medicare hospital payments and as we expect to achieve

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in medicare physician benefits . . . " (If you stop laughing, I will.) Mediplan is the Congressman's brainchild. He says it would provide basic and long term health care to all Americans for only $120 billion per year. (HR 5300) The late-Congressman Claude Pepper's plan to do the same thing, was defeated because of a price tag half that size. Mediplan would replace medicare and be financed primarily by a four percent surtax on all income over $16,000 per person per year, plus another four percent on all corporate income, plus a hefty premium of about $ 1,000 a year to be shared by the employer and each employee. Polls show three out of four Americans favor national health insurance. John Dingell of Michigan introduced a bill to create national health insurance as the 102nd Congress began, just as he has done every other year since 1955 and as his late father did 50 years ago. That's no surprise, but the surprise is the endorsement in the spring of 1990 by The American College of Physicians of a comprehensive health-care reform which would include some form of national financing. The larger more powerful American Medical Association favors having employers provide health insurance and an expansion of medicaid coverage for the poor. School systems are a group that is both large and healthy enough to attract private insurers to underwrite low-cost coverage. Florida has started a schoolbased health insurance project enabling parents to buy a preventive health plan for their children which includes immunizations and screening for $ 11.46 a month per child. There is a $52.82 package option that includes office visits, hospitalization, emergency services, maternity care and other services. The Healthy Kids Corporation is run by members of public agencies together with private insurers. The state will pay part or all of premiums on a sliding scale. The HCFA (the federal Health Care Financing Association) is adding a $2.2 million grant to the Florida legislatures $1.7 million initiative. Example: A lady needed to get a mammogram and when she asked a hospital how much it would cost she was told $275. She asked if there was ever a sale and was told as a matter of fact they were offered for $50 on Mother's Day. She said sign me up! This illustrates that there is a real incentive to look for sales in health care when the $$ are coming out of your own pocket.

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Alternative #25
Alternative to rationing health care services.
Goal: Most equitable distribution of services. How: Free market

in health care.

Practical Benefits:
1 - The only way to control costs. 2 - People will pay only for the care they need.

Soft Power Benefits:
1 - Empowerment. 2 - Charity will be encouraged. 3 - Fears will lessen.

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Background for Alternative #25
Rationing is a common response when demand exceeds available services. Rationing is unnecessary in a market system, however, because when freed from government restrictions and regulations, the supply naturally adjusts to increases in demand. Demand in a capitalist society is evidenced by ability to pay, and in most other societies by need. There is no doubt that health care in the United States has to a large extent been socialized. Government, through its immense programs and regulations effectively sets prices and determines service. Before government intervened in the late sixties, health care, like everything else in America, was a matter of economics and custom. Money bought excellent treatment in the cities and in poorer and rural areas there was a network of support unique to the culture. Mid-wives still practice among the poor of Apalachia and are often preferred by the well to do who populate the Berkeley hills. Rich and poor pregnant women often fail to see doctors even when cost ceases to be a consideration. Premature births have held steady at seven percent in this country, even though we know how to prevent most occurrences. Under a pure free-market system, anybody can have all the health care he can afford, or receive as a gift from others. Under such a system, prices would fall and unnecessary tests and useless procedures would be discontinued. It is the idea that everybody has a right to health care, regardless of his or her ability to pay for it, that is responsible for the unlimited rise in the cost of health care. The ultimate end of such a system is rationing. In the end, the free market is a more humane system. Unfilled demands for organs and human tissue shows that social policy has not kept pace with technology. How tissue can be procured and delivered equitably and efficiently is an issue to be resolved. So far we have failed to even consider a market orientation but what is the alternative? We want donations to be based on altruism rather than coercion or the profit motive. There has to date been a failure to specify who owns the economic value of donated tissue. In the absence of distinct property rights there is nothing to prevent the middlemen from reaping the value of donated tissue. Another mistake we may be making is to rely on nonprofit organizations who have few structural incentives to coordinate their activities between the organ procurement agencies and the transplant surgeons. There should be more than a sense of social obligation to send tissue they cannot use on to another agency. Profit oriented entities are motivated by competition and are pushed into economies. Without these "pushes" a system of coordination and communication has not arisen naturally.

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Doctor Thomas Peters of the Jacksonville, Florida Transplant Center broke the taboo. He wrote in a 1991 issue of the American Medical Association Journal that it might not be such a bad idea for organ procurement groups to offer $1,000 for organs. Although the purchase or sale of human organs is a felony under the National Organ Transplant Act of 1984, the doctor's idea would skirt the law by calling the transfer of funds for organs, reimbursement rather than a sale. There has even been talk of having the government pay (reimburse) families for organ donations through a federal tax benefit or grant of some kind. It's a game of semantics, but other people are beginning to understand that a market policy might provide tissue of high quality in sufficient quantity to all who need it. After all, banning markets does not stop the play of economic forces. The United Network for Organ Sharing maintains waiting lists for organs and matches organs with recipients. There has been a forty percent increase in that waiting list in the last couple years. That organization claims that 2,206 people died while waiting for a transplant in 1990 and as of March, 1991 there were 22,483 people waiting for hearts, lungs pancreas, livers and most of all, kidneys. There is speculation that families don't want a sick relative identified as an organ donor because they fear he or she might receive less aggressive care. Others say the manner of requesting organs is at fault. One study indicated that when organ donations are asked for at the time of death, only 18 percent of those asked will agree. If the request for a donation of organs is made separately, the success rate rises to 65 percent.

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Alternative #26
Goal: To keep power closer to the people.

How: Reform the present health care system as suggested elsewhere. Taxing
employer-provided health coverage and allotting tax credit to those who buy their own health care plans would save the government money and lower the nation's health care costs.

Practical Benefits:
1 - States will be better able to manage their budgets. 2 - More flexibility. 3 - More creativity.

Soft Power Benefits:
1 - Empowerment as local folk are afforded more input. 2 - Accountability. 3 - Fairness wins as oppression loses.

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Background for Alternative #26
States are already strapped for funds. Indeed, James Martin of North Carolina tried to get Congressman Gephardt to intercede on the Hill for a delay for the states in the increased funding they were being asked to come up with for the medicaid program. It's hard to get medicaid assistance for nursing home care because while medicare is a wholly federal program, medicaid is a shared burden. States pay over 40 percent of medicaid's total cost and that's why they struggle so hard to keep people out of nursing homes. In October 1990 they began paying even more to cover the costs of new federally mandated nursing home standards. In California alone that is estimated to add at least another $400 million to the state's $6.9 billion annual medicaid bill. By limiting access to nursing-home beds, states are able to push the cost of elderly care onto medicare and the hospitals. One praise worthy exception is Delaware. It's medicaid program has established a super-skilled-care category that pays nursing homes up to $500 a day for certain heavy-care patients. Oregon's health plan required a waiver from Congress so that the usual medicaid requirements could be suspended. Instead of paying for everything for people up to fifty percent of the poverty level and nothing for those between fifty and one hundred percent, under the new plan Oregon would pay for procedures for everyone below the poverty level on a prioritized basis. A list was made of all medical interventions and arranged according to the public's priorities. That information was culled from town meetings across the state and 1,000 detailed phone interviews. The most cost-effective and long-lasting benefits were given top priority. Whatever portion of the list the legislature decided to fund was to represent the minimum benefit package that private insurers can offer in the state and that the state would package in a special state insurance pool for low-income uninsured. Oregon's plan is rationing by logic rather than by waiting list. Medicaid is supposed to be for the poor, but poor adults without dependent children have never been eligible. Others loose their eligibility according to the number of parents in the household or the age of the children and so forth. The federal government dictates who must be covered, a practice which has been referred to as "redefining the poor for accounting purposes." Since 1991 states are required to pick up 100 percent of the cost of premiums and co-payments and deductibles for medicare beneficiaries below the poverty line. The system is already targeted to protect the poor. By 1995 states will have to pick up premiums for those living on up to 120 percent of the poverty-line income. This is a perfect example of how

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mandates from Washington play havoc with state and local budgets. That one little "do-as-I-say" is expected to cost states $387 million over 5 years. In the FY 1991 budget medicaid for children was expanded to include coverage to all children up to age six who live in families with incomes up to 133 percent of the poverty line. The poverty line in 1991 for a family of three was just under $10,000 so 133 percent would allow participation by families with incomes of roughly $13,147. By 1995 700,000 more children should be added to the program and by the year 2002 states will have to cover kids six through eighteen which will add millions more kids. This is all supposed to cost $1.1 billion over five years. They really know how to predict things like that in Washington, D.C.! For instance back in the early 1960s recalcitrant voters were talked into supporting medicare with assurances that by 1983 the program would cost no more than $8 billion. The actual cost in 1983 was $38.2 billion— a lot more by any one's reckoning. The new legislation is another instance of the feds telling state legislators how they must run their social programs, what they must spend on whom and then leaving them to locate the resources to comply. This represents a mammoth expense for state and local governments, especially now that state and local governments no longer have the surpluses they once did. Health care bills began to soar when the federal government became the big third-party payer in the sixties and the discipline of a normal market was discarded. Does this tell us something?

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!" #27 Alternative
Alternative to the high cosf of insurance. Goal:
Affordable and accessible insurance.

How:
1 - Don't regulate the supply. Don't let government mandate what should be included in an acceptable insurance package. 2 - Use new available technology to develop a data base providing consumers, providers and insurers with efficient access to information.

Practical Benefits:
1 - Cost control. Costs can only be controlled successfully via the market. 2 - Choice. The only way a market system can work is if consumers choose. 3 - Better information. The only way consumers can choose is if they have access to information. 4 - Efficiency. Technology makes the necessary access possible today.

Soft Power Benefits
1 - People are empowered. 2 - Insurers and providers will learn to be accountable. 3 - Fairness, optimism, hope and goodwill will have a chance.

!"!#

Background for Alternative #27
Many states required that all health policies cover a vast array of services without realizing that such mandates amount to regulation of the supply side. For instance, Florida and Nevada require insurers to cover acupuncture, Arkansas and Connecticut want naturopaths (specialists in prescribing herbs) covered, Massachusetts says insurers must cover artificial insemination and embryo transfer and Minnesota insists that wigs and hair transplants be covered. There are at least 800 state mandated benefits which drive up costs. Supply is better regulated by letting individuals choose and pay for the coverage they want and not what government demands. This market used to lay beyond the reach of the non-affluent, but half the states now mandate that health insurers cover the mind, making, as one writer put it, another burden of modern life institutional instead of the responsibility of the individual. One of the main culprits in accelerating health costs is the extension of insurance coverage to psychological problems and addictions. There are many reasons for the increase in mental-health care, including greater cultural acceptance and broader insurance coverage. Health-insurance costs are a function of changing social norms, commercialism and law. Some people see a correlation between the major social changes of the past fifty years and the increased need for mental-health services. They see medical and mental-health services compensating for the vacuum left by the loss of family and community. Additionally, third-party reimbursement for this type of care is not limited under the Diagnosis-Related Group schedules (DRGs) which apply throughout medicine. Insurance companies tend to pay for hospitalization for mental disorders, but not so much for outpatient services. The resistance to reimbursing outpatient therapy in the 1970s encouraged the current boom in private hospitals, a more costly form of treatment. The market system has not been allowed to work because, as I'll continue to point out until something is done about it, bills have, for the most part, been paid by third parties rather than the actual consumer with his own funds. Consumers have had no reason to restrict their consumption of health services, and in many cases have not had the ability to shop for quality. A mass of regulations stifles the entrepreneurship and innovation the health industry might otherwise use to cut waste and generate efficiencies. Policies to encourage price competition among health-care providers were advocated by the Reagan administration, but hospitals and consumer groups, who claimed such policies would have a negative effect on the quality of care and force hospitals to either sacrifice quality or turn non

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paying patients away, blocked legislation. Dr. Paul Ellwood of Interstudy calls his tracking system "outcomes management", a new approach to cost cutting. The idea is to study the effectiveness of various medical procedures used to treat everything from heart disease to back pain and to eliminate procedures that don't seem to help. Early data suggest that as much as 25 percent of the nation's health care bill goes for procedures that do no good and that perhaps some procedures are not being used that would do some good. Research would allow doctors to constantly adjust their procedures in response to feedback on what works best, just as other businesses adjust their buying according to a survey of what is selling and what is not. Food companies know the impact of a redesigned mayonnaise bottle on sales but doctors have only patchy information about the pay offs from their work. The effectiveness of half of what the medical profession does is unverified. There's no problem with something as straight forward as setting a bone or treating pneumonia but the murky area is chronic ailments where there is a real need for data. If the pros and cons of alternative treatments were better known, patients would be better consumers. To know what works requires a follow up on how patients are doing at least a year after the procedure. Some researchers have found that some so-called preventive surgery actually decreases life expectancy. A patient-consumer would like to know things like that, and so would physicians. Thanks to the prevalence of computers it is now possible to bring the health care industry under a market system. During the Health Care Summit which took place in November, 1991 it was estimated that electronic billing, standardized forms, technology to reduce error rates, faster pay etc. would save an estimated $15 billion a year in administrative costs. It won't be long before a computer will generate information so that consumers could compare health-care costs and choose doctors and hospitals accordingly. Aetna Life Insurance Company saved over $2 million a month after installing GMIS Clinical Information Services which developed a database of health procedures and costs that allows it to evaluate claims quickly and eliminate expensive manual review. Another small entrepreneurial firm provides an electronic network that links doctors to insurers and eliminates paper claim forms. The health-care industry needs efficient access to information and those that get it will be able to cut costs and will have a leg up on their competitors. But first we have to change the system so that health-care costs matter to consumers. Now, as a rule, consumers don't care what anything costs because someone else pays anyway. Up to now there has been no reason for comparison so what little there is along this line is understandably inadequate.

!"$#

For example, the 35 hospitals in the Pittsburgh, Pennsylvania area were scrutinized by the state's legislature and it was found that in 1988 ten of seventythree patients admitted for heart failure died at one hospital whereas only four of ninety-one died at another hospital. The first hospital charged each of the seventy-three $11,015 whereas the luckier ninety-one were charged only $5,845 which made them twice as lucky. Of course the hospitals claim age and severity of conditions weren't considered in the study so it is not clear just what can be drawn other than there are definite differences between hospitals and more information should be made available to the public. Prior to the 1980s, most hospitals received their revenue based on costs, not on the prices they charged. Many hospitals do not even know close enough to estimate for a patient-consumer what the actual price is likely to be for an illness or procedure. Room rates differ from one hospital to another by a factor of two to one, but hospital bills can differ as much as ten to one for the same procedures. Faced with medicare limits, some hospitals simply jack up their bills to other patients rather than work on efficiencies. In 1990 a study was done of the Chicago area, with its fifty hospitals, and 600,000 prices were compared. Besides finding that hospitals used different accounting systems, the definition of service differed from hospital to hospital as well. A Wall Street Journal article printed the following range of charges reported in 1988: $13 to $127 for a mammogram, $59 to $635 for a CT scan, $125 to $3,365 for a tonsillectomy and $125 to $4,279 for cataract removal. The Cleveland Clinic Foundation is one of the few institutions with sufficient competence in cost accounting to be able to quote fixed prices for twenty-two different procedures. This enables people to become more involved in their own health decisions. Health Quality choice program in Cleveland uses outcome statistics which are just now being made available. Consumers need to compete on price, they would only if they are paying the bills, rather than on amenities, as is the case if everything is paid for them. Because most of the health-care was paid for by employers and government there was a tendency to over use the system. The providers didn't feel pangs about over-charging because the patient was not going to pay the bill anyway. All the incentives were wrong. If employees become informed educated buyers and connoisseurs of quality care instead of passive sheep, health-care providers will have to increase their efficiency. Making people responsible for their own lives again, has got to be a step in the right direction.

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Alterative #28

Alternative to the chilling effect of tort law on health care providers, researchers and manufacturers and the heating effect it has on cost.
Goal: To minimize the role of tort law which currently acts as a depressant to
any hope of attaining abundant quality health care at a reasonable price.

How: Find a just way to do some of the following:
1 2 3 4 - Screen suits for merit. Most malpractice suits have none. - Limit attorney awards. - Cap damages for pain and suffering. - Encourage voluntary compensation programs by doctor pools, as in VA.

Practical Benefits:
1 - More reasonably priced health care. 2 - More health care providers and pharmaceutical manufacturers and researchers willing to take a chance at providing innovative new break throughs. 3 - More access to those who can least afford and more often need care. 4 - Quick settlements as opposed to lengthy trials means faster collection of damages by the plaintiff.

Soft Power Benefits:
1 - Accountability by the professionals and the consumers. 2 - Greater feeling of control over one's circumstances. 3 - Hope for our chances to solve this problem.

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Background for Alternative #28
Fear of being sued has driven more than half the family physicians out of obstetrics, and many of the specialists that are left in the field refuse to deliver babies. In a market economy this would insure higher prices for pre and postnatal services, as more dollars would be forced to chase fewer obstetricians. I guess that doesn't apply in our non-market situation and so we can be thankful for small favors. Unfortunately, the lower income people are the ones that get hurt most. Fear of liability leads physicians to avoid high risk patients who are also often socioeconomically disadvantaged. The social purpose of malpractice suits is to keep the medical profession accountable and to recompense patients. Limiting access to pregnant women and those at high-risk is another one of those unintended consequences. Sixty percent of the cases filed against doctors in 1986 were found to have no merit, yet it cost insurers $380 million to investigate them. In 1982 the annual liability-insurance premium for an obstetrician averaged $10,946. In just five years it soared 238% to $37,015. Physicians were advised to "play it safe" and fetal-monitoring tests rose from 114,000 to 647,000. Defensive medicine costs $20-$30 billion a year and could be cut back with tort reform. Illinois now requires that malpractice suits be certified as meritorious by a physician of the same speciality in order to go forward. Since the law's passage in 1985, the number of malpractice suits in Illinois has declined by thirty percent. In 1975 the California legislature passed the Medical Injury Compensation Reform Act which caps compensation for pain and suffering at $250,000 and limits the amount of any award that can go to an attorney. Trial attorneys kept the Act in court for ten years so it has been in effect only about as long as the Illinois legislation. One good side effect is that insurance premiums for obstetricians and gynecologists in California are only half what their counterparts pay in Florida and New York, although steep at about $50,000. Premium costs in FL= $129,000, in NY= $120,000, in MI = $106,000, in II = $80,000, in GA = $55,000 and in ME = $44,000. Same speciality illustrating the difference in premiums doctors have to pay when practicing in various parts of the country. Virginia's approach was different. As of January 1988, a fund to cover medical and other expenses for children injured at birth, was established via voluntary $5,000 contributions from obstetricians and hospitals, with a $250 assessment from every other doctor in the state. The money is paid to the injured child only as long as he or she lives, and covers medical and other

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expenses that resulted from the injury. The theory is that the injury is most often an act of God, as opposed to negligence by an attending physician. After age 18 the reimbursements are for living expenses, based on the state's average weekly nonfarm wages. The American Medical Association's answer to the problem is a system not unlike that used by the National Labor Relations Board and workers' compensation boards, except that fault needs to be documented. Every state would have a government-appointed board, made up of doctors and representatives from other professions, who would investigate malpractice complaints for merit—similar to Illinois' approach. If a case is found to have merit, agents would suggest a settlement, with pain and suffering awards limited to $200,000, which is shades of California's old legislation. All victims would have access to the system, and if successful would see their awards within one year instead of wading through the tort system, which often takes many years. Of course a dissatisfied victim would always have access to the courts as a last resort. The AM A solution is kind of a potpourri. Senator Orrin Hatch introduced the Insuring Access Through Medical Liability Reform Act of 1990, which is another one of those federal mandates. This one forces states to adopt a package of tort reforms to rein in trial lawyers. Utilization-review programs started out with flying colors, saving as much as twenty percent a year for employers who used them. Unfortunately half of the companies that now use them find that they have no effect on cost-control effects what so ever. Part of the problem is the expense of employing the reviewers. The expense does not arise from scarcity—there are over 300 companies selling review services— it is caused by the high rates of liability insurance. According to a recent California court decision, utilization review firms may be liable if a patient is injured due to early release from a hospital for instance, and the liability could even extend to employers if they can be shown to have negligently chosen the utilization review firm. Doctors don't do extra procedures just to pad their incomes, they need to protect against malpractice suits. Tucked away in the October 1990 budget package was a law mandating that patients be given what is being called "medical miranda warnings". Patients must receive written information detailing their legal options for refusing or accepting treatment if they are incapacitated. The legislation also requires the Department of Health and Human Services to conduct a nationwide campaign to educate people about right-to-die legal options.

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Alterna^^^ #29
Alternative to expanding the WIC Program which provides nutrition and health care for Women, Infants & Children.
Goal: Healthy infants, youths, mothers ---------------- citizens!

How: Behavioral changes such as:
1 2 3 4 5 - Slowing teen pregnancy. - Slowing substance abuse. - Slowing smoking. - Better housing. - Cleaner environment.

6 - Less crime. 7 - Encourage marriage. 8 - Strengthen the family.

Practical Benefits:
Gains made in changing behavior would show even more dramatic results than the economic gains always given as justification for WIC.

Soft Power Benefits:
Utopia!

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Background for Alternative #29
White infant mortality in 1915 was approximately 100 deaths per 1000 births and black infant mortality was 180 deaths per 1000 births. In 1991 white infant mortality was down to 9 deaths per 1,000 births and black infant mortality was down to 18 deaths per 1000 live births. The infant mortality rate for both races has fallen to a small fraction of what it was 76 years earlier. It may be time to admit that America's high infant-mortality rate is a social problem, rather than a medical problem that can be cured with more dollars. Infant Mortality is determined by many things that doctors and hospitals do not influence. President of Oregon's Senate, John Kitzhaber recognizes that the country's high infant mortality rate reflects housing problems, environmental problems, teenage pregnancy and substance abuse. He agrees our health-care crisis is not so much a lack of money as it is a flawed health care system. A million dollar study which was supposed to find evidence to justify the WIC program (a special supplemental feeding program for women, infants and children) reported nothing any fifth grader couldn't have surmised. The Department of Agriculture's Food and Nutrition Service Department came up with the astounding news that women receiving good diets are less likely to have babies of low birth rate. What kind of claim is that? "Less likely" is far from a cause and effect. It is more likely that low birth weight is caused by the mother's behavior than by underfunded nutritional programs. A researcher at the American Enterprise Institute traced the cause of low birthrate and infant mortality to teen pregnancy and illegitimacy. Among all races in the USA in 1987, twenty-four percent of infants were born to unmarried women. Infant-health among Latinos, who generally receive a significant amount of extended-family support during their pregnancies, was better than infant-health among the general population. He found a 1982 study which showed children of unmarried white college graduates had higher infant mortality rates than those of married white high-school dropouts. Statistics show that a child born to poor married parents has a better chance of survival than a child born to a single middle-class mother. Japanese statistics were also studied. The fact that Japanese women are four times more likely to die during child birth than are American women, attests to poorer prenatal care, yet Japan's infant mortality rate is half that of ours. Coincidentally less than one percent of Japanese mothers are either teenagers or unmarried.

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Health and Human Services Secretary, Dr. Louis Sullivan in a speech in the spring of 1992, claimed that 20 percent of Caucasian births, 30 percent of Hispanic births and 60 percent of black births are to single parents and that a child born to a single parent has five times the likelihood of growing up poor. He went on to say that ten percent of all infant mortality in this country is due to mother's smoking during pregnancy and that the infant mortality rate in this country is now half what it was in 1970. Those who are still unconvinced that the attitude rather than the health of the mother accounts for America's high infant mortality, should take a hard look at Washington DC, a city that spends $ 105 million on its residents health. The District of Columbia has an infant mortality rate three times the national rate—it also has the nation's highest percentage of births to unmarried mothers—also three times the national average. ""Coincidental? In the nation's capital prenatal care is free to any woman whose family income is less than $20,000. Clinics, which provide childcare, are conveniently open in the evening as well as the day, and at most there is less than a two week wait for an appointment. A woman can be referred for drug treatment, see a dentist, a social worker, a WIC representative, a registered nurse and an obstetrician. And no one can claim ignorance of the services. There is an extensive media campaign with announcements on radio and TV, posters on buses and other public places, and on top of that a van goes to the poorest neighborhoods looking for pregnant women and offering to take them to the clinics and reminding others of appointments and providing door to door transportation. What more could be done? Nevertheless 60% to 70% of the babies bom at the General Hospital are bom to women who used drugs and/or alcohol during their pregnancy. Counseling is not the answer. Most of the women knew about free care but weren't interested. Women (girls) who are into alcohol and drugs don't listen, and spending more dollars on prenatal care and services is not going to make any difference. But politicians don't listen either and despite our burgeoning budget deficits, as of July 1989, states were required to provide prenatal care to households with incomes at seventy-five percent of the poverty line. The threshold was raised to a requirement of 133 percent in April of 1990 with states having the option to go to 185 percent. The mandate was to be funded by medicaid, which means states have to pick up almost half the tab. California, with one of the largest state deficits, took the federal government up on its offer to split the care for Californians with incomes 185 percent of the poverty level, which in 1991 meant a cost of $38.7 million. In a fit of generosity the state decided to go even further and broaden eligibility on its own to include families with incomes up to and including 200 percent of the

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poverty level. California simply slapped on a special tax to raise the additional $ 18 million required. The California legislators seemed to forget that the problem is not lack of access but getting people to use the facilities provided. But besides teen pregnancies, drug use and illegitimacy, there are other reasons the USA is ranked behind 21 other industrialized nations when it comes to infant mortality. We now have the technology to save babies weighing less than 14 ounces, but of course the cost is devastating. According to the Spring 1990 issue of Policy Review we spend $7 billion a year on 93 programs in an effort to keep children alive. I wonder if infants with extremely low birth rates are figured into the mortality rates of other countries. In Sweden if the prognosis for a baby is grim, no effort is made to save it. Treatment is commonly limited throughout Europe. And even in Britain, where every effort is made to save newborns, if severe brain damage or death seems likely, and the parents agree, treatment is terminated. French physicians make the decision for French families, for, as a spokesman put it, "our responsibility as doctors is not to give a family a handicapped child." But this is the United States, not France, and Americans have a long history of valuing all life, without putting subjective values on quality. At Stanford University hospital, the care for the smallest preemies was estimated to cost $ 160,000. The bill for neonatal intensive care nationwide, was put at $2.6 billion by a 1990 study published in the American Journal of Disease of Children. Unhappily the technology that saves, can and does sometimes impose profound suffering in the form of neurological disorders such as cerebral palsy as well as blindness and other congenital defects. More and more people are beginning to question whether heroic and costly efforts at saving life are in the best interests of anyone.

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Alternative #30
Alternative to Medicaid
Goal: Health care services for those who haven't the means to pay for it How:
1 - Volunteer providers and non-profit organizations that care. 2 - Provide tax credits to those who buy their own health care plans. 3 - Tax employer-provided health coverage as income to employees.

Practical Benefits:
1 - Would decrease padded bills and cost-shifting. 2 - Insulation from true cost thanks to third-party-payors would end. 3 - Would ensure access to the many poor people without medicaid because eligibility cuts off now at approximately 50% of the federal poverty level.

Soft Power Benefits:
1 - Compassion, nurturing and the gamut of charitable instincts would quicken. 2 - A sense of fairness and hope would grow in those that had previously found themselves, at 50% of the poverty level, too well-off for the assistance that those 51% under were able to receive. 3 - Accountability from providers. 4-Favoritism and its ugly by-products, bitterness and jealousy, would weaken.

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Background for Alternative #30
Numbers vary greatly but the following is a sampling of statistics commonly accepted in 1992. There are between 31 million and 37 million Americans with no health insurance and 28 percent of the population faces financial disaster if illness strikes. We spend millions of dollars on intensive care for those whom months before we refused basic care. We give by-pass operations to persons with Alzheimer disease and hip replacements to comatose patients. Health care costs now consume 14 percent of the elderly's income. We rank 22nd. in infant mortality and our life expectancy is no greater than that found in other industrialized countries. We pay more and get less. Government has not been stingy. $137 billion in federal funds alone was spent on the 55 million elderly and poor Americans covered by medicare and medicaid last year. Providing health care for people without insurance or adequate funds of their own is not a new idea. In the past the cost of their care was just shifted to others via increased insurance premiums or padded bills. The result of costshifting and third-party insurance coverage was that public expectations and practice patterns were disconnected from the economic realities of funding them, and decision makers were insulated from the consequences of their decisions. Dramatic escalations in health-care services and prices were encouraged by hiding the true costs. Costs were simply shifted back to providers and third-party payers while expenditures continued to escalate. Accountability for both fiscal and health decisions retreated further and further into the background and nobody ever had to accept or reject the principle of universal access. There's no doubt there are problems with the present system. With the average medicaid eligibility at less than 50 percent of the federal poverty level we can't claim to have universal access. A family of three making more than $5, 000 a year is considered too wealthy to qualify for publicly subsidized health care in some parts of the country. Individuals on SSDI (Social Security Disability Insurance) risk losing benefits after they've earned more than $200 a month nine times. These are considered trial work months and needn't be consecutive. At $500 a month SSDI benefits may be terminated—medicare is theirs after two years on disability and it may also be terminated over time if a recipient earns too much money. Since private insurers usually will not provide a disabled person with adequate health insurance, it is really important to get on SSDI. A couple years ago when I was researching this subject, 2.8 million people were receiving SSDI benefits. Only one of every 200 ever rejoins the labor force. Considering the difficulty of qualifying for the program it is

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easy to understand that once in the system they find it prudent to stay in. They are afraid if they become able to work, but maybe have a relapse and need help later on, it will be at least as difficult, and maybe even more difficult, to regain access to the system. There must be a better way. The Social Security Work Incentive Act of 1989 sponsored by Representatives Steve Bartlet of Texas, Robert Matsui of California and Senators Dole and Riegle would make it possible for persons with disabilities to ease themselves back into the work force without relinquishing all the benefits for what may turn out to be only a trial-run or an unsuccessful effort at work. The proposal includes a new "Medicare-buy-in" program, allowing disabled workers to contribute on a sliding scale to their health insurance until they are fully responsible for their own Medicare premiums. If work becomes impossible again, full SSDI cash benefits could resume. In 1986 similar reforms were made permanent in the SSI (Supplemental Security Insurance) program. In 1988, as a consequence, 35,000 SSI recipients were back in the work force earning a salary. During the 1980s VA facilities shrank their mental patient load by 25 percent and many of these people still need help. The skyrocketing costs of mental health and addiction problems weigh heavily on public hospitals, where 29 percent of emergency hospital visits in 1988 were drug related. My youngest son, who is a paramedic, tells me that ambulance and emergency services are used on a frequent basis by non-insured lower income people. What else do you do when you don't have your own private physician to consult? It's only natural to go to the emergency room, and as long as it's not going to cost you anything, it's normal to think of calling an ambulance to get there. The Health Care Policy & Research Agency as reported in Business Week in January 1990, said that Brenda Spillman "calculates that uninsured men and women had... two-thirds as many emergency visits as their insured counterparts." Her study involved the costs of bringing the use of health care by the uninsured up to par with use by the insured, and put that cost at $18 billion in 1987. In view of the waste we are finding in the use of health care facilities by those insured by Medicare and private insurers, getting the uninsured "up to par" seems like a dubious goal to me. Healthcare Knowledge Systems in Michigan, found that uninsured women spend an average of 1.9 days in the hospital for routine childbirth compared to 2.3 days spent by those with traditional insurance. It may not seem like a very large difference, but when you think of all the births occurring nationwide on a daily basis, the costs add up. To provide uninsured people with access to preventive and maintenance care would be a worthy goal in itself, and saving the exorbitant costs of ambulance and emergency- room services, too often left as tabs for the taxpayer, would be an added bonus.

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Example: One answer might be modeled along the lines of CHIP, the Comprehensive Health Investment Project started three years ago as a cooperative effort of private doctors working with the support of existing social welfare agencies and health departments in the state of Virginia. Although many Virginia doctors would gladly give time at the twice-a-week free clinics throughout the state, only about one doctor in ten would accept medicaid patients because of the paperwork and frustrating regulations that go along with it. Starting with six pediatricians and one hundred patients, the CHIP program flourished and at the end of its first year had attracted more doctors and was serving three hundred patients. The program's success attracted private foundation funds (private foundations like to see good use made of their dollars) and before long it had expanded to serve almost a thousand patients with all of Roanoke Valley' s doctors offering to donate time. When the associated press ran their story at the end of 1990, the administrators had identified 4,800 potential patients and hoped to entice all of them into the friendly nonbureaucratic program. It had become a real community project. When prescriptions couldn't be filed after hours at the discount rates offered by the public health office, the community's largest 24-hour drug store provided the service at even lower prices. A church donated a van to pick up patients who needed transportation to keep their appointments. This type of community volunteer effort, coupled with private foundation funds and those of already existing government programs, may be a viable solution to part of our national health-care dilemma. I believe people helping people in a personal way is a giant step towards Utopia.

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Alter

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#31

Alternative to placing health care burdens on employers
Goal: Attaining an environment in which business enterprises can thrive and
provide jobs and continue to lay the golden eggs so many American depend on.

How: Reject "Pay or Play" or any similar plan which puts the responsibility for
employee health care on business. Reform government regulations like the one by FASB discussed on page **. Encourage voluntary adoption of wellness plans, but not via tax manipulations.

Practical Benefits:
1 - Allow business to invest in equipment and new technology. 2 - Frees funds for research and development. 3 - Frees funds for expansion and hiring new employees. 4 - Removes the disincentive to hire older workers.

Soft Power Benefits:
1 - Freedom: not forced to provide for others. 2 - Fairness: an incentive to work hard. 3 - Conforms to the ideals of the U.S. Constitution.

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Background for Alternative #31
A September 1990 survey of approximately 2,000 firms whose health plans covered over eleven million employees found that costs rose from $2,748 per employee in 1989 to $3,217 per employee in 1990—more than a seventeen percent rise in one year. Rates of increase varied from industry to industry with an increase of slightly over eight percent for wholesale retail employers on the low end, to a hike of nearly thirty-eight percent for the construction and mining workers. Health costs accounted for a whooping twenty-six percent of corporate earnings in 1990. You can see why more and more large businesses are getting behind the drive for national health care—it's self-preservation! As AFL-CIO head, Lane Kirkland, said, "the bottom line is overtaking ideology." Costs have more than doubled in just the last five years, and if current trends continue, according to the annual Foster Higgins survey, firms will be paying $22,000 for medical benefits for employees by the year 2000! In 1989 employers paid approximately $45 billion to the workers' compensation insurance, almost double the figure paid in 1979. Instead of making the hard choices and asking individuals to share more of their health care costs, policymakers, through medicare and medicaid, have been short-changing the health-care providers who in turn pass the shortfall on to the private sector. It's a large burden that now business is unfairly and shortsightedly being asked to shoulder. Gail Wilensky, former head of HCFA (Health Care Financing Administration) would allow the self-employed and unincorporated businesses a 100 percent tax deduction for the purchase of insurance instead of the 25 percent presently permitted. I would like to see the present tax incentives for employers to provide health-care as a part of wages, removed, so that replacing health benefits with cash becomes a viable option. Of course that would involve trusting grown ups with their own money and trusting their ability to make wise choices for themselves. On average, employers pay a little over $3,000 for health benefits for each and every employee. If the employee could pocket the difference between the costs that his personal prudent shopping for health-care coverage could produce and the $3,000 plus, then he would have an incentive to lower his consumption of unnecessary health services. I saw a survey in 1990 that found that seven of ten employees thought employers should provide health benefits for employee's families, but nine of ten employers said they planned to reduce or eliminate coverage. Is the

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government going to end up transferring to others the obligation it took on to provide health care, and can it make private employers provide health benefits? The New Jersey legislature started in 1987 with an eight percent surcharge on the hospital bills of all insured patients. That was to be raised to just under 25 percent in 1991. Since more than half of the one million uninsured in New Jersey are working, there is a proposal to transfer the burden of funding their health care from insured patients to employers via a payroll tax of $ 144 per employee. A $ 1,000 per employee penalty would be levied on employers who refuse to purchase health insurance. But New Jersey wasn't through. It has set up a fund with public money to help families facing financial disaster due to a child's medical bills. A touching and worthy cause made to order for private philanthropy. But an already financially strapped state government has usurped the role. New Jersey's program, which generates about $5 million a year, is funded by a surcharge on all employers who are required to make payments into the state's unemployment compensation fund. No one listens to the small employers when they talk in terms of principle, when they say that it is not the employer's responsibility to be the first provider of health care. As for the larger companies, most of them have been providing health benefits as part of their compensation package for years and are convinced that rising medical costs reflect the expense of treating workers left uninsured by the smaller employers. But once the principle is established that legislators can constitutionally and should morally make some people provide for others, there will be no end to the wish lists nor to the gripe lists. For instance, insurers would like to see more people participating but are worried about excessive regulation; advocates for the elderly want generous nursinghome benefits and coverage for medication but states are concerned about picking up the tab for the expanded medicaid coverage; advocates for children want funds for more prenatal and health care but can't figure out how to make people use the programs. The California Medical Association has been trying to get the state to require employers to provide insurance for all workers as Hawaii has already done and as New Jersey is trying to do. They use New Jersey's argument, claiming that since four of the six million uninsured Californians are working, employers should pick up the $120 per month per capita average cost. You know the rest; the problem of the uninsured eventually hits everyone, driving up costs for health care services, insurance premiums and labor costs. Here also, small businesses are opposed and large businesses support the concept because it would reduce the costs they already

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provide. The AMA estimates a need for about $2 billion in state subsidizes and figure the alcohol and or tobacco tax money would do the trick. Determining the need for mental health care is subjective. Companies are finding evidence that the prompt diagnosis and treatment of mental health problems may lower other health care costs and increase worker productivity. Nevertheless the costs are substantial. The per-employee cost of psychiatric and substance-abuse benefits was $ 163 in 1987, $207 in 1988 and $244 in 1989 or for companies with more than 5,000 employees the cost was $297 a head. According to a Foster Higgins survey, the claim is not usually made for the worker's care, but for the care of a dependent—too often an adolescent. Unfortunately many private psychiatric hospitals have become dumping grounds for adolescents whose parents cannot deal with teenagers. The unrelenting growth in health care bills and the Financial Accounting Standards Board (FASB) changes requiring companies to set up huge reserves to fund retiree benefits are causing many businesses to cut back retirement benefits for employees. For example Vons Cos. once offered a generous health plan to its retirees, providing coverage with virtually no deductible or premiums. In 1990 it switched to a system in which retiring non-union employees will receive a onetime allocation of credits based on length of service, credit to be used to pay annual premiums ranging from $ 1,400 to $4,000 for one of two insurance plans. The switch is intended to cut Vons anticipated expense under the FASB changes in half. Ball Corp. in Muncie Indiana hopes to shift the burden of health-care coverage to employees in a plan that will allow them to put money away via payroll deductions for future medical needs. The company would invest these employee after-tax dollars. As long as the money is spent for health care after retirement, both principle and interest earned would be tax-free. In 1990, Ball's retiree obligation amounted to about $700,000 a year, or a little over a thousand dollars for each of its retirees and health care costs for active employees amounted to about $14 million. In 1990, about 4,100 of the company's 7,100 employees were eligible for health coverage upon retirement. This would give Ball a potential liability of about $60,000 per employee which, according to the FASB rules, would have to be accounted for on current balance sheets. The FASB regulations were on hold in early 1991 and the last I heard were being reevaluated. Some companies are moving away from the standard practice of setting a fixed charge for all employees and instead are instituting incentives and even sometimes penalties for good health practices by employees. Wellness programs are inexpensive and are suppose to be effective. In the fall of 1990 the Council of State Governments created the National Association for

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State Employee Wellness. The 22 state program of NASEW consists of a newsletter, a health-risk screening program, education classes on stress management, parenting and the like which are usually provided by personnel of health or insurance departments. Some states fund the programs via workers compensation insurance rebates, specific grants or through their regular budget. Local governments fund similar programs via car washes, bake sales or whatever it takes. Even profits have joined the rank of the old stand-by nonprofits, like the March of Dimes, in providing health education to the public. Corporations often use patient advocacy companies, as they are called, to keep their employees informed, healthy and in a healthy work environment. They are finding that a handful of workers account for the most expenditures. Bonuses are often paid if employees take a series of steps to get healthy or additional charges are levied on the health insurance for smokers or obese employees. Example: Ren, a Nashville Tennessee provider of kidney dialysis services, wanted Congress to force private insurers to pay more of the $2 billion annual bill for dialysis treatment now covered by medicare. In 1991 employers provided primary coverage for affected employees for twelve months—about $200 million a year. Ren's plan would extend employer coverage to two years which would free up $200 million which congress persons could claim as evidence of their attempt to reduce the deficit. Other businesses claim Ren expects to profit from the cost-shifting because private insurers pay more for dialysis than medicare does. Worst of all, the extra $200 million burden on business may discourage smaller companies from buying coverage for workers.

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Alternative #32
Alternative to Medicare and its lack of nursing home and long care coverage.

Goal: Peace of mind and adequate care for the elderly

How: Greater use of home care and provision of catastrophic hospital and long term care in exchange for larger payments for ordinary care.

Practical Benefits: 1 - It's want the country wants and needs. 2 - No need to declare bankruptcy in order to get care at the end of your life. 3 - Flexibility with new technology making home care a more viable option every day.

Soft Power Benefits: Release older people from fear that without the assurance of long term care they could find themselves or their loved ones destitute and with no place to go. Peace of mind and renewed hope are soft power benefits.

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Background for Alternative #32
Medicare provides hospital insurance, along with limited coverage of stays in skilled nursing facilities, for the elderly and disabled. It is entirely federally financed and provides uniform benefits but it is not available for long-term custodial care in nursing homes. Often elderly patients are forced to exhaust their resources to qualify for medicaid which pays the bills for 65 percent of the nation's nursing home residents. There have been studies which show that 46 percent of those over 75 years of age who enter nursing homes are bankrupted in 13 weeks and 70 percent are bankrupted after a year. Nursing home residents with a living spouse, may protect a minimum of $ 12,000 or half their combined life savings up to a maximum of $60,000. In addition they may keep certain exempt assets, generally including the family residence if a spouse or dependent relative is living there, household goods and personal effects, a car, burial plots, and funeral expenses up to $1,500 each. Single individuals may protect only about $2,000 of their assets and have a more limited list of exempt assets than do married couples. If a nursing home patient wishes to pass an inheritance on to his children it is possible, but there are pitfalls. Transfers for less than fair market value made within thirty months of a medicaid application can be invalid. A medicaid qualifying trust will allow an inheritance to be passed to children if structured properly. The trust must be irrevocable and the person transferring assets to the trust (trustor) must give up all control over those assets with only the right to the income produced by the assets which revert to named beneficiaries upon the trustor's death. For example if assets worth $200,000 were put into such a trust and invested to yield a modest 8 percent annually ($16,000) and thirty months later the trustor were to enter a $30,000 a year nursing home, the $16,000 would pay the nursing home without depleting the assets in the trust and medicare would pick up the $14,000 shortfall. If the trustor regained his health, he would continue to get the $16,000 income for living expenses from the assets placed in the trust. Without the trust he would have had to pay the entire $30,000 a year for his nursing home care and may have depleted his assets to the extent that his return home would have been to a life of poverty. Additionally, nothing of his life's work would be available to pass on to the next generation. But not many people know about medicaid trusts. That's why I'm so anxious to see government's role reduced in the lives of all American citizens. Those "inthe-know", or who can afford knowledgeable attorney and financial planners, come out just fine in a bureaucratic state. Experts start devising ways to skirt the rules and regulations even before the ink on

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new legislation is dry. That's what Leona Helmsley had in mind when she said those infamous words, "Only the poor pay taxes". Those with knowledge, see to it that their tax bill is minimized, or in this case, nursing home bill. Consider that those over sixty-five make up roughly 12 percent of the population and number around 30 million. If you realize that 1.4 million of these citizens are in nursing home care, that's roughly three percent of twelve percent, or less than half of one percent of the general population. The problem will occur over the next forty years as the number of elderly double and the over age 85 group reaches 5.3 million. Unfortunately the premiums required by private insurance companies for nursing home policies providing good-quality coverage, exceed the budgets of most older Americans. Although over a hundred insurance companies sell long-term care policies, yearly premiums average close to $ 1,500 for people who sign up at age 65 and almost double that if they wait until age 75. Equally expensive policies are available that cover at-home care. Oregon's system of home-care is one of the best and different versions are being used, to a lesser extent, in other states. The trick is to get insurers to go along. A 24-hour hospital stay can cost a patient $800, whereas the same services provided at home might cost less than half. Insurers may go along as sophisticated homecare providers proliferate and the demand for high quality cost-effective care accelerates. New products for the home-care market are coming out every day. A company in California has produced three videos to help chronically ill patients care for themselves at home. They address self-care, mental coping and family support. Another offering to make home-care more feasible is a hospital-style bed for people unable to sit up or get to a bathroom without assistance. At the touch of a button, a conveyor roller, directly under the patient and on top of the mattress, maneuvers the patient to the foot of the bed and into a detachable wheelchair at the end of the bed. The bottom half of the bed then raises the patient to a sitting position in the wheelchair, or to a standing position. The reverse puts the patient back to bed. It rents for $60 a day, or for long term care, it can be purchased. The cost of comparable home intravenous programs for nutritional and antibiotic care can vary as much as 700 percent. The General Accounting Office can point to instances where home medical-equipment supplies have overcharged medicare (taxpayers) by $240 million a year. The plight of people under age 65 that need nursing home care is even more tragic. The under 65 disabled have a waiting period before any benefits are available and entry to the medicaid system is exasperating and exhausting. Paying for interim care is a real problem. Congresswoman

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Barbara Kennelly of Connecticut recently introduced a bill which would allow a person who has been certified as likely to die within a year, to receive, tax-free, the proceeds of any life insurance policy. That would allow a younger family to keep its assets in tact in case they are faced with the need for custodial care for a family member with a terminal illness. There was a lot of talk about cuts in medicare at the end of 1990. The budget compromise bill passed the end of 1990 for FY 1991 provided mammography screening for 18.7 million women on medicare (additional estimated 5-year cost of $ 1.25 billion) regulated medigap insurance polices (adds federal penalties up to $25,000) and regulated prices medicaid pays for prescription drugs (hurt drug companies by supposed to save government $ 1.9 billion over 5 years), provided more home-care service for low-income frail and elderly (authorizes $580 million for program over 5 years) and expanded help for low-income people in general, all to the tune of $22 billion (supposedly over 5 years). There was a proposal in the FY1991 budget that persons with incomes above $ 125,000 a year pay 75 percent of the true cost of their medicare insurance premiums ($63.60 per month) instead of only 25 percent of the cost ($31.80) as is now the case. But nothing ever came of it. Medicare was supposed to be a voluntary self-sufficient program, not a welfare subsidy. There are many elderly people who don't begin to need the financial help as much as their grand-children do in trying to afford an education, a home or even a family. Yet government picks up the tab for 75 percent of the real cost of medicare premiums. Why the premiums should be subsidized at all is beyond me. We're not talking about return of monies paid into the social security system as in payroll taxes, you understand. In the early eighties Ronald Reagan suggested that those choosing to participate in the medicare program raise their premium payment slightly from 25 percent of the real cost, to cover 35 percent of the real cost, and lobbyists for the elderly had him running for cover. President Reagan tried in 1983 to have the elderly or disabled medicare beneficiaries pay higher out-of-pocket costs for most hospital stays in exchange for protection against catastrophic illness. Now the government picks up most of the tab for a set number of days and that's it. I would like to see medicare patients shoulder a greater share of the cost for the early days, and then have Uncle Sam pick up the tab when the burden becomes too great. The Reagan administration figured that kind of peace of mind would have only cost the seven million medicare patients hospitalized each year about $294 more than they were paying at that time. However a plan like that could be a disaster without first instituting incentives for health care providers to curb costs. Otherwise there would be less reason than under the

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present failing system, to make rational economic choices and, since everything is on Uncle Sam, more reason to use excessive measures to prolong a patient's last year of life. The rapid rise in health-care costs is connected to the aging of the population. Eighty percent of the health-care dollar is spent during the last six months of life and with the population aging, the pressure to expand coverage to incorporate long-term care is enormous. As a society we are reluctant to accept the inevitability of death. Instead we devote scarce resources and pile up emotional and other costs in search of dubious benefits. The last year of life took 28.5% of the health care budget in 1978 but miraculously decreased to only 28% in 1988. But this can be misleading as major illness is very rare. Ten percent of the population consumes 70% of the health care-—unchanged over the last 40 years. Medicare used to reimburse hospitals for the care provided, whatever the cost, but in 1983, it started paying set amounts for each illness or medical procedure. This makes it costly for hospitals with long-stay patients. Long-stay patients are sometimes referred to as "border elderly", those older patients who have no place to go. Actually, about 25 percent of the nation's hospitals struggle under the burden of "border elderly". The problem is far more pervasive than that of the more publicized "boarder babies" abandoned by mothers addicted to drugs. Contrary to popular perception, President Reagan increased medicare spending to the tune of $10 billion/year, the largest increase in medicare since 1965. Another popular misconception is that administrative costs for private health care coverage are three or four times more expensive than the administration of the government's medicare program. Congressman Marty Russo is one who has fed this misconception by publicizing flawed facts. Medicare is suppose to use 3% of the health care dollar in administration whereas Blue Cross uses 8% (counting taxes they pay) and other insurers' administration costs are admittedly as high as 10%. But in the comparison with medicare various things are added or not counted. It may be true that administrative costs between private and public programs are not equal but they come closer when figured "fairly".

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Alterna^ #33
Alternative to the way government deals with health care providers.
Goal: To have the market determine value, not bureaucrats.

How: Repeal "relative value" and reform or eliminate utilization reviews

Practical Benefits:
All the values of a market system as against a bureaucracy.

Soft Power Benefits:
1 - Fairness issue for physicians. 2 - Self-determination and control issue for all providers. 3 - Accountability and honor would be strengthened.

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Background for Alternative #33
The "relative value" concept is a variation on "comparable worth". In December 1989 Congress approved a massive overhaul of the $47 billion medicare physician reimbursement plan. The intent was to bring the incomes of higher paid specialities in line with lower paid doctors. To accomplish their purpose, bureaucrats will "rationalize" over 7,000 services, assigning more weight to office visits and the like and less to more complicated medical procedures, just as one might arbitrarily assign more weight to sweeping and emptying the trash and less to teaching in order to bring the salaries of janitors and teachers into line. Instead of using a market system and letting consumers decide worth, planners would do it for us under a Relative Value System. This new bureaucracy doesn't even purport to save money, it only redistributes it differently among doctors. The reason you heard no debate on this outrageous idea is that the American Medical Association approved it, not on principle, but because the members that stood to gain from the implementation outweighed the would-be losers. Although there is some truth to the allegations that certain medical specialties are "overpaid", the reason is due to past political meddling by government. Government offered incentives for one kind of service over another. Now we have this new misguided and dangerous attempt by government to solve the problem it first created by adding one more layer of bureaucracy. Utilization-review programs employ cost-cutters in the health field to look over the doctors' recommendations and try to find less expensive methods to achieve desired results. They do not threaten the quality of care and cause some patients to be dismissed from hospitals too early as critics once claimed. A 1989 Institute of Medicine study found absolutely no evidence that review programs jeopardized the health and safety of patients. In 1990 the Supreme Court ruled that hospitals and nursing homes may sue in federal court to compel state officials to set "reasonable and adequate reimbursement rates". The American Hospital Association's claimed a shortfall in medicaid payments of $4.3 billion in 1989. And in the FY1992 budget doctors and hospitals are again being asked to take an even bigger hit. There may be some crackdowns by the IRS on hospitals who fail to provide enough charitable care to justify their federal, state or local tax-exempt status. Congressman Edward Roybal, chairman of the House Select Committee on Aging, was quick to propose a bill to reinstate charity-care

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as a fundamental basis for tax exemption. It would require a hospital to provide indigent care worth at least half the amount of its exemption, in addition to providing evidence of other community benefits equal in cost to 35 percent of its tax exemption. One Texas hospital was sued for not providing enough indigent care. The hospital's president had an interesting definition of charity which he used to answer the IRS charge. He claimed that as a teaching and research center, activities which are beneficial to society, the hospital fulfilled its charitable functions and did not intend to extend care to the poor specifically. Nobody wants to turn indigents away, and they are usually treated, with the cost either borne by taxpayers or shifted to the private sector via the insurance system or padded bills. And it is not always the indigents that have to be subsidized. Healthy people often under-insure. It's hard to turn one's back on suffering, even if it could have been prevented. Medicare has reimbursed hospitals for capital expenditures in the past, paying 85 percent of what is spent on new plant, equipment and technology, multiplied by the portion of hospital days spent treating medicare beneficiaries. In FY1991 medicare's capital expenditures amounted to almost six and a half billion dollars. A recent scandal that revealed funds spent on lavish swimming pools and foyers probably furthered the federal government's decision to limit and scrutinize capital reimbursements in the future. Under the change proposed in 1991, hospitals would be paid a fixed amount according to the number of medicare patients they serve. Of course hospitals are fighting the proposed change. All hospitals, but especially public hospitals, have been having trouble with Washington attempting to cut the medicaid program at the expense of health care providers. In 1988 emergency visits at public hospitals were almost five times more numerous than at general hospitals, and occupancy rates were far higher. Thirty percent of in-patients and fifty-two percent of out-patients were uninsured, and forty-two percent of fees weren't paid. Hardly any patients pay their own hospital expenses directly without thirdparty payers. Medicare and private insurers pick up the tab for 90 percent of hospital revenue and have their own reimbursement formulas. Since only ten percent of the revenue comes from consumer-patients, hospitals have little reason to keep track of line-item prices. Of course some line-item prices are used in the more complicated cost-reimbursement formulas, but this only gives hospitals an incentive to artificially raise or lower prices to manipulate the reimbursement from third-party payers. Again, let me stress that the problem here is that these artificial prices are not determined by supply and demand. Another problem is that those least

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capable of coping with high hospital costs are the ones that are having to pay out-of-pocket. Primary payers need to shop and compare prices in order to make prudent buying decisions. This means having total package prices submitted by hospitals before admission. The government is responsible for taking health care out of the market system and they should help reestablish it, perhaps by requiring hospitals to quote pre-admission prices to all patients the way auto-mechanics, contractors and other service providers are required to do. That is the only way patients will know in advance what their total bill will be and the only way to control spiraling health-care costs in this country. Example: A bureaucracy generates paperwork and administration and those costs are spiraling. At one hospital in 1983 a cataract operation required three days of hospitalization, produced 12 pages of paperwork with seven signatures whereas in 1990 the same operation took a three-hour stay, produced 38 pages of paperwork requiring 30 signatures. At his 430-bed Redwood City, California hospital, an official set the price tag for dealing with all the regulatory bodies and government mandated paper work at $7.8 million annually. In an article written for the Wall Street Journal and published in June, 1990, he claimed his hospital had the same average number of inpatients as it did 25 years ago but the staff had increased 75 percent. Some of the increase could be justified; for instance, the rise in nursing staff from 374 to 533. It corresponded to a rise in outpatient service and the higher number of patients needing intense care today, due to government regulations which restrict the point when hospital admission is permitted. But the largest increase came in accounting and administration which tripled in size. The federal government, in a misguided and futile attempt to curb health care costs, insists that medical procedures be thoroughly audited often by three or four entities, and constantly checked for quality and appropriateness. The billions of dollars spent in regulatory costs nationwide are a major factor in the high cost of health care in this country—a cost which does nothing for the people's medical well being. The answer we've been getting from members of congress is greater and greater government involvement. It's idiotic to call on government to deal with the problems government itself created!

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Alternative #34
Alternative to hearing only glowing reports about health care in other countries.
Goal: More informed decision making-more balanced information. How: Look

for the other side of this and all public policy issues.

Practical Benefits:
Better informed citizens.

Soft Power Benefits:
Renewed pride in America's capitalist foundation and gratitude towards those who have worked to keep socialism at bay in this country. While they did not succeed completely, if they had not stemmed the tide, even as they were able, the rest of the world would have no place to turn for the highest quality care and the newest technology. If we succumb, where will the world turn for advances?

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Background for Alternative #34
In West Germany the government regulated sick funds, foot the entire bill for doctor, dentist, hospital and medications. The cost came to $5.2 billion in 1960 but was a whopping $72 billion in 1988. The West German system, which covers 92 percent of the population, is funded with contributions by both employers and employees amounting to about 15 percent of salaries. As in our system, there is little incentive to practice frugality. The Germans tried to reform their system in 1988 by slapping price controls on drugs. The fear now is that R&D in pharmaceuticals could move to this country now that we're speeding up our drug-approval process. It would cost between $200 billion and $300 billion a year to institute a system like Canada's here in the United States. The Canadian health system is supposed to guarantee equal access to health care, at no direct cost to the citizen, with any practitioner the patient chooses. Canada doesn't permit a private sector alternative, so Canadians travel to the U.S. A recent Canadian study found no difference in death rates between Canadians and Americans who experienced low and moderate risk procedures, but death rates in the U.S. were lower when high risk procedures were considered. The joke is, the system is great as long as you don't get sick. As in all nationalized systems, access to major procedures is strictly rationed. A study by Stanford health economist, Victor Fuchs, published in 1990 and based on 1985 data, found U. S. health expenditures to be 38 percent higher per capita than in Canada. Again, the difference is most striking in fees for procedures requiring specialists. There was very little difference for routine office visits. It is estimated that general practitioners and family physicians deliver two-thirds of the routine care in Canada, but just one-third of the care in the U.S. On a per-capita basis, Americans get three-quarters of the doctors' services received by Canadians, which is contrary to the popular notion that lower costs in Canada are a result of providing fewer services. Instead it is the kind and difficulty of services that accounts for the differences in the two systems. Canadian doctors, in order to maintain their incomes, are forced to perform more, not less, procedures since their fees are capped. Canada has twelve magnetic resonance imagers used for diagnoses, or one for every 2.1 million people compared to 1,375 in the U. S. or one for every 182,000 people. In Canada there are only eleven facilities doing open heart surgery compared with 793 in the USA and fourteen sites doing organ transplants compared to 319 in the USA. There are waits for operations such

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as hernias, cataracts and coronary bypass grafting. Many Canadians die before their wait is up, and this of course, saves the system money. Heartbeat Windsor is a private volunteer organization founded in 1989 whose purpose is to help Canadian heart patients obtain critically needed surgery in the U.S. The thriving private practice of medicine in England is not an alternative for Canadians as the government forbids it. Canada has a smaller percentage of its population over age 65 than we do, and that accounts for some savings to the Canadian system, as costs increase with an aging population. Incidence of teenage pregnancy is 250 percent greater in the USA than in Canada, and the incidence of smoking, drinking and doing drugs during pregnancy is much less in Canada. Research and development account for a much higher percentage of health costs in the USA than in Canada. In Britain at any time, 800,000 people are waiting for operations. Waiting is not access. In England the number of people with private insurance has doubled in the last decade so that now over 12 percent of the population is privately covered. Maybe the fact that 9,000 kidney patients are denied treatment by the British NHS each year has something to do with it. Naturally money is saved when you don't offer the expensive services. Ambulances are used in England as a free taxi service with 91 % of the trips used for non-emergency purposes. Just as well, as they are not equipped with the life-saving equipment considered standard in this country. The British NHS spends $70 million a year on tranquilizers, sedatives and sleeping pills, approximately $19 million on antacids and $21 million on cough medicine, according to John Goodman of the National Center for Policy Analysis. NHI doesn't work as advertised anywhere. The wealthy and powerful find ways to circumvent the lines. Those pushed to the end are not aware of the technologies they are being denied. But Americans have access to information about modem medical technology and there are plenty of lawyers and advocacy groups to represent the down trodden. People may be used to being pushed around in other parts of the world and accept it as their lot. Americans won't stand for it! In a strange dichotomy Americans are the first to say "You can't push me around" and "There ought to be a law"! In New Zealand, 33 percent of the population is covered by private health insurance, with private hospitals performing one quarter of the surgery. The elderly have the most to lose from the adoption of national health insurance (NHI). In Europe 22% of patients over age 55 are not given access to dialysis and in Britain 35% were refused treatment, as were 45% of those kidney patients over age 65. Such treatment is rarely allowed for those over age 75.

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NHI is a middle-class phenomenon. There have always been responses in all countries, from all governments, to the health-care needs of the poor. NHI is a way to woo the middle-class taxpayers. Numerous inexpensive services affecting millions of voters is better policy, as far as politicians are concerned, than spending large amounts of money on a handful of acute patients. It is always politically expedient to redistribute resources from the few to the many. Whenever medical care can influence the outcome, the USA is on top. For premature babies, and those with cancer, heart disease, and those requiring transplants and so forth, their outlook is best in this country. We may pay more, but we get more.

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Alternative #35
Alternative to our current dropout problem.

Goal: To have as many students as possible obtain a good education. How:
1 - Incentives to keep kids in school. 2 - Establish programs making it easier to reenter the system. 3 - Encourage diversity and flexibility.

Practical Benefits:
1 - The nation needs an educated workforce to compete in the 21st century. 2 - Educated citizens are more likely to be contributors than takers.

Soft Power Benefits:
1 - Education makes it easier for individuals to reach their potential. 2 - Education is good for everyone and pushes the human race ahead. 3 - Staying in school even when it doesn't feel good develops discipline and strengthens character.

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Background for Alternative #35
We need to discourage dropouts in order to compete in the global market. The drop-out rate today, meaning by one reckoning, the rate of those not graduating on time, is 28.4 percent—unchanged since the late 1960s. In 1989 die average dropout rate for all U.S. students was about 12 percent, but for Hispanics it was closer to 32 percent. A report based on the most recent census found that 78.7 percent of Hispanic 16-17 year-olds were in school compared to 91.6 percent of the total population. School completion dropped for those ages 18-24 from 62.9 percent in 1985 to 55.9 percent in 1989. In some cities phantom kids are carried on the books long after they have dropped out of school because schools get money according to the number of students enrolled. It is almost impossible to accurately determine the number of dropouts because the calculations are so diverse. There is the completion rate which simply states how many household members in certain age groups have not completed high school. Then there is the event rate which documents the number of kids who leave school in any single year without getting a degree. This rate is inaccurate because many kids drop out more than once inflating the results. Some schools count those enrolled in high school equivalency programs as dropouts and others don't. We certainly have the technology to obtain more accurate figures and the National Center for Educational Statistics and the Council of Chief State School Officers are testing various procedures in 27 states in an effort to establish a uniform and more accurate system of determining dropouts. The Achievement Council in California issued a set of statistics that showed California was more troubled by drop outs than the national average. The Council claims that between 1984-1987 dropout rates increased from 29 percent to 33 percent in the state and the drop out rate for Latinos and African Americans rose from 45 percent to 48 percent. In the 1990s these groups will make up a school-age majority in California. With that in mind, statistics showing larger drop out rates for minorities in the state, have to be taken seriously. Drop outs become adults and if too many adults are unable to support themselves others may not be willing or able to support them later. School systems across the country have experimented with ways to keep potential dropouts in school including mentoring and tutoring programs as well as the old remedial summer school. Unfortunately legislators are expanding their power. Wisconsin has a program called "Learnfare" where a family's welfare check is withheld if kids don't attend school on a regular basis. Although it gives parents, or more likely a parent, incentive

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to make sure their children attend classes, this is, I believe, an unwelcome expansion of regulatory power. But the expansion is rampant. Oregon ranked 35th in their high school graduation rate and the state plans to correct this by tracking dropouts and having work rules that make it almost impossible to find a job without first passing a test given at the end of the 10th grade. Other states have threatened to refuse drivers licenses to dropouts. The Boston Compact guaranteed jobs for those who got high school diplomas and the dropout rate actually increased with that promise. Apparently the lure was too far in the future to keep borderline kids interested. The four main reasons for dropping out are lack of academic success; a feeling that no one in the school cares; a feeling that school isn't relevant to their present or future lives and personal problems. The best prevention programs address as many of these issues as possible. In the public system as we know it today, drop outs who decide to go back to school should be allowed to attend classes outside their own districts. Minnesota has an incentive program which allows drop outs, who want to have another go at education, to attend a high school outside their district. In it's first year (1987) 15,000 students enrolled. With the best of intentions millions of dollars are lavished on anti-dropout campaigns that emphasize the hopelessness of life without school credentials when every close study has shown that diligence, determination, and the drive to get ahead are most important to productivity. Today it is possible to continue or even start an education at almost any stage of life. Failing to march to the drummer of one's peers need not spell disaster. Every day brings its own set of hopes, dreams and opportunities. I abhor those who wring their hands and suggest that "It is too late!". We should stop acting like a decision at one point in time is some kind of stigma which will last forever and rather encourage diversity and make sure our educational system is flexible with plenty of opportunity. Example: "Success for All" started in Baltimore and over a five year period has spread to 31 schools in 12 states. It starts with pre-school, full kindergarten days and reading tutors in the first grade. The idea is to not let anyone fall behind and to assure that as many as possible savor early success.

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Alternative #36

Alternative to lack of parental involvement in education.

Goal: To get parents to support the educational efforts of their children. How: 1 - Reaching out and involving parents and letting them know what they do and think matters to their children and the entire community. 2 - Allowing them to have more choice in the kind of school their children attend.

Practical Benefits: 1 - Schools function better with parental involvement. 2 - Children perform better when they know their parents care. 3 - Children are not alike—it takes a variety of systems to provide the optimal education for a variety of children. 4 - Concern & involvement strengthens the family & the country.

Soft Power Benefits: 1 - People feel better about themselves when they are given some power over decisions which affect their lives. 2 - People develop responsibility when given the opportunity to do so.

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Background for Alternative #36
Asian and Jewish parents are known for the importance they place on their children's education. Until recently Hispanic and black parents haven't reinforced education in the same way. In 1988 25,000 Ph.D.s were awarded to Americans but only 358 went to blacks. Some Hispanics understand that education is a way to escape poverty and despair but even so they are often intimidated by the system and have other priorities. Newt Gingrich of Georgia introduced a bill to provide monetary rewards to students for reading and reporting on books, something which, in my opinion, should not be influenced by legislation. Former Secretary of Education, Terrel Bell proposed states legislate what he calls a Parent Educational Responsibility Act that would make parents sign a contract obligating them to take an active role in their child's education as a prerequisite to entrance to the public school system. Some things shouldn't be legislated. It is ridiculous to legislate character or matters of the heart. Most children would think it silly to pass a law that says everyone should be good, or loving, caring and nurturing or take an interest in the life of their children. Individual character is built through responsibility and individual character is something that is sorely lacking in our society today. Example: In West Lynn where parents regularly participate in the classroom, over 50 percent of middle school science students are given local internships through a program called Future Makers.

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Alternative #37

Alternative to schools that fail to educate our children.
Goal: Schools that turnout educated young people. How:

Through competition and the market system.

Practical Benefits:
1 - The proliferation of schools that do the best job and closing of those that fail to perform satisfactorily. 2 - An educated workforce. 3 - Citizens capable of thinking, creating and taking care of themselves and each other. 4 - Taxpayers will get their money's worth. 5 - More people will be able to participate.

Soft Power Benefits:
1- Education is the foundation for all progress. 2 - Education breeds tolerance, creativity and responsibility. 3 - To obtain a good education requires discipline.

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Background for Alternative #37
Clint Bolick of the Heritage Foundation claims only five percent of high school seniors can decipher a bus schedule and only twenty percent can write a letter. Not long ago in Los Angeles, Pacific Bell had some job openings and 258 applicants responded but only 140 showed up for testing. Of those, only seven percent were able to pass the test, the rest simply didn't have the skills for entrance level jobs. It seems that Citicorp of Illinois rejects 840 of every 1000 applicants for entry level tellers because they can't complete the forms. Business spends a fortune trying to teach new employees what all employees started out with a few decades ago. Educators blame others for the poor performance of students. I am bothered that educators are more than willing to accept pay increases and benefits as incentives to solve a problem that by their own insistence, has its solution elsewhere. If a private enterprise makes a mistake it closes down but if a government entity makes a mistake it grows, attributing the "mistake" to lack of money. Maybe teachers should share in the profits and losses. Private schools have smaller bureaucracies and need to please customers rather than political constituencies which works to make them better. Variety is the key. Mandate as little as possible. To avoid having an educational system run by bureaucratic administrators, such as we have now, it is important that we leave educational entrepreneurs to their own innumerable devices. Let them provide the ideas, the energy and the capital. If they want to offer entrepreneurial shares to teachers as an inducement to attract or keep the best, then let diem make that decision. Back off with your "shoulds"—this country is already suffering from too many "shoulds" and not enough freedom. Miami has a 45 minute a day elementary school class for sixty students—it is described as an "Afro-centric self-esteem class." In Detroit in 1991 27 girls enrolled in the intended all-boys schools (560 boys) which the ACLU and NAACP and NOW stopped. In Minneapolis thirty at-risk students, although of both sexes, ran up against desegregation laws when they were put in a remedial class. In Baltimore twenty-seven black kindergarten boys, having trouble and all being raised by single mothers, were put in a class taught by a young black man who is staying with them through fifth grade. The attendance, behavior and academic record is so good that Baltimore is adding more such classes and some for all-girls also. So far no one has objected. Dade County, Florida, for the past four years, has allowed autonomy in all their schools. They give each facility in their district a block of money to spend at their discretion. Instead of an assistant

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principal, a district is free to hire four para-professionals. Teachers make decisions on how the funds can best be spent right along with the principals. In Cambridge, Massachusetts where everyone is forced to choose among public schools—most actually chose on the basis of proximity so they end up going to their old neighborhood school. . .people wanted more alternative programs than were available and two schools were undersubscribed. People were unhappy if they didn't get any of their first three choices and so the two undersubscribed schools were transformed into die alternative schools most desired. Choice became a force in Cambridge to increase quality as a whole, as well as involving parents. Memphis has had choice for ten years. Montclair, New Jersey has turned all its schools into magnet schools with open enrollment and that St Louis allows transfers within 23 districts. The new Soviet minister of education, Edward Dneprov, told the London Times that his goal is to dismantle the centralized and authoritarian Soviet education system. He already has programs ready to launch in Moscow and Rostov to provide vouchers to Soviet children, equivalent to die cost of one year's education. They will be offered to the independent public or free-market private schools of a Soviet family's choice. The Soviets are accepting capitalism at face value and their children may enjoy the freedom to attend the school of their choice before ours do!

There are many inspirational examples throughout the country.
The Marcus-Garvy school in Los Angeles, Westside Preparatory run by Marva Collins in Chicago and Philadelphia's Ivy League, Father George Clemmons' Holy Angels School, Wally Simpson's Lower Eastside Community in New York City are all superior independent black schools. They operate on about one third of the budget of most public schools. Kansas State has managed to produce "Ivy League-caliber scholars on a shoestring budget." Forty-two of the forty-seven top national scholarship winners since 1986, came from Kansas State University. The National Society of Black Engineers named a K-State student the top black engineering student and six of the nine architectural awards given by Architectural Digest magazine went to K-State students. All K-State's nominees for the Barry Goldwater scholarships, set up by Congress in 1989 for science and math students, were winners. These accomplishments are achieved despite low faculty salaries and operating budgets, proving that money is not an essential ingredient for success in academic pursuits.

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I guess Jaime Escalante, the teacher who was immortalized in the movie "Stand and Deliver", proves that poverty and the home environment cannot defeat excellent teaching. This immigrant from Bolivia has been a true inspiration for the entire nation. He was able to help 576 kids from the barrios of Los Angeles pass the College Board's rigorous Advanced Placement calculus test. When asked his secret he said all a teacher has to do is care more about teaching than he cares about the system. In the summer of 1991 Mr. Escalante left that school after 17 years. Garfield's loss is Hiram Johnson's gain as Mr. Escalante began to teach in this 70 percent minority high school in Sacramento, California in the fall of 1991. Ronald Nagrodski, 36 is a teacher in a small Illinois school (397 pupils). He has instituted an advanced mathematics curriculum similar to that used by Jaime Escalante at Garfield High in Los Angeles. His ninth graders are learning from textbooks previously used by seniors. He only earns $30,000 a year and says "The only thing you get out of working hard as a teacher is the gratitude of your students and the feeling of doing a good job." At Tilden High on Chicago's South Side a dedicated lady who has spent 34 years teaching has instituted a challenging program for inner-city students. Journalist Michael Ryan wrote of Joyce Oatman in Parade Magazine, June 9, 1991: Oatman read every educational textbook she could get her hands on and began enrichment programs for her students. She brought them to school early in the morning and talked them into staying late and coming in on Saturdays. She worked with them on basic skills like reading and math but also talked to them about how to think critically and about issues as diverse as philosophy and the environment. Urban Day school started in 1967 and has been providing quality education for inner city youngsters for almost twenty-five years. Over 98 percent of Urban Day students graduate and 50 percent go to college. Polly Williams, a Milwaukee politician, has become the political symbol for school choice. Her goal has never been to undermine public schools but to give them competition, (see pp her story under Good People)

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Alternative #38
Alternative to our current lack of character and values.
Goal: To encourage the instinct to do good and to build rather than to destroy
and to equip future citizens with the ability to distinguish between the two.

How:
1 - A variety of schools where values of the parent's choosing can be taught. 2 - Reinforcement of character and values in homes, public institutions and the arts including movies and TV.

Practical Benefits:
1 - Cut back crime and the country would be a better, safer more pleasant place to live. 2 - Business will be more efficient when what the other person says can be relied upon. 3 - Trust inspires confidence which makes people happier with themselves and more productive. 4 - The United States of America will be the number one nation in the world if it can instill character and values in its citizens. 5 - Less dependence on welfare. 6 - More volunteers to help those who are in need.

Soft Power Benefits:
1 - Character and values is what soft power is all about. 2 - Power from within cannot be effectively destroyed. 3 - Freedom is safe in the hands of those who value it.

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Background for Alternative #38
Al Shanker, president of the American Federation of Teachers reportedly said, "Teaching kids values won't help them learn to read or write." But a different attitude was reported by the general public in a recent Belden and Russanello poll which found 80% thought values should be taught in all our schools. New York's One Nation Many Peoples curriculum hopes to de-emphasize the content of social studies and heighten the critical thinking of grade-schoolers with questions that "equips them with the moral sensitivity to ask: 'Is my economic well-being at the expense of the well-being of others. What can I and others do to promote greater economic fairness and equity?'" At the other end of the spectrum we have schools where teachers are afraid of indoctrinating students with their own personal beliefs and therefore fail to lead class discussions or to teach anything of real value. In one instance a student found a lot of money and returned it to the rightful owner. Everyone in the class told the student what a stupid move that was and declared they would have kept the money for themselves. The teacher was silent, offering no guidance to the class and no encouragement to the student who had returned the money. If we don't teach morals and responsibility we won't get them from our young people and the United States of America won't be, and in some places already isn't, a very nice or safe place to live. The trouble is, in a diverse nation such as ours, there are many views concerning morality and sensitivity. How does a school system determine which view of morality to teach? This would not be a problem if parents were given the choice of where and how to have their children taught. In 1947, religion was outlawed in public schools. The Supreme Court, which by the way opens with a delivered invocation, "God save the United States and this honorable Court", may have something new to say about prayer in schools when it rules on Lee vs Weisman in the spring of 1992. That was the suit filed by a parent against a Rhode Island school principal who allowed a prayer during graduation ceremonies. The anticipation stems from the presence of the two newest Justices, David Souter, and Clarence Thomas, who many think may join forces with Justices Byron White, Antonin Scalia and Anthony Kennedy to change current church-state rulings. Currently the Court holds that any government action whose purpose or primary effect is to promote religion, violates the First Amendment. Justice O'Connor contends that government actions that appear to

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endorse religion should be held unconstitutional. It makes so much more sense to me that any display of religion is acceptable as long as no coercion is involved. The prohibition is not against the practice of religion, (that prohibition occurred in the USSR) but against the establishment, which is where the coercion comes in. In Maryland a couple years ago, a Baltimore Judge John Carroll Byrnes began sentencing juvenile offenders to "library time". Juveniles had to read as a condition of their probation. The Judge firmly believes that kids that get in trouble have as much potential as anyone else. He says, "The huge difference between good and bad in our society is education." By giving them books to read he feels he is giving them a chance to get a look at life and values that are far different from the street values that they have been exposed to all their lives. A report, known as Code Blue, was issued by a commission of educational, political, medical and business leaders. It said "Never before has one generation of American teenagers been less healthy, less cared for, or less prepared for life than their parents were at the same age." Since 1950 teen suicide has increased by at least 300 percent and is now the second leading cause of death among adolescents. The teen homicide rate is up 232 percent since 1950 and it is the # 1 cause of death, at least among 15 -19 year old minorities. According to the report 25 percent of black males are in prison or under court supervision. One third of high school seniors get drunk once a week. The average age for first time drug use is 13. Behavior is die cause of all this suffering—behavior such as drinking, drugs, violence, promiscuity. A 1991 Johns Hopkins survey found that by eighth grade, 61% of the boys and 47% of the girls in a Maryland rural school district had had sexual intercourse. The first reaction of bureaucrats was to demand condoms. As of 1990 31 states and DC all mandated schools provide some form of AIDS education. Every state encourages educational programs. Actually there are few sources of reliable information regarding teen sexuality other than sketchy health department records. The syphilis rate among 15-to-19-year-olds zoomed 50% in the 1980s—that's some evidence of the problem. Although Aids among adults is more prominent in males it seems to be pretty mixed in teens. The statistics are so poor because the incubation period for HIV is ten years so teen agers have a hard time believing the disease actually exists in their age group. There is a growing consensus that restraint should be considered—that telling kids not to have sex and then providing education and the wherewith-all to have sex more safely is giving mixed signals. I see two alternatives. One is letting individual solutions proliferate without broad based government policies and the other is to make abstaining from sex as acceptable as abstaining from smoking has become—if not more so.

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It must become fashionable again to recognize that there are numerous things of value in this world besides money. It should be commonplace for a man or woman to take pride in having spent extra time nurturing a family, cultivating friends, tending a garden, caring for animals, exercising and/or drawing closer to nature, reading, studying, praying, communicating, creating in any of the arts—all rewarded, not generally with money, but with intangibles that should demand respect. A person's life should not be judged so heavily by material possessions but these other things should be taken into consideration when assigning valuing —especially when a young person is considering options.

Example:
A Columbia, South Carolina beauty-shop owner wrote away for safe-sex pamphlets and photocopied them for her clients. Upon hearing that condoms were part of safe-sex, she ordered 5,000. In an attempt to demystify sex, she has kids sit around her place talking frankly without embarrassment. That's real grass roots involvement. In August 1991 three church-sponsored Cornerstone Schools opened in the inner-city of Detroit as an experiment combining academic and non-denominational religious instruction. The very day the project was announced there were 300 applicants which led to a waiting list of up to two years. That shows the desire for educational alternatives and especially education with a strong moral underpining. The interfaith Cornerstone School Association operates its three schools on a year round basis charging a modest tuition of $1,800 with scholarships available. The Association will probably expand to fill the need.

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Alternative #39

Alternative to illiteracy

Goal: To eliminate illiteracy among all those capable of becoming literate.

How: Help by volunteer individuals and groups who are truly concerned.

Practical Benefits:
1 - A more efficient and capable workforce. 2 - Citizens less dependent and better able to care for themselves. 3 - A safer environment for former illiterates and those around them.

Soft Power Benefits:
1 - Self esteem. 2 - Happier and more productive citizens.

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Background for Alternative #39
Senator Paul Simon of Illinois and Representative Tom Sawyer of Ohio introduced the National Literacy act which failed to pass in the 101st Congress. The National Literacy Act would have spent an additional $900 million on unproven programs and increased federal involvement in education. It would have duplicated existing and underutilized programs. There are already 4,200 adult literacy programs even though only between five and ten percent of adult illiterates are enrolled in a program. The drop out rate here is between 50 and 75 percent. You can lead an illiterate person to a program but you can't make him enroll or stay in that program. Example: Salem's Bush Elementary School, with 75 percent of families below the poverty level and one third not speaking English, has what they call an Even Start literacy program which provides weekly tutoring. Even an 85 year old lady has been helping out for five years. The local church helps with language and is currently building a playground There is something called a Literacy Network. It is a national umbrella sheltering activities in eleven cities around the nation. The best example is Houston's Read Commission.

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Alteri^ve #40
Alternative to underfunded schools.
Goal: Adequate supplies, equipment, teachers and safe pleasant surrounding in
which our children can learn.

How: Let the federal government provide educational vouchers adjusted only
for geographically determined cost of living differences.

Practical Benefits:
1 - When funding is no longer based on property taxes, children in poorer districts will receive the same benefit from the government as children in more wealthy areas. 2 - Competition will weed out the weakest schools, teachers and curriculum and encourage the most successful. 3 - Competition breeds innovation and diversity. 4 - Consumers can effect change by taking their business somewhere else if they are dissatisfied.

Soft Power Benefits:
1 - A greater sense of fairness and more opportunity for selffulfillment. 2 - Vouchers will give power to the consumers of education.

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Background for Alternative #40
Depending on how education is defined, 52 percent of California's budget goes to education. By the terms of Proposition 98, passed in California in 1988, forty percent of the state budget has to, by law, be allocated to education. Jonathan Kozel's recent book, Savage Inequalities explores the extremes of wealth and poverty in our school systems. Mr. Kozol suggests doing away with the property tax for school funding and substituting the more fair (read more progressive) income tax. The federal government provides between six and seven percent of the funding for education with the rest of the bill underwritten on a pretty equal basis by the states and by local property taxes. Mr. Kozol claims the states have a constitutional obligation to provide education. He believes they ought to provide three quarters of the funding for public schools with the other one quarter coming from the federal government. Regardless of the budget percentage in actual practice, it is absolutely clear the system needs to become consumer driven and results oriented. Funding should follow performance. England has grant-maintained schools which are independent schools financed by government. We could have the federal government provide one hundred percent of the funding for education in the form of vouchers. If an amount was allocated to every child in the nation, formulated for his or her particular locality and funded in the form of a voucher, competition would do the job now facing myriads of bureaucratically-picked commissioners. Vouchers would unleash the ingenuity and creativity of millions of ordinary citizens and the best ideas would survive to be copied because the market would demand them. The five million children currently in non-public schools save tax payers annually approximately $27 billion. Because it typically costs less to educate a child in a private school, providing assistance to low-income parents could save taxpayers billions of dollars. The costs of buildings and land are not included and in comparing the price of public versus private education options, the fringe benefits provided to teachers are often left out of the equation, even though they make up as much as one-third of a teacher's compensation. The public school system spends a national average of $5,200 per pupil. Chris Whittle, founder of Whittle Communications, the company that tried to get commercially sponsored news programs, into public schools a couple years ago, broke the cost down and found that we pay $250 million an hour to run the public school system, kindergarten through twelfth grade. He found that if we took all the millions of dollars donated by businesses and

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foundations across the nation each year and lumped those dollars all together in one pot, the donations would run the public school system for approximately 90 minutes. And here is a good place to say that independent or private sector education is not a rich man's issue. Recent figures show that 41.7 percent of families who send their children to private schools have incomes less than $25,000. We spend more than any other country and yet our children are not getting a decent education. Between 1929 and 1987 total real expenditures per pupil— that's adjusted for inflation—rose 500 percent in the public school system. Most spending on education occurs at the state and local level. During the Reagan era real per-pupil spending on education grew 24 percent as opposed to a 16 percent growth during the seventies. In 1981 we spent an average of $2,491 per public school pupil; in 1991 that figure increased to $5,638; up thirty-three percent after inflation. Gross dollar amounts are often used in calculations instead of per-pupil expenditures. Gross amounts show a slow down in spending on education which was due to the Baby Bust that followed the Baby Boom— a decrease in the rate of increase. The Economic Policy Institute, a DC think tank, issued a report early in 1990 that was supposed to show that the United States ranked 14th out of 16 industrialized countries in spending on^ducation, pointing to the fact that only 4.1 percent of its GDP (gross domestic product) went to education whereas West Germany devotes 4.6 percent and Japan 4.8 percent. Because our GDP is so much larger we still spend more than any other country (except Switzerland) on education on a per pupil basis which is the only way that it makes sense to look at the situation. Per-pupil spending across the nation has been increasing, with a low in 1990 in Utah of $2,579 and a high in the District of Columbia of $7,850 per-pupil. Spending the most per-pupil did not bring the best results. DC spent most on students and its teachers were the third highest paid in the nation ($39,850) whereas they ranked 50th in high school graduation rates and fell near the middle on test scores with a rank of 22. Even though Utah spent less than a third of DCs expenditures, its test scores ranked 15th and it was 8th in high school graduation. Teachers salaries ranked 47th ($23,652) showing no correlation between money spent and results attained. The 1987 Walberg and Fowler studies found no link between per-pupil expenditures and student achievement. Walberg and Fowler determined that it is not spending as much as it is teaching techniques that determine results in the classroom. Eric Hanushek of the University of Rochester looked at 65 studies on the relationship of spending and performance and found absolutely no correlation in 75 percent of the cases, a positive impact in 20 percent and an actual negative impact in 5 percent of the studies.

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Included in the independent evidence to refute any contention that there is a correlation between dollars spent on education and the performance of students is the June 1989 Brookings Institution study which found resources such as teacher salaries and per pupil spending have little correlation with student achievement. South Korea spends little on a per-pupil basis but Korean children consistently outscore Americans on math and science examinations. Actually we spend far more on education than most people realize. No one figures the cost of the unfunded pension liabilities which the states will have to pick up as teachers and others connected with the public school system retire. Public-school teachers don't come under the federal pension system but they are nationwide and their pension liability is increasing on a fast track. In 1988 those unfunded pension costs topped $400 billion. Supervisors, middle management, administrators whatever you want to call them - they expanded at the expense of the classroom teacher and the students. In education in 1970 there were approximately thirteen students for every staff member and by 1990 the ratio was nine students for every staffer. $6,107 was the average spent per pupil in 1989 in 116 public high schools in New York City. Of that $6,107 only $1,972 actually reached the classroom. The rest was spent on administration along the way. Of the &' city's 119,258 employees, only 54 percent were teachers and some of those were staff and development employees and not ever in the actual classroom. In Milwaukee, of the $6,541 allocated for the education of each child, only 26 percent made it to the elementary classroom. Instructional spending in Milwaukee in 1968 accounted for 70 percent of the education budget, but by 1989 only 45 percent of the budget was used for instruction. The Cascade Policy Institute found that Oregon's public school system had one central office person for every 92 students whereas its private system had one central office person for every 2,300 students. Even without Oregon's new proposed bureaucracy, that state already has 53 oversight and ______ regulatory agencies to which the public schools are accountable. Examples: If you're looking for ways to control the cost of education one solution might be to cut the number and the pay of administrators. Chicago' s school superintendent makes $175,000 a year and spent another $67,000 in expenses, meanwhile asking 30,000 teachers to give up a scheduled pay raise. When asked to cut his own salary as a symbolic gesture he was interested but ended up recommending a ninety percent cut in the amount spent on supplies and equipment and deferring building maintenance and

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repair until the following year. To steal a smooth phrase from the masters of one-line advertisements; we are definitely spending more now and enjoying it less. There are more ways than one to fund our schools. The Epsom Plan which originated with the small town of Epsom in New Hampshire, would give property-tax credits to taxpayers who educate children outside the local public schools. Taxpayers would receive up to $ 1,000 in property-tax abatements if they pay to educate a high-school student outside the regional public high school. Since it costs the town $5,000 a year for tuition for each student attending its schools they will save $4,000 with each abatement. It's a win win situation because it expands choice while lowering taxes. The National Education Association and ACLU both threatened suit before the plan was even finalized. School districts have been known to save money by providing their own health insurance. A local district dropped out of the county health pool and insured itself and saved enough to give teachers a much needed six percent pay hike. A few years ago the Emeryville, California school district was issuing I.O.U.s to its teachers and last year it provided $ 1,000 scholarships to each of its graduates. Emeryville is small; only 525 students in the entire school district, kindergarten through twelfth grade. The district was turned around and saved from bankruptcy by the leadership of the District Superintendent, Dr. Peter Corona. Some American "can do" attitude was evident in the principals, teachers and staff who came in on weekends and evenings and did double and triple duty as teacher, administrator, counselor, janitor and gardener. They all pulled together and turned a probable disaster into an unqualified success. The district repaid a $600,000 five year loan from the state in only three years and was able to give its teachers pay raises and its students a quality education, as evidenced by the district's test scores which were higher than before the financial problems. The scholarship which, besides the financial help, is tangible evidence that someone cares and has a real interest in what students do with their lives beyond the confines of the Emeryville school system.

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Alternative #41
Alternative to a shortage of quality teachers and lack of selfesteem among our children.
Goal:
1 - An adequate number of excellent teachers. 2 - Development of a healthy "can do" attitude among our youth.

How:
1 - Institute more open system where creative and talented people can teach without the say so of an unnecessarily restrictive educational bureaucracy. 2 - Provide opportunities for success and the development of confidence without sacrificing a honest recognition of ability or failing to provide penalties for failure.

Practical Benefits:
1 - A greater variety of available teachers. 2 - More interesting and interested teachers. 3 - Teachers more qualified to teach in their fields. 4 - Children more eager and able to learn. 5 - People are less likely to commit crimes or to rebel against social institutions when they have self-esteem.

Soft Power Benefits:
1 - Teachers that are happier and have a higher self-esteem. 2 - Teachers that like teaching and their subject matter. 3 - People are more creative when they believe they have the ability to succeed. 4 - People with self-esteem are more optimistic and optimism is catching.

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Background for Alternative #41
We pay more and get dissatisfied teachers and kids with low test scores and high dropout rates. While teachers' salaries increased by 24 percent between 1986-1990, their satisfaction with their standard of living dropped from 80 percent to 67 percent and satisfaction with their jobs dropped from 90 percent to 77 percent. Those statistics would suggest that satisfaction is more important than pay. In Chicago nearly 18,000 children come to school and find no teacher, not even a substitute. Author, Jonathan Kozol claims that on normal days onequarter of Chicago's public school teachers are substitutes. On the other hand, a lot of people with four-year degrees are shut out of teaching even though they would like to give it a try. Creative and talented teachers are prevented from teaching by the stultifying web of political, administrative and union controls. Yet when asked if certification is a prerequisite for good teaching in a recent poll, 18% of the general public said yes and 71% said no. 33 states now have alternative routes to certification. In those states as a prerequisite to teaching it is no longer necessary to take educational courses. The requirements vary. Only Connecticut, New Jersey and Texas have programs available in all subjects on all grade levels. Others restrict entrance to areas where there is a shortage. In New Jersey there is a basic skills test and a one year apprenticeship and these new teachers need a certain number of teaching courses from an accredited college. Since 1985 the number of teacher applicants has doubled and the quality has improved. The number of minority teachers has doubled. Many alternative teachers scored higher on the national teacher's exam than their traditionally certified counterparts. 22 percent of teachers who responded to a 1990 poll said they were not well prepared in subject-matter knowledge to teach; 54 percent thought they were not well prepared to recognize student learning styles and 44 percent thought they were not well prepared in understanding child and adolescent development. 78 percent of teachers polled said they were in education because of a desire to work with young people; the second most popular reason chosen was the value of education to society= 38 percent; job security was third and 32 percent were attracted to the long summer vacation. Unfortunately 30 percent thought they had too much invested to leave. Most telling was the fact that 83 percent thought schools should adjust to needs and interests of students rather than students adjusting to expectations of the school, 77 percent thought academic achievement standards should be flexible enough so that every child could feel successful and 25 percent thought kids should be passed to the next grade regardless of performance.

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One of the emphasized goals of teaching over the last twenty years has been to make every child feel successful. Chester Finn, in his book, We Must Take Charge: Our Schools and Our Future, tells the story of a student teacher at a college of education who proudly told her colleagues that she carefully avoided introducing her second-grade students to words they did not know on the grounds that "the children should feel good about themselves as readers." In California it is illegal to keep a student in a grade below his age group, even though he may not have developed the skills to move on. In 1990 the American Association of University Women (AAUW) commissioned a study which found that between the ages of 9 and 15 self-esteem among girls took a real plunge and supposedly led them to give up any ambitions they might have otherwise had in the academic area. The connection was made that self-esteem is correlated in a positive fashion with academic achievement. A 1989 study asked children from six countries, who were tested in math, how they thought they did. The Koreans that did the best showed poor self-esteem in thinking they did the worst, whereas the Americans showed excellent self-esteem by thinking they did the best and actually coming out on the bottom of the ladder. The AAUW forgot to take into account the findings that minority girls felt great about themselves but did far worse than the others in math and science. One might conclude that self-esteem is not a prerequisite for good mathematicians. Example: Teach for America is a program that recruits graduates from the top colleges in a kind of Teach Corp—a variation of the Peace Corp. These new graduates, after a summer training program, give a couple years of their lives to teaching in the nations schools. The energy and commitment volunteers bring to the various school situations has been absolutely phenomenal. What these eager, generous young people lack in teaching experience they make up in intelligence and enthusiasm. I am really impressed by everything I have heard about Teach for America. Most of all I like the fact that it is a volunteer organization and shows that people truly do care and still feel they can make a difference to the country. More than anything, I like the energy and example of the founder, 24 year old Wendy Kopp who has said, "I believe in change. There's always a better way to do something." Amen. *As a nonprofit organization it is funded by charitable contributions from foundations, business and individuals. Unfortunately the organization is pushing for federal funding, which I believe is a mistake.

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Alterative #42

Alternative to our current system of education.
Goal: To reform the current public school system. How: Market based reform through competition among educational innovators,
funded by the federal government from general revenue, rather than by local and state taxes. Parents and students, as voucher holding consumers, will determine which curriculum, facilities, teaching staff and philosophy will survive. Those that please the education consumer will flourish and expand and those that don't will fold.

Practical Benefits
1 - Results are bound to be better than under the present system or else the school will cease to exist as students switch to those that show themselves capable of achieving the results desired by consumers. 2 - A great variety of schools will be available. 3 - More innovations will be possible than under the old system of education and without the bureaucratic nonsense that made change take so long. 4 - Will put an end to the present system of spending more and getting less. 5 - Children will not be required to conform to a mold that does not fit their personality or unique educational needs.

Soft Power Benefits:
1 - People will have more control over their lives. 2 - People will become more confident and optimistic as they realize that what they think and how they feel makes a difference.

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Background for Alternative #42
American high school graduates in the eighties were more than one year behind the test scores of their sixties counterparts. A sign that public education has been a monopoly for too long. That accounts for its inefficiency, high cost and poor quality. It needs competition, which means privatization, which means vouchers. Poor kids are too often subjected to drugs and crime instead of education. Robert Woodson, founder and president of the Washington D.C. based National Center for Neighborhood Enterprise, favors choice. He says it gives poor folks the chance at what the more affluent already have. A 1988 Harris Poll found that half of public school parents would choose private schools for their children if they had the means to do so. Chicago's public school teachers are twice as likely as other parents to send their children to private schools. In January, 1991, 27 low-income parents filed suit accusing the public schools of Chicago of "educational malpractice". They demanded Chicago provide vouchers so their children could have the option of attending private schools like the children have in Milwaukee, Wisconsin, thanks to the efforts of democratic state legislator, Polly Williams, (see pp ) A lot of people are afraid vouchers would mean the end of the public school system. Those that raise the loudest objections are often the ones that have already taken their own children out of that public system. That's why Polly William's threat influenced the Milwaukee teachers. The majority of teaching parents in Chicago send their own children to private schools. Jesse Jackson's son attended the exclusive St. Albans in DC while the Reverend warned against the destruction of the public school system. Former DC delegate, Walter Flauntroy, also sent his children to private schools. A recently reported Belden and Russanello poll found 87% of the general public think private schools are a valuable option and only 8% condemn them because they take resources from public schools. Only 5% believe public schools are best at discipline and ten to one they believe private schools are better at giving basic education. The poll found the younger the people the more they favored vouchers. 77% of non-whites favored choice and a plurality supported vouchers. The poll showed that public assistance to private schools is most feared by private schools, most of which are religious independent schools. Vouchers are a way for everyone to reject poor schools and pay for the best schools they can find. Public schools would set tuitions to attract vouchers and parents could supplement their vouchers and send their kids to a more expensive school. Vouchers give parents the maximum power to

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control their children's educational destinies, with the possible exception of home schooling which isn't plausible for a large percentage of the population. The GI bill was the ultimate in choice in education because the money followed the individual and could be used for the public or private education of the holder's choice. H.R.5115, the Equity & Excellence in Education Act, better known as the Bartlett-Eckhardt Amendment for Parental Choice, is legislation advocating open enrollment in public schools. It was found that private school enrollment decreased in Massachusetts where the program was tested. There was no longer a need to flee from the public schools when open enrollment was instituted. Actually open enrollment started in Minnesota in 1987. Students can apply to schools in any district because the money provided by the state follows the student to the school of his or her choice. Arkansas, Iowa, Nebraska and Ohio all practice open enrollment. Other states have what is known as "controlled choice", where parents cite their school preferences. Controlled choice doesn't permit a child to attend his neighborhood school if it would upset the racial balance. Controlled choice is not as flexible as open enrollment. Choice will work, but it must be accompanied by high standards and autonomy. The philosophy behind the magnet school concept is that successful schools should be imitated and even duplicated. Magnet schools are designed to attract students from outside their areas and presently comprise twenty-five percent of all schools of choice. Magnet schools generally focus on specialized academic courses such as math and science, or they focus on performing or creative arts or vocational education or unusual or experimental learning methods; some are remedial. Students are admitted either because of their superior academic performance or on the results of a lottery or on a first come basis. Example: New York City gives 90,000 of its 940,000 students choices among 250 alternative programs; some by lottery, others subject to screening. Since 1973 the graduation rate has increased in the open enrollment district of East Harlem in New York City from less than 50 percent to over 90 percent. And even though East Harlem has the highest poverty in New York City, it ranks 16th instead of last in New York's testing. The two schools in East Harlem that failed to attract students were simply closed and later reopened with new staff and programs.

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Alterative #43
Alternative to a national curriculum.
Goal: The greatest variety of teaching methods and learning experiences possible.

How: By using a free market system for education as opposed to bureaucratic mandates.

Practical Benefits: 1 - The more systems and ideas vying for consumer approval the better the chance of developing superior systems to educate our people. 2 - Success in the market place virtually assures the universal adoption of curriculum that works—that is satisfies the demands of the greatest number of people which is another way of saying "society".

Soft Power Benefits: 1 - Citizens will feel they have more power if they are less manipulated by commissions and other symbols of bureaucracy. 2 - Respect for diversity and freedom will thrive.

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Background for Alternative #43
Some people worry that if curriculum was not regulated and the only criteria for receiving government vouchers was proficiency in die basics as shown on national tests, schools that teach religion, or race hatred might benefit. I believe the market would weed them out. The reputation of the school would be publicized in a free market, if not by those who run the institution directly, then by their competitors who would want potential customers to know that if they chose XYZ, along with a good academic background they would get lessons in bigotry. Higher educational institutions and employers would help the process by choosing not to accept students with that kind of "extra" training and parents and students would find it in their own self interest to take their vouchers elsewhere. The free market would destroy those schools more completely than government mandates and thousands of big brothers second guessing and evaluating teaching curriculum. We have the Learning Research and Development Center at the University of Pittsburgh working on a New Standards Project with the National Center on Education and the Economy in Rochester, New York. Somewhere else the National Board for Professional Teaching Standards is working with industry to determine how to raise standards and evaluate teachers. This group feels you can't have meaningful reform without developing some way to assess teacher performance. I can't help wondering why it doesn't occur to any of these commissioners, panelists and board members that the market place will assess teachers and programs in a far more meaningful way than can be done by any fancy manufactured point system or whatever carefully structured criteria these otherwise irrelevant groups can come up with. It used to be taken for granted that in the USA such things were decided by the market place. Now we hear about the Commission on Achieving Necessary Skills, a group of philosopher kings who have taken on the task of defining the basic competencies needed for most entry-level jobs. Not long ago I wrote about all the levels of bureaucracy in the Soviet Union that presented an almost comical barrier for those attempting to accomplish anything in either agriculture or industry. As for education, the laugh may be on us. The more entities that are experimenting with ideas the greater chance we have on hitting on a brilliant new concept. The United States of America thrives on diversity. That's our ace in the hole.

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Alternative to mandated testing on a national level.
Goal: To make certain schools are giving students the education necessary to
make them literate and productive members of our society upon graduation—especially if a market system is adopted and schools are receiving taxpayer dollars. There must be accountability but it is not necessary to force schools to subscribe to testing.

Alternative #44

How: In order to attract students, competing schools must be able to advertise
their success in an objective manner which can be easily evaluated by prospective student-parent consumers. This would virtually assure us that schools would voluntarily submit to taking an objective test which could then be compared on a nationwide basis. A successful school would welcome objective nationwide testing results and would be anxious to show off how successful it has been compared to its rivals. Some schools would be forced out of business because of test results.

Practical Benefits:
1 - Voluntary conformity is preferable to police state force. 2 - Voluntary testing gives consumers some information from which to make an informed decision when choosing schools for their children.

Soft Power Benefits:
1 - The less coercion by government the more free and content the people are likely to feel. 2 - Educational entrepreneurs will be accountable. 3 - Parents are likely to develop a heightened sense of responsibility in choosing the best schools for their children.

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Background for Alternative #44
SAT scores were on a decline throughout the seventies and still haven't rebound to their 1963 high. In fact in August, 1991 the College Board announced that nationwide verbal SAT scores dropped to an all-time low and declined in math. Many educators point to those tests scores as proof that more money should be put into our educational system. A minimum mastery of basics must be assessed for two inescapable reasons. First, holding a school accountable is the only way to prevent any charlatan from putting his hand in die taxpayer's pocket by opening a store front school and wasting the time and abilities of kids as well as the taxpayers' money. There are myriads of ways to achieve the basics tested for and then the rest would be up to the imagination of the educators and the tastes of the studentparent consumers. Second, taxpayers are tired of forever paying more and getting less. National proficiency goals should be set which must be reached by every student in basic skills such as reading, writing, math, geography and science. No more paying thousands of dollars and finding that "Johnny can't read."! If the school has accepted vouchers (taxpayer dollars) and some of its student- customers have not learned—i.e. not been satisfied— a rebate should be due the taxpayers. A couple years into the new system the government should pay the schools, not only on the basis of achievement, as seen in test scores of students, but at the end rather than the beginning of the school year. This would avoid any problem with having to collect rebates from defunct schools. Just like any business, a school should perform in order to break even, and excel in order to make a profit. There is some truth to the teachers claim that national assessments would force them to teach to the test and have the same result as mandating curriculum. What's the alternative?

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Alternative #45
Alternative to busing and forced integration of schools.
Goal: To allow parents to choose the best educational opportunities for their
children.

How: To deny tax dollars to any institution that denies educational
opportunities on the basis of race.

Practical Benefits:
1 - Children would not be bused away from a neighborhood school of his or her choice to conform to arbitrary racial mixes. 2 - Race would cease to be a prime determinant of one's qualifications. 3 - Racial tensions on campus would lessen if less attention were paid to racial groupings. 4 - People would be valued for their accomplishments rather than having race used as an explanation for a minority member's success.

Soft Power Benefits:
1 - Peoplewouldlearntovalueeachotherfor"thecontentoftheir character" rather than the color of their skin or nation of origin. 2 - People would have greater opportunity to reach their potential as human beings, as opposed to members of a specific race. 3 - People would be valued for effort which they control rather than circumstances of birth over which they had no control.

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Background for Alternative #45
In 1973 a federal court ordered HEW (Department of Housing Education and Welfare) to force the states to set goals for raising minority enrollments at predominantly white public colleges and universities. If a school failed to meet goals in its state plan, the order stipulated that the federal government could cut off financial support. Some people think affirmative action programs on campuses do more harm than good. On campuses affirmative action began as an ending of the preference for white males but took a wrong turn and became an exclusion of white males on the bases of their color and race. Drop out rates were high because many minorities were recruited merely to satisfy federal mandates. When there is no follow up support system, studies show only about one third of black students graduate from the colleges that recruit them. There was a 1985 study which showed that only 32 percent of Penn State's black students graduated after five years, compared with about 60 percent of its white students. People catch on and resent being used. When Craig Thomas was a senior in high school, he was told by Penn State University recruiters that he would be admitted and would receive a scholarship that would pay 75 percent of his tuition for four years. Still he decided to go to the University of Houston because he felt Penn State accepted him only because he was black. He didn't like being used to fulfil Penn State's racial quotas. Penn State reportedly gives black students a .5 grade-point advantage over other students. Another university pays black students $550 for maintaining a C average, and $1100 for anything above a C+ average. There have been ill conceived policies to get minorities into college and ill conceived policies to get them out. In 1986 Howard University granted degrees to nine students who failed to meet graduation requirements and even columnist Carl Rowan agreed that this was a disservice to blacks and " . . .to Americans everywhere who are fighting for opportunities based on achievement, potential and character." In the California legislature during the summer of 1990, Speaker Willie Brown backed legislation that would require that minorities be graduated at the same rate as whites. Already they were given preference in admission to the state's colleges and universities, but apparently that was enough. That was Speaker Brown's response to statistics that came out in 1990 showing that graduation rates for blacks and Hispanics nationwide were fifty percent less than for whites. It is widely held that people of color cannot be racist because they lack

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power, but because whites supposedly have power that makes them intrinsically racist. Jacob Weisberg, an editor of The New Republic, during a visit to the Oberlin campus, reported that a group of white students responded to his question "Are you racist?" in the affirmative. They considered it part of their "white skin privilege" and felt that those students who didn't see it that way were simply "in denial". Two black female Oberlin students were asked to leave a restaurant where they sat eating food on the outdoor tables—food they had purchased at a rival restaurant. They instigated boycotts and finally had the restaurant owner apologizing to all blacks over something that had nothing whatsoever to do with race. It's a shame that young people, who should be getting an education and enjoying the company of fellow students of diverse backgrounds are instead squabbling among themselves and diverting their energies with destructive nonsense. But muddle-headed adult administrators make matters worse. An antiracism seminar, required for some upperclassmen, where the adult leader had everyone reciting things like "all whites are racist and only they can be racist", was held on that same campus, Students were not encouraged to be color-blind but rather they were urged to heighten their consciousness of race and take on the task that is required of every white person— to shed an "inherited racism." I would imagine such nonsense could do a great deal of damage to a sensitive white student. While racism may not have disappeared, all whites are not racist. Treating students differently because of their race used to be called discrimination. A1985 survey in Public Opinion magazine found that more than 75 percent of black Americans were opposed to preferential treatment for blacks in hiring and college admissions. California Assemblyman, Tom Hayden apparently never received the message. He introduced legislation that urges all publicly supported colleges and universities to have, by the year 2000, a student body that is proportionately representative of the ethnic composition of recent high school graduates. This imposes a ceiling on every other ethnic group. These policies are just as likely to cause resentment by members of other races. The accreditation of Baruch College in New York was held up because the number of minorities on the faculty were considered inadequate and not enough minority students were graduating. In March, 1990, a state institution in Florida, in an effort to increase its low black enrollment, offered free tuition to every qualified black freshman. . Non-black Floridians rose up in anger. Remember the flap about the Fiesta Bowl and race-exclusive scholar

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ships in 1990? First the Bush administration said race-exclusive scholarships were illegally discriminatory and the civil-rights lobbies went ballistic. Then the administration regrouped and said schools can award racially exclusive scholarships that are privately funded. This of course ignored Tide VI of the 1964 civil Rights Act, the 1987 Grove City ruling which stipulates that all parts of a university are subject to civil-rights laws if any part receives federal funds as well as the Constitution's guarantee of "equal protection". In December 1990, columnist Carl Rowan denounced the Bush administration's "outrageous attempt to outlaw affirmative action scholarships". In a splendid example of double-speak Rowan claimed scholarships for whites only would be a perpetuation of the pernicious racism some have practiced for generations, but for a college to set aside some scholarships for blacks, Hispanics or others, is a non-malicious effort to right 300 years of wrongs. George Will pointed out in a one of his columns written during that same time period, that the only remaining rationale for any civil rights lobby today is to expand the racial-spoils system. Equal has come to mean "preferential". Just weeks after the scholarship flap the Supreme Court in the Oklahoma City case, dealt civil rights what Mr. Rowan would consider to be another severe blow . That was a 5 to 3 decision in January, 1991 to allow federal courts to end supervision of desegregation plans if school boards have complied in good faith and eliminated the vestiges of past discrimination to the extent practicable. The ruling means school boards will have to prove in a court of law that they have met the standards. Chief Justice Rhenquist wrote "Federal supervision of local school systems was intended as a temporary measure to remedy past discrimination." He didn't take into consideration present or future discrimination which is bound to occur when he wrote that decrees are not intended to operate in perpetuity. All this concern about schools just goes to show how important education is to social and economic mobility. A teacher called a talk show program in the Bay Area in November of 1990 to report what she referred to as an all too common experience. She told the audience that in California, children are tracked (segregated) by language and race, in a well-meaning attempt to favor them. She spoke of a middle class child, born in this country and with two working parents, but because of her Hispanic background, the child was tracked from Kindergarten through 5th grade in a Spanish-only program. The mother had been pleading that her child be taught English and yet the well-meaning bilingual pressure group tried to get her to place her child in yet another after-school Spanish speaking program. They heard her requests for English but kept

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assuring her that it was "her decision" and that Spanish was just fine and she should not feel pressured into having her child make the change to English. The teacher reporting the episode was present at the meeting between the child's mother and the Spanish-only pressure group. This teacher's job was to conduct very intensive English catch-up courses. Her point was that the child had been taught nothing but Spanish for six years at extra expense to the taxpayers and now, at an even greater extra expense, she had been called in to straighten the child out with intense English classes. Between 1980 and 1989 the Hispanic population in California grew by 39 percent compared to the growth in the total population of 9.4 percent. Less than one quarter of Hispanic three and four year olds were enrolled in preschool. Los Angeles offers salaries as high as $33,000 for first-year bilingual Hispanic teachers which is several thousand dollars more than the salary of comparable Anglo teachers. Hispanics account for 31.4 percent of public school students, blacks amount to 8.9 percent with Asians and others totaling 11 percent making a nonwhite population of 51.3 percent. These statistic are the basis for two interesting attitudinal changes. First, white children are now a minority in California public schools and secondly, as affirmative action has broadened to include other groups, blacks see that it offers less value for them. According to research done by John Chubb of Brookings and Terry Moe of Stanford, private schools are more racially mixed than are public schools. In Milwaukee in 1990 tests in the cities integrated schools showed white students averaged 60 on a reading test and blacks averaged 25. A task force figured the schools were at fault and recommended an all-black school as an experiment. After all the idea for integrating the schools was to bring black children up to par. The black schools are emphasizing values and a sense of community, something young black males especially are missing in their splintered home lives. They also emphasize African militancy. But by closing their door to white children, these schools are discriminating on the basis of race. Should the end justify the means? Julia Hill, president of the board of directors of the Kansas City, Missouri school district, wrote an article published in the ABA Journal in September 1991. She wrote "that the cure for segregation is not just about buses and school assignments, but about classrooms worth going to." The first reverse discrimination cases arose in the seventies to challenge the solutions that were proposed as remedies for "past effects of past discrimination". I guess those could be fairly traced to 1954 and the Brown vs Board of Education case in Topeka, Kansas which ended in an order to

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integrate the schools. The Court found using race-conscious and numerically based remedies was often the only practical way to desegregate the schools. Then there was the 1964 Civil Rights Act Title VII in which schools were ordered to bus children and employers were order to hire on the basis of race. The rationale was "remedy for present effects of past discrimination". In 1985 nineteen of Kansas City's fifty elementary schools had 90 percent or higher black enrollment as did three of the eight middle and three of the eight high schools. By 1991 only six elementary and one middle school were at that high level of black enrollment. In the fall of 1991 1,300 new non-minority suburban and private-school students applied to attend Kansas City magnet schools. One of the elementary magnet schools (school of choice) was recognized in 1990 by the Department of Education as one of the 221 most outstanding public or private schools in the nation. Before desegregation Central High School was all-black and with its change to a magnet school with an outstanding computer program and new facilities, by 1991 it had pretty near reached the goal of 40 percent non-minority status. Examples: Mark Anthony Nevels is the black child who lived across from a first rate "magnet" school somewhere in Kansas City and sued the school district for refusing him entrance to his good neighborhood school and instead bused him across town to an inferior school. The Kansas City schools were under a strict racial quota of three blacks for every two whites and in this case white children did not enroll in this exceptional school which happened to be located in a black neighborhood. There was room for 122 kindergartners but because only four whites enrolled only six blacks could be admitted and so 112 places in this superior school went begging and 86 eager-to-leam kids were placed on waiting lists and forced to travel to inferior schools because their skin did not conform to the policymakers' Utopian plan. Desegregation of the schools shouldn't be about achieving racial balance at the expense of educational opportunities. The civil rights lawyer originally argued that the purpose of school desegregation was indeed racial balance and that improvements in educational opportunities would be frosting-on-the-cake— so to speak.

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Alterative #46
Alternative to the notion that everyone knows Head Start works.
Goal: To develop a more objective realistic evaluation of preschool programs. How: To be equally receptive to what experts holding opposing opinions say
about the cost effectiveness of various preschool programs and to stop the nonsensical parroting that starts out "Everyone knows. . .". This is politically correct denial that there are two sides to everything.

Practical Benefits:
1 - Decisions made on the basis of fact rather than rhetoric are more beneficial. 2 - It is only possible to prioritize the use of limited funds when all facts are laid on the table and evaluated in a rational manner. 3- As a nation we will not be guilty of negligently harming as many children as we are helping by failing to question a politically expedient program.

Soft Power Benefits:
1 - Honesty will be valued above political expedience. 2 - Rational fact finding will triumph over misleading emotion. 3 - A sincere desire to help children will be recognized and strengthened.

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Background for Alternative #46
The praise for Head Start stems from the results of a single 1985 study of the Perry Preschool program in Ypsilanti, Michigan. 123 black youths were tracked into young adulthood and the study concluded that the 58 students who had attended the Perry Preschool program incurred half the teen pregnancy of their non-preschool counterparts, less juvenile delinquency and were less likely to become dependent on welfare. However Perry does not offer incontestable proof that taxpayers will save millions of dollars by investing in early education as proponents claim. But because the miraculous benefits of pre-school education have been presented to the general public as unquestionable fact, all discussion has been stifled. Other studies have investigated millions of children and found no correlation between preschool and long term success. Developmental psychologists are skeptical because the sample at Perry was small and those results have not been duplicated at any other preschools. Perry teachers visited each home weekly throughout the year and this parental involvement may have done the trick at Perry. Getting parents to be more concerned and involved with their children does not require federal dollars. To use a study of such a ridiculously tiny sampling, especially when its results are contrary to so many other larger samplings, as justification for spending billions of dollars on a national pre-school program is ludicrous! A program for 17 four-year olds held in a church building in Jersey City, New Jersey cost $4,000 per child and was run by two teachers and a parenthelper. Expensive, but don't forget Head Start provides a hot meal and a snack as well as medical and dental screenings and immunizations. Spending per child on Head Start programs averages approximately $3,000 nationwide, without including local matching funds. Proponents of Head Start are fond of pointing out that every dollar spent on pre-school education saves taxpayers six dollars that might otherwise be needed for special education, teen pregnancy, welfare and crime. Proponents: Keith Geiger, President of the National Education Association deplores the "hodgepodge of public and private daycare centers, nursery schools, childcare homes, and babysitters of widely differing quality, huge variation in cost, and limited availability." He brings up the census bureau prediction that by 1995 eighty percent of children under age six will have mothers working outside the home. He says children in families with incomes over $35,000 are twice as likely to be enrolled in preschool programs as children whose families earn less than $10,000 a year and suggests that this is a prescription for educational, social and economic disaster.

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Senator Edward Kennedy cites the Perry Preschool as a dropout prevention, crime prevention and teen pregnancy prevention program all roiled up into one. The Massachusetts' Senator is sponsor of S.B. 123 known as Smart Start. It would give federal grants to states and cities in order to educate all four year olds regardless of economic circumstances. The proposal calls for a sliding scale to be charged to upper and middle income parents. It would authorize expenditures of $500 million in FY1990, $750 million in FY 1991 and$l billion in FY1992,1993 and 1994. Of the 460,000 children presently participating in the nation's Head Start program, eighty percent come from families living below the poverty line. S.B. 123's main beneficiaries would not be the poor. However mandating pre-school for all 4-year olds "regardless of economic circumstances" could possibly harm a good many children who would find themselves forced into a school situation prematurely, at least according to Dr. Ziegler's theories. (See below.) Under the terms of the proposed Smart Start legislation, parents who don't think mandated preschool is a good idea would be forced to subsidize it anyway. Already twenty-eight states fund pre-kindergarten and ninety percent of the nation's five year olds attend kindergarten. The federally funded programs would have to meet certain federal standards and for-profit and religious institutions would not be eligible for funds. Opponents: Ron Haskins, a developmental psychologists and senior staff member of the House Ways and Means Committee, concludes the research literature on preschool education won't support the claim that such education will yield lasting impacts on childrens' school performance nor will it provide substantial returns on the investment of public dollars. Another critic is Edward Zigler, author of Head Start in the sixties and currently involved in preschool education at Yale. He claims universal preschool education is a misguided enterprise. Different families and different children have different needs. In fact early schooling may be harmful for some four year olds. He has found that the conversations that young children carry on at home are more helpful than a school experience in many cases. Medical attention and nutrition may offer the greatest benefits for poor kids in these early childhood programs, not education. Dr. Zigler allows that having disadvantaged children mixing with middle class children would benefit the former but the later would more likely do better at home. He thinks government programs should focus on the poverty population and not give scarce places to those who don't need them. There are alternatives for middle class parents who seek preschool experiences.

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H.R. 3 would spend $2 billion over 4 years on early childhood education. It would expand Head Start to ten hours a day year round and include families with incomes up to $31,200/ year. Currently the Head Start program consists of 1,300 programs restricted to families below the poverty level, during the school year only and for just half a day. H. R. 3 would provide half the money necessary to fund the program and local governments would provide the other half. The new system would also act as an all-day-year-round day care center and as such would reach out to families making $33,300. CBO, the congressional budget office, estimates the program would cost a total of $7.6 billion. Example: More than fifty corporations banded together and created their own Corporate/Community School in Chicago in 1988. They chose students randomly from the more than 1,000 applicants in the destitute Lawndale area. Although the elementary school is privately operated, it is tuition free. Children as young as two are enrolled in this year round 7 a.m. to 7 p.m. facility. As a private-public alternative to Head Start, the Corporate/ Community School is a bold experiment to reach disadvantaged children early.

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Alternative #47
Alternative to having apprenticeship programs. government create new

Goal: To have every citizen become a productive self-reliant member of
society.

How: Where one is not academically successful there should be alternate means
provided for learning a trade or marketable skill but not as a separate new bureaucracy requiring new funding from the taxpayer. This type of education can take place within the normal system of education.

Practical Benefits:
1 - People with a means of supporting themselves become contributors to not takers. 2 - If skills can be learned without new programs the tax burden will be lessened on the producers in society.

Soft Power Benefits:
1 - Self-reliance is possible. 2 - It is more possible to realize potential. 3 - Self-esteem and happiness are more likely.

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Background for Alternative #47
In December 1990, the Progressive Policy Institute held a meeting to discuss whether the apprentice program, developed in postwar Germany and hailed as a source of that country's remarkable economic growth, could be successfully adapted to the USA. Proponents of the idea believe that American companies should dedicate themselves to providing intensive— even expensive—on the job training so employees continually upgrade their skills. However the child labor laws, safety regulations and liability all work against any apprenticeship program, not to mention the cost to businesses that are having to let already qualified workers go. Attempts to combine academic with on-hands work experience is nothing new to this country. The Lick Wilmerding High School in San Francisco is an example and so is Ohio's Antioch College founded in 1852. There has always been good reason to increase the skills of American workers. Community Colleges that have begun to work closely with business, have become training academies of a sort, with ten percent of the population upgrading their work skills there. The average age of students is 29 which means they have spent ten years in the work force without the benefit of training a community college can provide. Arkansas passed a bill in the spring of 1990 which provided funds for five youth apprenticeship programs in areas which the Governor, Democratic presidential candidate Bill Clinton, perceived as critical to the state's future well being. "Critical to the state's future well-being." I question the wisdom of having a small group of people decide just what is "critical to the nation's future well being." As for the need for government subsidized apprenticeship programs, just look at the following: Examples: Norman Darden a former math major and potential concert pianist started a floor-polishing, window-washing business, staffed with high school drop outs. He gives young black men hope, opportunity and teaches them the work ethic. He proposes that high schools teach courses in 'maintenance arts.' They used to offer programs emphasizing trade skills like sheet metal, wood working, auto mechanics and so forth. The idea just needs reviving. For almost ten years Rich's Academy has offered work-for-credit and provided part time jobs for students in Atlanta, Georgia. Rich's is a department store and it provides the space and some funding as well as employee-mentors. The public school system provides the teachers and

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English, history, math and science curriculum. Many former dropouts attend Rich's and similar schools set up by companies as diverse as Sears Roebuck and Burger King. Even non-profits are getting into the act. The YWCA is involved in the operation of schools for homeless children in Oregon and Washington. There is a vocational program in New York City which trains high school students as certified aircraft maintenance workers. Upon graduation from Aviation High, students receive a Federal Aviation Agency certificate in airframe or engine maintenance, which amounts to a ticket to a starting mechanic's salary of between $30,000 to $40,000. Some of the graduates go on to technical and engineering colleges. The school, back in 1983 boasted a fully equipped maintenance hangar with 21 airplanes and helicopters, mostly donated by the Navy and Air Force. At that time it had room for only one out of approximately seven applicants. The over 2,000 students were drawn mainly from inner-city schools and were kids with average abilities. The admission officers looked for motivation and reliability. Half the day was spent in shops learning how to install propellers or check out fuel systems and the other half involved some pretty intense academic classes such as calculus and physics. Aviation High is a contrast to many of the low-expectation solutions being proposed today which are reminiscent of the high-cost-low-results CETA programs of twenty or thirty years ago. CETA cost more than $58 billion; it funded just about anything without any concept of economic return to those who provided the dollars and those who invested the time. The Opportunities Industrialization Centers started in 1964 under CETA were, I admit, an exception to the rule. Participants in OIC were offered a real opportunity to make a living upon graduation. The OIC teachers were nonsensical and expected participants to tackle the academic courses because they saw a purpose for the skills they were developing. Courses were offered in many areas as diverse as office machine maintenance, data processing and food service, along with courses in math and English. Many OIC programs continued under the JTPA (Job Training Partnership Act) which replaced CETA in 1984, but more than that, it's empowerment philosophy proliferated to all parts of the country. Empowerment is the key more than ever during the economic slump of the nineties. The other hot idea is to encourage participation by the outside community in the running of the public schools. The more input the better, since everyone seems to agree that our present system of education is not working.

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Alter^ve #48
Alternative to complaining that business does not do enough for education.
Goal: To recognize the generous contributions being made by businesses
around the country.

How: Become informed about the various programs sponsored by business in
your community or at schools Mound the country and write the companies responsible and let them know of your appreciation and support.

Practical Benefits:
1 - If appreciated and encouraged business may do even more. 2 - You may find you have some ideas about the type of program you would like to see business sponsor and could be instrumental in getting new ideas tried. 3 - You may find you or your children are eligible to participate in programs you didn't formerly know existed.

Soft Power Benefits:
1 - There is not enough gratitude in society today. 2 - Knowing others care and Me trying to make a constructive difference leads to an optimism and sense of "can do" which is good for the nation.

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Background for Alternative 48
There is no question that an educated and skilled workforce is essential to our ability to compete in the global marketplace. House Majority Leader Richard Gephardt urges business to pick up more of the educational tab claiming they'll get workers with higher skills in return. According to Mr. Gephardt, if the government gets back to basics and invests in people, training and caring for them, they'll lead us. Business will provide, as for everything else. It doesn't seem to bother Mr. Gephardt that business is already picking up sizable bills for health-care, child-care and other family problems as well as spending $210 billion a year to train their own workers. He has a proposal to impose a two percent hike in income tax rates for those companies with taxable income over $10 million annually. Mr. Gephardt doesn't seem to understand that the additional cost to business for remedial employee-training was estimated at $30 billion in 1988 according to the American Society for Training and Development, an Alexandria, Virginia group. This is money that would have been saved if the school system were doing its job. These costs threaten the competitiveness of American companies. John Bishop, a Cornell University economist, estimates a $3 trillion loss in our GNP between now and 2010 thanks to our deteriorating education system. Check out the following examples and let Mr. Gephardt know what American business is already contributing to build the human capital of this nation. Examples: Business is contributing more to education in every way, not just dollars, than it ever has done in our nation's history. According to figures compiled by Joel Keehn in a special report in Fortune magazine October 21, 1991, the median business contribution went from $173,000 in 1990 to $344,000in 1991. There was a big shift in giving from the upper to the lower end of the educational ladder. Between 1990-1991 the number of companies contributing to preschool education rose from 14 percent to 31 percent; giving to elementary education more than doubled from 27 percent to 64 percent. Both IBM and Exxon donated $24 million in 1991 and the percentage of businesses making contributions of over $1 million rose from 18 percent in 1990 to 24 percent in 1991. And dollars were only part of the giving spree. Eastman Kodak contributed except more than $5 million, and 3,000 of its employees served as tutors and mentors in the schools in Rochester, New York.

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Cray Research has been inviting 900 math and science teachers to rural Wisconsin for a development program every summer. GTE has been giving $ 12,000 awards to fifty teams of teachers with the stipulation that a portion of the award be spent on a new classroom project. The program is called GIFT and stands for Growth Initiative for Teachers. IBM has developed a multi-media approach to education that is second to none. Children are able to learn about the Declaration of Independence, and read great historical documents in it's "Illuminated Books and Manuscripts" program. History comes alive in a multimedia version of "Columbus: Encounter, Discovery and Beyond". Apple Computer donates computers, laser disk players, optic scanners and video cameras to schools around the country. After observing more than 3,000 students, ACOT Apple Classrooms of Tomorrow, found that by using high tech products students became more confident and brought a more positive attitude to problem solving in general. Tandy Corp., American Airlines and Burlington Northern, all in Fort Worth, Texas, together studied one thousand jobs to ascertain essential skills that might be lacking. They concluded that there wasn't enough emphasis placed on math, and the next thing you know Fort Worth was getting an innovative training program for teachers. The package, called Equity 2000, provides counseling and motivation for students and parents also. Then there is RJR Nabisco's $30 million Next Century Schools project. And the program that pays retired engineers and even active engineers to get their teacher certification and become math and science teachers. *Many other companies are getting into the act. Xerox, Coca-Cola, The Prudential, Saturn, Sprint and the Johnson Publishing company have come up with a video and guidebook series focusing on black heros. The programs go on and on. The good will and creativity out there is absolutely incredible! *I would like to recommend to anyone who has any interest in the role business is playing in helping to get education back on track in this country, that he or she get a copy of the October 21,1991 Fortune magazine where listed on pages 162-180 there are descriptions of the programs sponsored by 132 generous and caring companies. Business is expected to come up with $200 million for a research and development fund. In 1992 New American Schools Development Corp; a private non-profit entity, plans to award contracts to seven design teams.

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The teams are generally made up of education consultants, academic types and business people. The idea is to find which of a large variety of innovations will work the best and then to have other districts copy the winning innovations. Most business leaders, politicians and educators agree on the need for higher standards, more effective tests, a curriculum that emphasizes the skills employers need, better training for teachers and an expansion of preschool education. The wealth of ideas and the innovative programs that are already in place is truly amazing. Keep in mind that this is voluntary self-interested giving. Nobody is forcing this kind of giving. We should keep the ideas coming and not cut them off by blanket-mandates and frenzied micro-management.

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Alternative #49
Alternative to new schools that teach creative thinking.

Goal: To encourage creativity among our citizens.

How: Not by establishing schools for that purpose but rather by having existing schools with curriculum and teachers flexible enough to encourage creativity.

Practical Benefits:
1 - Creative people solve problems and often provide jobs and make life in general easier for the rest of us. 2 - Innovation is the engine that drives America, not manufacturing as Paul Tsongas would have us believe.

Soft Power Benefits:
1 - Opportunities to create are opportunities to realize potential. 2 - One breakthrough, as in the field of energy, spreads throughout the population and makes life easier and provides more people with opportunities for fulfillment.

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Background for Alternative #49
Business needs people who can think and solve problems. In Australia teaching thinking skills is public policy. Many legislators think it should be public policy in this country also. Edgar Fiske, author of Smart Schools, Smart Kids, gave an interview on August 17,1991. He brought up a math test given to eight graders in New York City. There were 4 multiple choice answers to the question: "I'm thinking of a number between 40 and 80—the sum is eight and the product is twelve." The students had to choose one out of four suggested answers. Two of the answers weren't between 40 and 80 so the choice was narrowed to either 53 or 62. The kids were asked in essence to play a game—they were only called on to manipulate information that other people generated—they were not being asked to think. Thousands of schools are teaching their students how to think, to analyze data, organize thoughts and apply thinking techniques in their lives. Edward De Bono, director of the British Cognitive Research Trust in Cambridge, developed such a program. Dr.Edward De Bono's method is being used at Memorial Jr. High School in Valley Stream New York. Studies of Dr. De Bono's methods show, even with small interventions like eight hours spread over four to five weeks, there is significant improvement in student performance in a range of areas. However if the program is not followed consistently, the gains are short term. Too often our children are busy interacting and learning to get along in social situations. It's not surprising that critics urge less "psychobabbling" and more concentrated study on subjects like science and math. We have twice the population of Japan but only half the number of scientists and engineers. I would prefer to see thinking skills developed naturally as a by-product of problem solving. Just as a soccer player increases his running speed in pursuit of the ball, so will a student develop thinking skills in tackling real problems. I am not the expert in this area that Dr. De Bono is, but that I have functioned as a participant in developing such skills and observed my own sons and other young people develop such skills. I would like to see logic, and other philosophy courses introduced into high school curriculums. That is the admittedly old-fashioned approach to problem solving. I tend to agree with the thinking of University of Virginia professor, E.D. Hirsch, Jr. who believes students are too often encouraged to concentrate on skills to the exclusion of content. Knowing how to think critically but knowing nothing to think about is ridiculous.

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Alter^ve #50
Alternative to erecting new school buildings.
Goal: To have pleasant safe surroundings in which learning can take place. How: Where new facilities are needed, school districts should investigate the
possibility of renovating surplus buildings taken over by the RTC. In the future there should not be as great a need for physical structures to house students. Technological advancements make it possible even today for great numbers of students to learn from videos, television transmissions and computer programs.

Practical Benefits:
1 - People in remote areas can take advantage of the best teachers in the nation. 2 - The curriculum can be br^kiened. 3 - In crime ridden areas students can learn without fear via telecommunications. 4 - Computers and a phone jack make fantastic libraries and otherwise prohibitively expensive text books affordable to students.

Soft Power Benefits:
1 - Anything that makes education more universally available and easy to take advantage of should be encouraged as a source of empowerment. 2 - Democracy is not a spectator sport but the uneducated and ill informed are not equipped to play. Our political system will be safe in the hands of educated and thinking men and women.

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Background for Alternative #50
Many of our present teachers are less than inspiring. Many function only as disciplinarians and many of the buildings where education is supposed to take place are dangerous and ugly places that children should not be forced to attend. On the other hand primary school youngsters still need to relate to a human teacher who, as every teacher of young children can affirm, serves as much more than an instructor. In fact he or she must often function as a surrogate parent. As for older youngsters, I believe we need, not only a choice of institutions, but also a choice in the way knowledge is transmitted. We should take advantage of new computing and telecommunication technologies in structuring a brand new approach to education in the twenty-first century. We would do well to incorporate new technology into learning and allow students to work alone with video tapes, computer programs or TV teachers at their own pace, following their own interests. The only stipulation would be that they continue to pass the "did-you-get-what-you-paid-for" tests — the TSTs—tests to satisfy the taxpayer. Along that line, Teaching Company, is a private firm, already marketing video lectures delivered by the best college instructors in the nation. Today a huge library is accessible and interaction with prominent scholars is possible via any phone jack. Edutech is a Monterey, California company that came up with a much needed way to make computer programs as affordable as text books. Schools buy rights to make copies of a computer program at a fraction of the capital needed to buy multiple programs outright. Many electronic devices could be adapted to educational uses. It only takes the political will and leadership strong enough to shut down the outmoded classrooms that continue to consume more and more of our tax dollars and give us less and less educated youth. Fiberoptic networks, with their almost unlimited capacity for transmitting information can be the revolutionary new tool our secondary educational system needs, linking the most gifted teachers with the greatest number of students. The connection can be interactive, with dialogue taking place between teacher and student no matter where each may actually be. With the application of "virtual reality" a master teacher can virtually appear in many places at once. Exercises done on the computer and assessed electronically could be part of the program. Schools that never on their own could afford to do so, are now able to offer their students courses formerly available to only the best students in New England' s elite prep schools. Interested students can take ITV courses in advanced math, foreign languages, science, economics, philosophy -----------whatever! It is now possible to enrich the curriculum of the most rural, poorest school systems in the country at minimal cost.

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Newton Minow, former head of the FCC under President Kennedy and now with the Annenberg Program, spoke to the National Press Club on October 2,1991. He would like to see an excise on the sale of TVs in this country. He pointed out that Japan spends twenty times more per person than we do on public television programing and that consequently NHK, the Japanese state station, is the dominant force on Japanese airways. I believe market forces should prevail. Consumers would lose control, as they always do, when something is funded by force. Persuasion is the answer. It my be harder to change what people want, but that is the only acceptable solution in a free society like the United States of America. Examples: The Jason Project is the brainchild of Dr. Robert Ballard, director of the Center for Marine Exploration at the Woods Hole Oceanographic Institution in Massachusetts. Dr. Ballard gives high school students a real-life feel for some of his underwater exploration trips via satellite hook up. For two weeks, participants in the Jason Project go to one of twenty satellite receiving centers where they view live, interactive broadcasts of Dr. Ballard's underwater exploration teams and even have the opportunity to control Jason, the underwater robot. The expedition to the Galapagos Island in December 1991, was expected to provide a unique and stimulating educational experience to 10,000 teachers and about 600,000 students. Before the viewing, participants have spent an average of fifty hours following a course of study specially prepared by the National Science Teachers Association in anticipation of the project. The project is underwritten by the National Geographic Society and several large corporations. Another innovation is referred to as distance education. Master teachers can instruct millions of kids in distant classrooms, or even in their own homes. Two way communication is even possible today where students across the country are able to call in questions before or after a class or specific lecture. Everyone can have access to the very best teachers in any subject via satellite. There are not only a limited number of experts, but there are a limited number of experts that also have master-teacher skills which are crucial in turning a student off or on to a subject. Jaime Escalante and his method of teaching calculus is an example of a real turn-on. The television screen has been used for preschool education as exemplified by the Sesame Street productions. This technology is equally, if not better suited for the college age crowd. Already thousands of students nationwide enroll in classes produced in University or college studios and

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broadcast live, or pulled off a satellite or computer, or packaged in videos, as done by Teaching Company. The Annenberg Corporation for Public Broadcasting Project offers courses at over 2,000 colleges nationwide and also gives credit for courses offered on cable and public television stations. These are especially attractive to adult part-time students who are expected to make up 60 percent of all college enrollment by the turn of the century. New technology allows these mostly workers, to sandwich classes in at odd hours during breaks. The Wall Street Journal featured an island in Maine in a recent article on the subject of distance education. (9-13—91) It seems that Maine was ranked last in the nation in adult participation in higher education and 47th in having their high school graduates go on to college. In 1989 the Community College of Maine began offering courses via video and audio transmittals to other campuses and public schools. In the fall of 1991 almost 4,000 students registered for 35ITV courses (interactive TV). Teachers get double pay for each remote course they teach and this helps attract a better faculty who don't mind working harder and coming up with innovative new ways to reach distance students. ITV students hear the same lectures and must turn in the same homework and take the same tests given to on-campus students, but there is obviously no face-to-face contact and often the phone calls with questions or comments are backlogged causing concern to the faculty about the quality of the program. ITV students perform as well, if not better than campus students. Their high motivation plays a large part in their success. Also ITV students have certain advantages, like being able to review a taped lecture and recapture any part they may have missed through distraction or whatever. In Maine, a biology course offered ITV students fetal pig specimens to be dissected at home while viewing a televised demonstration. The best part is the chance for people, who for some reason had to delay their education, to now get a second chance at fulfilling their potential. There have been inspirational cases of people who never completed high school being motivated by this technology to pass the high school equivalency exam and go on and complete college and even attain graduate degrees.

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Alterative #51
Alternative to emphasizing grants over loans to fund higher education.
Goal: To provide opportunity. How: I have a long range proposal. We value education and are agreed that an
educated workforce is the key to our competitiveness in the 21st century, so why not let the federal government provide vouchers for education from pre-school through graduate school instead of from kindergarten through 12th grade as is now the accepted norm? Those who show by their scholastic record that they are capable of working hard should be given the chance to benefit themselves and society. Why shouldn't higher education be considered one of the things that government provides for its citizens in the 21 st century along with the court system, the military and police protection? As a short range solution I would advocate the use of loans rather than grants to students, grants necessitate favoritism and breed contempt for government and rebellion in those who pay taxes which are used to send other people' s children to college and not their own.

Practical Benefits:
1 - Long range we could get rid of the bureaucracy that processes loans or grants. 2 - Short term we could get rid of the injustice that comes from granting scholarships to some and denying others, not on the basis of effort and accomplishment but purely on the income of their parents.

Soft Power Benefits:
1 - A gain for justice is a gain for everyone. 2 - Favoritism is an evil which breeds discontent and it should be discouraged. 3 - A mind is a wonderful thing to develop. 4 - Potential has a better chance of being realized.

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Background for Alternative #51
There are a variety of proposals to finance higher education, including low cost government loans to be paid back out of payroll deductions adjusted according to the graduates' income. David Price of North Carolina recently introduced a bill to restore the tax deduction for interest paid on an education loan. Many members of congress are trying to eliminate private lenders from the federal guaranteed student loan program and force the government to return to grants instead of loans as the preferred form of federal aid to students. The idea is to convert the old Pell Grants into entitlements. Something is called an entitlement when a person or group automatically qualifies for benefits by meeting specified requirements. In this instance, any student whose income qualifies for assistance would receive a grant, no matter the condition of the federal budget or his past academic achievements. Half the money of the student loan program is not going for education but for loan defaults and administration of the program. Defaults alone cost the nation $2.5 billion a year. The Bush administration wants to limit Pell grants to students with family incomes under $10,000 which critics claim would eliminate 400,000 students from eligibility. After we get our national debt paid down and government trimmed back , why can't we agree to include education as one of the federal government's few legitimate functions? What's wrong with having the federal government provide one hundred percent of the funding for education in the form of vouchers? An amount could be allocated to every child in the nation, formulated for his or her particular locality and funded in the form of a voucher and good through graduate school to those who make the grade and qualify on the basis of achievement rather than poverty. Tacked onto the Budget Reconciliation Act at the end of 1990 was a federal law requiring college applicants lacking a high school diploma or its equivalent, to take a government-approved test to determine their ability to benefit from higher education. The idea was to weed out applicants likely to default on federal college loans but it was criticized for its suggestion that not everyone might benefit equally from advanced education. Although I criticized the law, although for different reasons, such an attitude denies effort, ability, ambition, determination and discipline. For too long we have been providing incentives to stay poor rather than to excel. Let's get our act together!

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Alternative #52

Alternative to smaller classes.
Goal: The best learning environment within budget constraints.

How: Not by reducing class size and spending limited resources on additional
teachers where there is no convincing correlation between class size and successful learning.

Practical Benefits:
1 - Scarce resources will be used in more cost effective ways. 2 - Reforms would not be undertaken because they are popular but because they have objectively been determined to be best.

Soft Power Benefits:
1 - Honesty would dominate over popular perceptive.

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Background for Alternative #52
There may be no convincing correlation between class size and successful learning. A report recently issued by the Educational Research Service in Arlington, Virginia analyzed one hundred different studies which had focused on class size over a 35 year period and concluded that smaller classes have a beneficial affect in the earliest grades but matter little or not at all in high school? A study was conducted in 1967 of the Riverside school district in Southern California and it was determined that class size made a big difference in the reading skills achieved with first graders but not much difference at all by the third grade. That study even suggested that high school students did better with larger classes. To have any really significant impact the change in class size had to be rather drastic; below 15 or over 40 except when it came to truly disadvantaged students where smaller classes almost always resulted in benefits. A relevant study by Herbert Walberg and Bill Fowler of schools in New Jersey was published in 1987in77ie Educational Researcher. They showed that while class size went down between 1955 and 1988, test scores did not go up. Spain, France, Japan and Korea all were shown to have much larger classes; an average of 55 students in Korea. Japanese classes are much larger than ours. Their math classes are almost double ours in number of students and yet Americans have come in last in international math tests. We have to look elsewhere to cure our educational malaise.

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Alternative #53
Qui

Alternative to extending the school year.
Goal: To have every student receive the best education possible.

How: We should carefully analyze the proposal to extend the school year and
do so only when and where objective evidence supports the belief that the children will benefit from an extension.

Practical Benefits:
1 - Having more days to learn could result in better educated youngsters. 2 - Ways to achieve the same increase in learning might result from a thorough investigation of alternatives such as new technology, specialized schools and new creative approaches to education that have already been discussed.

Soft Power Benefits:
1 - We should feel better about ourselves for making the effort to respond to a perceived problem with a careful analytical approach. 2 - A decision to extend the year would show that as a people we value learning and are willing to sacrifice if we truly think it would help.

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Background for Alternative #53
Since our young people seem to be getting less education than youngsters in many other parts of the world we have been looking at differences in the various educational systems. The length of the school year is something that is easy to isolate. The number of school days required in Japan = 243, Germany = 210, USSR = 210, Thailand = 200, Holland = 200, England = 192,Finland= 190, France= 185, Sweden = 180 and USA = 180. In California a move to a 220 day program from kindergarten through high school would cost $121 million a day according to the director of the National Association for Year-Round Education. Oregon plans to extend the school year from 175 to 220 days by 2010 by adding forty days to the school year gradually over a 20 year period. In New Orleans a school district which extended its school year to 220 days found little improvement in their test scores and a large increase in the expense of education. The federal government picked up almost two-thirds of the nearly $900,000 tab for the extra time but the school board doesn't feel it can continue contributing it's share which came to over $250,000. Like reducing class size, extending the school year may be helpful in some instances but is not a panacea for our educational ills.

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Alternative #54

Alternative to the high cost of housing.
Goal: To make housing more widely available. How: High prices are due primarily to government's interference in the free
market via excessive restrictions, regulations, mandates and tax manipulations. The solution lies in 1 - Removing excessive government regulations. 2 - Reforming building codes. 3 - Making zoning laws more flexible. 4 - Recognizing the role private property rights play in our society. 5 - Letting the free market solve the supply and demand imbalance. 6 - Encouraging technological advances instead of blocking them.

Practical Benefits:
1 - That's what people want. 2 - When people have a stake in society they are more involved and the country is more stable. 3 - Housing is an engine which stimulates jobs in other sectors and adds tangible value to the nations net worth.

Soft Power Benefits:
1 - Fosters responsibility. 2 - Increases self-esteem. 3 - Rewards hope and effort.

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Background for Alternative #54
The government owns over half (63%) of the nation's softwood, saw-timber inventory, the raw-material base for the plywood and lumber that is essential to housing. Bureaucratic timber-marketing policies kept these timber supplies constant, a condition which artificially kept the price of wood products at a level higher than it would have been under free-market conditions. This is something that obviously affected home prices and never is included in the discussions about affordable housing. Softwood-lumber prices jumped more than 60 percent between 1967 and 1979, naturally raising the costs of wood products for consumers, and housing for home buyers, a phenomenon attributable in large measure to federal unwillingness to increase harvests in government forests. The government created artificial timber shortages. Before the second world war less than half the housing units in America were owned by their occupants. Easy homeowner financing and the housing boom which followed the war brought home ownership within reach of more and more Americans and by 1955 fifty-five percent of all households owned their own homes, with that number rising to over sixty-five percent by 1980. But even with soaring prices, high interest and a decline in inventory, home ownership and owner occupied units dropped only about one percent to just under sixty-four percent in 1987 and has failed to come back. But if you examine those statistics more closely you'll see a disturbing trend. Thirty-nine percent of households headed by a person under 35 owned their own homes in 1989 down from forty-one percent in 1982 which was the first year such data was available, whereas seventy-seven percent is the constant figure for those over age 50. That means almost twice the percentage of older people own their own homes and that percentage has held steady while fewer young people are becoming home owners. In an attempt to get the numbers on an upward slope again for those under age 35 the Reagan administration tried to substitute loan subsidies for rent subsidies and home ownership for public housing. It obviously depends on the part of the country, but generally speaking, at the end of 1990 a family with a median income of $35,353 had 113.4% of the income needed to qualify for conventional financing to buy a home costing $92,800, which was the national median. The recession of 1991-1992 didn't lower the national median home price which by the spring of 1992 had risen to the neighborhood of $106,000. There was a scramble by buyers who feared interest rates had bottomed out and were poised to rise. The real culprit in the high cost of homes is not interest as much as it is regulation. Four columns appeared not long ago in our local paper tided "Design Review, The Process and You". The article explained the prelimi

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nary review, design review committee, public notice, and planning commission hearing, which requires all sorts of fees, forms and meetings costing residents time and money. The National Association of Home Builders recognizes the pernicious impact of local government regulation, particularly zoning and building fees, which push the price of housing out of the reach of low and middle-income people. NAHB doesn't suggest specifics to eliminate these counterproductive controls. In fact NAHB generally favors anything that might lead to actual construction. Besides the benefits from the FHA, they also would like to see an increase in the availability of variable-rate mortgages, perhaps an expansion of the VA loan guarantee program, adequate funding for the Farmers Home Administration (FmHA), increase federal funding and tax incentives for the construction of low-income and rental housing, including $4 billion in block grants to states and localities and $656 million to fully fund the McKinney Act, that potpourri for the homeless. NAHB wants its own subsidies and is apparently unwilling to sacrifice its narrow interests to ensure the nation's fiscal responsibility and a better future for our children. It has to realize that asking for more money for HUD will increase the deficit and destabilize the economy; more money to municipalities that are already wrecking their local housing markets will further insulate them from the destructive effects of their policies. Home builders must see the real key is to have a strong economy with low interest rates. There are numerous examples where a builder has made a request to build, say 100 homes, and ended up with permission for only 60. That means 40 families that could have had housing will not and the buyers of the 60 homes will have to pay more than they would have otherwise. Developers pass their costs on to buyers of new homes and that raises the property values of existing homes which suits most owners just fine. Unfortunately it makes it harder for newcomers to get that first home. People are beginning to be concerned that all the fees and planning charges are going to add too much to the cost of a new home. Jack Kemp has been giving speeches as HUD Secretary accompanied by a magnificent chart that shows all the fees, regulations, stipulations, donations and so forth that add a whopping $40,000 to $50,000 to the cost of a new California home. Florida encouraged development for so many years that it is hard to get long term residents, and especially established builders, to accept all the new restrictions. The wide spread practice of making developers donate acres of their land for public purposes in order to get permits to build, is a form of blackmail, but it has been widely accepted by those in the industry and the public in general. For example, not long ago a developer had to set aside 600 acres for a preserve for the gopher tortoise, which is not an endangered species,

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and this, even though only three were sighted on a proposed 4,800 acre development. Butterfly and other insect sightings have also been known to either halt a project or increase its cost in California. Whether or not something productive is being accomplished, employees' salaries and business overhead keeps running. When excessive and sometimes frivolous lawsuits slow down or stop a project, the cost attributed to the delay is passed on to the consumers in sales price. Unfortunately home builders spend a lot of time in court now days. Some people say the fees are so excessive in California and Florida because both states have caps on property taxes and this is just another way to collect revenue from property owners. Collecting money seems to be what government does best. Today there are militant groups that will go to extreme lengths to stop, delay or curtail development proposals. In a recent book, "Everyone Wins" by Richard Klein, a twenty year veteran of the environmental movement. Klein states his purpose in writing the book right on the first page:". ..to help you protect your home, your community and the environment from the damages associated with land development." To sabotage any development, Klein recommends raising concerns about possible endangered species, archaeological finds, soil erosion, inadequate water supplies or sewer systems, overcrowded schools, noise, traffic and harm to surrounding property values. But things may be looking up for would-be home owners and down for Klein's followers. A group of home owners attempted to block a large real estate development in southern California and ended up being counter sued for the delay they caused Of course a property owner can request variances, special exceptions and can claim the restrictions would "adversely affect use and value", or "create unnecessary hardship". If all else fails they can point out how his or her property is "distinct, unique has peculiar conditions". Unfortunately these types of appeals aren't often successful. And even if a petitioner is successful in obtaining permission to use his own property and creative impulses, he is at least slowed by the need to get every conceivable type of license and permit. In his 1990 book, The Excluded Americans, William Tucker discusses housing policies and homelessness. Mr. Tucker suggest that housing could be within the reach of all Americans if government would back off and let the free market prevail. After all it is the marketplace that relays needed information from buyer to seller, from consumers to producers, telling them what and how much of any product is needed and what price consumers are willing to pay. It is only when that communication is disrupted that we end up with shortages. According to Mr. Tucker, "The housing industry is so strong and versatile that it can produce just about anything people want".

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There have been remarkable improvements in modular housing, which is constructed according to state industrial and local building codes and manufactured housing which is regulated by federal codes. Modular housing is virtually indistinguishable from your regular stick-built units. Many components are built in factories and fastened together on the building site. This makes the building process move more swiftly; one to two thirds less time is required for construction. The biggest cost savings come in labor and that is why unions are dead set against modular housing. Manufactured homes, more familiarly known as mobile homes, are virtually completed at the factory and then shipped to the site. They bear little resemblance to the old trailers and are hard to spot among their site-built counterparts in a tract of single-story ranch houses. They cost anywhere form $19 to $25 a square foot compared to $75 to $100 a square foot for conventional housing. Not surprisingly, unions are unhappy with the concept. Nevertheless sales in 1990 were up 40 percent over the previous year. Even now technology is in the wings which will allow housing in the future to solve problems in other fields, notably crime and health care. A smart house has been designed which replaces ordinary wiring with a single cable capable of handling control and data signals as well as audio-video signals. About 150 tiny computers will serve the controllers which receive power and signal information. Anything that uses electricity can be programmed to function according to the wishes of smart-house owners. Smart-house wiring standards are written into the 1987 National Electrical Code and may initially cost $5,000 to $7,000 above ordinary wiring but the benefits are phenomenal—especially in high crime areas or in homes providing shelter for handicapped or elderly persons who depend on special equipment and supervision. The smart-house concept is extremely versatile and because there are so many ways it can be used, in a free market it would likely be a winner. Unfortunately, subsidies, including the voucher program, interfere with the workings of a free market and inhibit these new creative solutions to our housing problems. Examples: According to one reckoning the country wants 7.6 million three bedroom three bath homes costing under $30,000. We may be able to get closer than that. Let me tell you about Charlotte Gardens in the Bronx, which is one of my favorite examples of successful modular housing. Genevieve Brooks decided to do something about her decaying neighborhood in in the South Bronx. She gathered a group of her neighbors together and made Charlotte Gardens a model of what human energy and determi

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nation can do with minimum help from the government. The neighborhood group, called "Mid-Bronx Desperados" (MBD) got loans from the Chemical Bank of New York, and with state backed mortgages and tax credits for low income housing, was able to entice investors to put up modular homes costing, in the early 1980s, $57,000 a unit. The average incomes of the home buyers was $25,000. MBD went on to renovate and construct over a thousand additional units, many of them for the elderly, in the Bronx area. This is a success story! It shows that change can and does sometimes occur via a grass-roots endeavor from the bottom up and without a direct infusion of government funds. Not only did Genevive Brooks change dilapidated buildings, into a neat appearing middle class neighborhood, she changed the lives of the inhabitants. Home ownership not only enhances net-worth, but enhances self-worth as well. There is a fiscally sound alternative to FHA and VA if you believe the federal government has a role to play in helping lower-income Americans achieve the American Dream of home ownership. It's called the HOME program, an acronym for Home Ownership Made Easier. As far as I know, the plan originated with the Chicago-based National People's Action, a consumer advocacy group for lower-income people, and the Mortgage Insurance Companies of America (MICA). The idea is simple. Potential home buyers would contribute savings into a participating bank or other lending institution and according to the income of the saver, the federal government would match those deposits at a rate varying from $1.50 to $4 per savings dollar. The funds would have to accumulate for a minimum of three years in order to vest fully. If the funds were withdrawn to buy a house after only one year, only 25% of the federal portion of the savings account could be used. After two years 50% of the federal portion would be available and after three years 100% could be used. At any rate the savings would have to be used to purchase a house within seven years or all the federal money would be forfeit and savers would receive only five percent interest on their own funds. This would be true if die funds were withdrawn for any reason other than to purchase a house. Participating savers would receive a certificate which, when presented to a lender, could be applied to the down payment, closing costs or to reduce the mortgage interest rate. It may sound kind of like food stamps, but we're not talking about a subsidy. The federal matching funds would convert into a second mortgage or deed of trust secured by the subject property. The government could sell those seconds with the highest interest rates to private investors and would receive steady interest from the loans it keeps. Realizing, first of all the inaccuracies of estimates based on fluctuating house prices in various parts of the country, and on fluctuating interest rates,

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estimates were made back in July 1989 and you can take them for what you think they're worth. At that time estimators claimed that a fully vested savings certificate used to buy down the mortgage rate would allow a family with an annual income of $ 14,400 to consider buying a house in the $46,000-$47,000 range rather than having to consider only houses under $31,000 as they would have been forced to do without the "certificate". For higher-income families earning $23,000 a year, their home choices would expand from a choice of homes under $50,000 to homes under $65,000. It may be hard to imagine how a family with only $14,400 in income have any savings, but the incentive to home ownership would lead to sacrifices, not unlike those made by our immigrant forefathers. People are good at this, if the stakes are high enough. What people don't like is tightening their belts while Uncle Sam wastes their dollars. The belt tightening required here would pay off big and in a tangible way. Remember, the lower the saver's income, the greater the matching funds. If the family making only $14,400 a year were to trim $60 a month from its already admittedly tight budget the federal government would add $2,880 a year in matching funds. That would give them at the end of just one year, a housing certificate worth $3,600. Sixty dollars a month for twelve months equals $720, matched at the highest rate of four to one------------because an income of $14,400 would put them in the lowest-income category and therefore entitled to the highest matching funds. Four times $720 equals $2,880 in government funds added to the families own savings ($720 + $2880) gives them the $3,600 value of their one year certificate. That's some incentive! The obvious flaw in the proposal is the cost in time and money for administration and the possibilities for fraud and showing favoritism that another government bureaucracy entails. I would only go along with HOME if it replaced some of the other money-losing bureaucracies like FHA, for instance. It appears to have the same strengths and weaknesses of the other federal loan guarantee agencies i.e. making housing more affordable for low-income citizens without costing die government money but with the risk of default if the new home owner fails to make all his mortgage payments. However there's an added benefit. HOME encourages savings and it tests the resourcefulness, determination and staying power of a buyer before the government acquires a position as a secondary lender on the property. As a member of the National People's Action put it, "It demands that buyers have a real equity stake in their home." There is a somewhat similar program in Michigan only the Michigan proposal, at least when I read about it, had no limits on the price of the prospective home purchase or on the income of the prospective buyer.

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Alternative #55
KM;

Alternative to the High Cost of Multi-family Construction.

Goal: To make multi-family housing more available. How:
1 - Do away with government interference in the market via mandates such as the recent well-intentioned but misguided amendment to the Fair Housing Act. 2 - End Rent Control. 3 - Reform building codes.
4 - Make zoning laws more flexible.

5 - Encourage innovation.

Practical Benefits:
1 - People want it. 2 - Less need for government subsidies (taxes). 3 - Leaves more dollars for investment in other areas.

Soft Power:
Opportunity and empowerment.

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Background for Alternative #55
The Amendment to the Fair Housing Act was designed to make certain disabled people have access to housing they can use easily. Unfortunately the legislation puts 20th century builders in the same boat with 18th century weavers, (see page 527) It says that when building multifamily housing with four or more units, the ground floor units must be accessible to the handicapped if there is no elevator, and if the building has an elevator, all units must be made accessible. The general guidelines proposed in January of 1990 require that kitchens, bathrooms and doorways all be designed to handle wheelchairs; and that hilly sites be regarded and ramped for better access. The guidelines would add at least four inches to doorways, which along with the larger bathrooms and other rooms would add at least five percent overall to apartment sizes. These mandates could increase the size of entire buildings and in some cases make the building sites impractical. Thousands of planned apartment units marginally profitable before the new law, will simply not be built. The more onerous the requirements and the greater the litigation exposure the higher the costs. The head of The Paralyzed Veterans of America estimates the cost of the new regulations at about $900 million a year. The directive is so vague no one seems to know what exactly conforming with it would entail. Even when the new rules are sorted out, they are going to be so expensive that the legislation may have the unintended consequences of pricing disabled people out of the housing market altogether. Especially troubling is the issue of accommodating wheelchairs in bathrooms and kitchens. Builders can't get an answer and since to go ahead and do something wrong and have to tear it out is an expensive risk, construction has been virtually stopped. If we're not careful we'll end up once again hurting most those whom we wish to help. The disabled will be facing economic barriers as an outgrowth of excessive regulation. Example: The developer of a 20-unit luxury condominium complex had to pay enormous architectural fees when he was asked to revise his original Mediterranean design because some review board members didn't like it. He was asked to preserve the views of the bay for users of a nearby city park and to make certain "sufficient" open space was preserved. The garage area had to be redesigned six times! More micro-management was apparent in the requirement of the number of various kinds of units and the specified square footage and the stipulation that half of the units must be rentals rather than

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owner occupied and that at least 2 out of every 14 units be set aside as lowincome units. The rental units can not be rented for less than 29 days and may not be used for time-share. Too many people accept this as business as usual. I'm amazed. I'm incensed! This is bad for the entire nation. I'm not talking about the pocket books of builders, renters and buyers. I'm talking about the principle of private property. I'm talking about basics. I'm talking about soft power vs hard power. How can you not be incensed too? San Francisco has been the beneficiary of a prolific non-profit developer since 1983 when the Bridge housing corporation was founded by Donald Terner, one-time California housing director. The group raised $5 million from local business groups to build private-sector low-income housing in San Francisco. In its first six years Bridge built 3,500 units with 40% of them reserved for families with incomes equal to no more than 80% of the median in the area (which meant no more than incomes of $25,000 in 1989) and the other 60% of the units were sold at market rates to families with incomes between $25,000 and $40,000. Any profits from the market-rate units were used to expand the number of lower-income units or to reduce their cost. These non-profit providers generally request, and often receive breaks not granted to profit-making builders, such as relief from impact and other fees and zoning waivers which sometimes allow them to build more units on a lot. Just as Rouse's Enterprise Foundation brings expertise in finance and construction gleaned from years in the for-profit business world to local do-gooders, Bridge also teams up with for-profit developers for their financing connections and general know-how. Manufactured buildings can even be used for apartment houses, (see previous discussion of manufactured housing on page _____ .) The technology has actually progressed to the point where manufactured multistory buildings are feasible and safe and could be used to produce extremely low cost housing. Enter government with another brake on a good idea. The Department of Housing and Urban Development (HUD) refuses to approve the designs.

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Alternative #56
Alternative to government subsidized housing. Goal: To make
housing more widely available via the market. How: 1 - Through voluntary organizations like Habitat for Humanity & Jubilee. 2 - Simply permitting an owner to live over his own store is perhaps the cheapest form of subsidy. 3 - More SROs—single-room-occupancies. 4 - Remove oppressive code restrictions 5 - Vouchers. 6 - Innovative technology. 7 - Decrease "blackmail edicts" raw power of government 8 - Tenant purchases.

Practical Benefits:
1 - That's what people want. 2 - Reduces tax burden. 3 - Easier to find shelter. 4 - Supply & demand is most efficient regulator.

Soft Power Benefits:
1 - Restores dignity. 2 - Removes incentive to keep rents high by discouraging the attitude which says "It's free-take all you can-easy pickins!". 3 - Removes disincentives to work which is there when the lower the pay check the higher the government hand-out. 4 - Eliminates favoritism (eligibility requirements). 5 - Discourages dependence. 6 - Lessens feeling of oppression in those forced to ante-up subsidy money (blackmail).

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Background for Alternative #56
In June, 1991 the Department of Housing and Urban Development came out with their new "fair market rents" which were substantially higher than the old ones. Kirstin Downey claimed in her article for the Washington Post, that the new allowances "could give subsidized renters more choices of places to live, including luxury apartment complexes in some neighborhoods". "Fair market rent" is the price the government, in its omnipotent wisdom, has determined to be appropriate compensation to a landlord willing to participate in HUD's Section 8 program (subsidized rental housing). The qualified renter pays 30% of his or her income and the government pays the rest. Instead of doing things the old fashioned way and letting supply and demand determine value, the government takes a survey. And there is a disincentive there too. Basing rent on income acts as a disincentive to work by giving those who work hard to get ahead a penalty instead of a reward. Of course, under the guise of fairness. It's a shame when honest and well meaning attempts to help, end up hurting the recipient instead. That's why I like the idea of loan instead of rent subsidies. Low interest loans often bring mortgage payments down to the level of rent and offer a family a real chance to get ahead. Home ownership almost always equates to middle-class and accountability. The evil here is that some people who are barely scraping by and saving to realize their dream of home ownership, end up paying taxes which subsidize another family that may well end up getting their home with less effort and even quicker. There's a fairness issue whenever Uncle Sam plays favorites. New York has an "affordable housing" program where about fifteen percent of the subsidies go to families with incomes between 100 and 165 percent of the median, or making $32,000 to $53,000 a year. Nationwide that would include pretty near half the families in America! Community Development Corporations (CDC) first appeared in the late 1960s and caught on because they involved local residents in planning and managing developments. In 1979 when Franklin Thomas became president of the Ford Foundation, he founded a group called Local Initiatives Support Corporation (LISC) with $34 million of Ford Foundation money. The LISC was designed to cut the risks of CDC projects by demanding rigorous lending and management standards. The MacArthur Foundation, Metropolitan Life Insurance Company and Cigna Corporation were all charter investors. In 1986 the LISC had more than $100 million in capital from more than three hundred corporations, foundations and three government bodies and it had funded400 community groups in twenty-seven cities.

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CDCs and LISCs have been successful in areas where efforts by other organizations have failed. In December of 1986, LISC announced the creation of a $10.5 million fund to purchase more than forty loans made to CDCs by LISC and others who had lent money to LISC projects. This created a secondary market guaranteeing decent returns to participants and making the entire concept that much more stable. Some experts actually see the withdrawal of federal support for housing as a good thing as it may lead to greater diversity and interest by private philanthropies. CDCs provide know-how and hands on expertise. For instance a few years ago a sub-group called "Local Initiatives" worked with ten New York City agencies and developed twelve projects totaling approximately one thousand units, finished ahead of schedule and under cost. Mr. Johnson credited a coordinated delivery system Vouchers provide assistance while preserving mobility and freedom of choice. They are cost-effective, costing taxpayers half as much as a new public housing unit where developers are subsidized more than tenants. The Office of Management and Budget found that in government subsidized construction projects, tenants receive 34 cents worth of benefits for every one dollar spent whereas they receive 84 cents for every dollar spent in a voucher program. Vouchers are supposed to make up the discrepancy between 30 percent of a family's monthly income and the established "reasonable rent" authorized for the area in which the participating family chooses to live. Many of the restrictions associated with the initial program have been eliminated. For instance voucher recipients can supplement the rent payments from their own incomes and upgrade their neighborhoods. But New York City refused to even distribute vouchers for ideological reasons. Instead the City demanded money from HUD to rehabilitate the foreclosed buildings it owns. Moderate Rehabilitation is a program separate from tax credit programs. In one such program, rents were calculated at $425 a month, but figuring in the tax credits brought the rent up to $600 a month. If vouchers had been adopted, twice as m any people could have been helped for a lower cost. The large housing market could be stimulated without government subsidies simply by modifying zoning ordinances. Most major cities have unused or abandoned building in their inventories that could be turned over to profit or nonprofit groups for conversion into low-cost housing. Between 1983 and 1989 the Boston Housing Partnership Inc. rehabilitated 1,600 units with no federal subsidies beyond tax credits.

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Martin Levine of Fannie Mae is a real public-private partnership advocate. By the way, Fannie Mae is the government's secondary mortgage market—a wholesaler of credit. Mr. Levine sees Fannie Mae as having a private charter to fulfill a public mission. Over die years Fannie Mae has reduced the cost of a mortgage for a lot of people who could not otherwise have afforded to purchase a house. In 1989 $3 billion was spread around to 60,000 households with onethird of Fannie Mae's purchases under $40,000. Fannie Mae issues bonds via local governments, cutting out the middlemen—the investment bankers. Its guarantees also impart a higher rating to borrowers. And in case you 're wondering, those guarantees are not counted as government liabilities when totaling up the national debt. The Institute for Policy Studies in Washington D.C. would like to see the federal government provide funds to build 200,000 new units and rehabilitate 400,000 older units for low-income people on an annual basis. A few years ago their idea was estimated to cost $24 billion a year, but we know how cost estimates grow! Of course there is a stipulation that the housing never fall into private, i.e. for profit, hands; it would have to be operated by nonprofit or tenant co-ops. Since there would be no mortgages, tenants' rental payments would cover taxes, maintenance and upkeep. Another incentive to remain poor. The National Affordable Housing Act, sponsored by Senator Cranston passed before the first session of the 101st Congress adjourned. The legislation was to provide incentives to prevent the loss of about 360,000 federally assisted low-income housing units over the next twelve years, 117,000 of those located in California. Current law allows owners of federally assisted housing to convert their properties to condos and market rental properties after paying off their mortgages over twenty years. The Cranston Bill would restrict the opportunities for owners to take advantage of the promised conversions and would instead encourage landlords to sell the properties to their old tenants. As an incentive the bill would guarantee an eight percent return on investments if the properties remained open to low-income tenants and would also provide planning and financial help to tenants trying to purchase their units. The acronym HOPE (Home Ownership & Opportunity for People Everywhere) is HUD Secretary Jack Kemp's pet project and is the part of Cranston's legislation designed to facilitate the purchase of public housing by tenants. And speaking of acronyms—at the heart of the Cranston bill is a grant program known as HOP (Housing Opportunity Partnerships) which also contains provisions to extend community development programs, rental assistance and other help for the homeless. It would give federal dollars directly to

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states and local governments so they can meet local housing needs. They would have to match the federal dollars but could use the money to get private financing and work with local non-profit community housing programs. The Cranston bill is supposed to bring California 40,000 new low-income housing units. However die legislation was never fully funded. The Kenilworth housing project in DC was purchased by its tenants in January 1989. Legislation to permit residents to purchase the public-housing units they live in has angered some people in the field. Bob Mc Kay, executive director of the Council of Large Public Housing Authorities derides the program calling it a cruel hoax to play on the poor. But Secretary of Housing, Jack Kemp claims critics don't like the program because it takes power away from the public-housing authorities. It is rather strange to find low-income housing activists who supported tenant management for more than twenty years suddenly desert the cause when Ronald Reagan and Jack Kemp added the wrinkle of selling public housing to its tenants. Another wrinkle which I am not too fond of is the stipulation that for each unit of public-housing sold to a resident management corporation, a replacement unit must be provided. To smooth that wrinkle a bit, Congressmen Armey and Fauntroy cosponsored the 1990 Urban Homestead Act which, if passed, would permit the use of housing vouchers to meet the requirement that each unit of public housing sold to a resident management corporation must be replaced with a new or refurbished public-housing unit so as not to diminish the public-housing stock. Congressman Fauntroy, who used to represent Washington D.C, disliked the section of the 1990 bill that would permit the use of housing vouchers to meet the replacement requirement and old-timer Henry Gonzalez of Texas is also dead set against using vouchers that way. Congressman Gonzalez firmly believes that each public-housing unit that is sold must be replaced by another physical structure. Bad Example: Not long ago a requirement that 158 acres of adjacent land be permanently dedicated to agriculture threatened to kill a low-income housing project in our area. The family that owned a total of 537 acres is as anxious as the county to build low-income housing on 28 acres but is only willing to dedicate 351 acres of the remaining land to "agricultural purposes forever" stating that the remaining 158 acres is marginal farmland. Of course the officials who try to impose their idea of Utopia on the rest of us imagine we should be grateful. The way the Monterey County Board of Supervisors see it, they already went out of their way to help keep housing

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affordable in a low-income area of the county by waiving the EIR (environmental impact report) and allowing increased density. About the same time a church was asked to redesign its proposed building and reduce its height by four feet in order not to violate prohibitions against ridgeline development in the county's general plan. The pastor objected to a requirement that the church deed 5.5 acres of land to the county for future highway expansion, and also pay the county an as-yet-undetermined amount as an "impact fee" based on projected traffic increases due to the expansion of church facilities. The pastor mildly asked the commission to accept the 5.5 acres as settlement of the fee requirement. Examples: Shared housing is the trendy industry term for describing a living situation where unrelated adults live together for their mutual advantage. It's not a new concept. In fact it was quite common for families to share housing during the depression and during the housing shortage immediately following the second world war. Today it is a good way to make the rent or the mortgage and tax payments more affordable. Innovative Housing in Fairfax, California proposed building a variation several houses around a community courtyard and garden. The buildings would provide a variety of sleeping-living accommodations, ranging from ground floor bedrooms with bathrooms outfitted for the handicapped, to rooms with sleeping porches to shelter the children of single parents. They all would have community kitchens and common areas. Some houses would contain large community rooms, others specially insulated music or television rooms. Besides providing inexpensive housing, I would imagine that sharing would provide a community atmosphere with all kinds of social benefits if the tenants were chosen from different generations. There are a lot of good, yet simple ideas out there. San Diego got creative recently by waiving some regulations and allowing the construction of SROs (Single-Room-Occupancy) hotels, which are definitely the cheapest type of housing to build. They don't have individual baths and kitchens and make do with less square footage and amenities than generally permitted by today's codes. Habitat for Humanity is an organization that is probably familiar to a lot of people because of President Carter's much publicized involvement. Habitat for Humanity operates in 170 cities with an $11 million budget raised from churches, businesses and foundations. Forty major banks across the country have set up community-development subsidiaries over

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the past decade. Habitat for Humanity, paid $19,000 to New York City for a sixstory building which had been abandoned for five years. It was transformed into 19 apartments which were sold at no profit, to low-income persons under longterm, no-interest mortgages. Jubilee Housing has an approach to housing that Robert Woodson and Jack Kemp would appreciate. This volunteer group, based on Christian principles, seeks "to meet social needs in ways that encourage self-development of persons instead of further dependency." The rents are low in the units it owns and manages and residents participate in maintenance and management. The Jubilee group has related agencies to provide health care and help tenants acquire job skills, parenting skills and other education, as desired. In 1973 members of a church in Washington D.C. needed help to purchase a couple of dilapidated buildings that they intended to renovate and use to house the poor. Developer and philanthropist, James Rouse, used his credit to borrow the purchase money and at the end of three years and after more than 50,000 volunteer hours of work, the first 90 units of the Jubilee Housing Project were ready for tenants. There is speculation that Rouse's Enterprise Foundation which helps people gain the skills to finance, renovate and manage property at the lowest cost possible was inspired by Jubilee Housing. It could be said that James Rouse is to Jubilee Housing what Jimmy Carter is to Habitat for Humanity. Both of these organizations, by the way, are, in my opinion, two of the best examples of privatized low-income housing in the country. The Nehemiah project in Brooklyn is an example of private-public sectors partnerships in housing. The City donated thirty blocks of vacant land and interest free second mortgages to help make the one thousand new low-income residences a reality. The Nehemiah project involved the construction of 5,000 two and three-bedroom homes each with 1,150 sq. ft of space and a basement. Mostly black and Hispanic buyers, who might not otherwise be able to afford home ownership, were able to buy these properties for $41,000 each, half the price such a home might normally bring. An initial revolving construction fund of $5 million was raised by 48 churches and supplemented by tax-default land donated by the city of New York. The City also deferred property taxes for ten years and provided special 9.9% mortgage financing that reduced monthly homeowner payments to about $350.

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Alternative #57
Alternative to rent control.
Goal: To make rentals less expensive and more plentiful.

How: First choice is to persuade local politicians and voters that it is in their
best interest to voluntarily end rent control. Second choice is to end federal housing subsidies to cities with rent regulations, (more coercion). Third choice is to substitute a gross receipt tax. (unjust tax).

Practical Benefits:
1 - Open market would reduce costs and provide more and better dwellings. 2 - Would increase revenue for local governments. 3 - More $$ would be available for uses other than shelter. 4 - Less bureaucracy. 5 - New buildings would be constructed.

Soft Power Benefits:
1 - Free citizens from govt control of their properties & destinies. 2 - Relieve somewhat the awful feeling of desperation. 3 - Allow more room for expression via more discretionary $$.

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Background for Alternative #57
When the market is kept artificially low, people don't outgrow their apartments and leave them for those on the rung behind. No pure blooded American can pass up a truly good deal and that's what many of New York's apartments have become under forty years of rent control. Fourteen percent of the tenants living in rent-regulated apartments have incomes over $40,000 and six percent have incomes above $50,000. A recent analysis showed that 45 percent of the benefit of rent regulation went to households with incomes above $40,000. "Benefit" was defined as the difference between actual rent paid and the rent someone in that income bracket would be expected to pay absent rent control. Some New York apartments are kept and sublet for handsome gains on the black market even though the original tenants left town long ago. The poor benefit least as they are most likely to move around and rentcontrol always reduces the number of units available in a community. Under rent control there is a subtle but speedy shifting of valuable property rights from owners to old tenants. Powerful political constituencies emerge and feed on people's desperation. Black markets develop as old tenants demand tribute for access to their lease rights. Ownership rights become a drag on the market—a losing proposition under rent control—but leasehold rights are in great demand. Vacancies are communicated via the underground, necessitating the payment of more tribute to the bearers of news about possible vacancies. Lower-income people would have the choice of low-rent privately constructed technologically innovative units or they could move into older units vacated by those who would move up and on once the inducement of artificially cheap rents was removed. And there would have been other benefits, or will be, if we can convince politicians to implement these recommendations. Consider the loss of tax revenue due to the dilapidated and abandoned housing units and depressed assessments due to rent control. Rigid building codes, a wariness to experiment with new developments and restrictive zoning laws are strong disincentives to the construction and renovation of low-cost housing. Not long ago Berkeley was spending $2 million a year to administer its rent control bureaucracy. In San Francisco, until recently, each tenant was paying only $8 a year for the administration of its rent board but that figure will increase as the minutiae in the new vacancy law will take lots of publicemployee hours to determine just what the landlord is allowed to charge, how and when as well as what he must do. Already the permit bureaucracy is horrendous. The old San Francisco Victorians will deteriorate if not maintained. This law could be one of San Francisco's bigger mistakes. 221

The gross receipt tax is unpalatable but an alternative that should be considered. Under a gross receipt tax a landlord would raise his rent to whatever the market would bear and then pay, say 3% of his increase, to a fund to subsidize low income tenants so that they can afford to live in the now more expensive units. There would be no government imposed cap on rents. The market would determine the price of rental units but government would collect a new tax for affordable housing. In a choice between a gross receipt tax or rent control I would have to chose the tax as far less detrimental to the housing stock and the spirit of the community. Why doesn't the government pay rents directly to landlords who are easier to supervise than hundreds of thousands of welfare clients, many of whom get the government money but forget to pay their rent. This would cut down on evictions. Many people make a practice of leaving one apartment after another in shambles, always one step ahead of the landlord and the sheriff. The members of the welfare culture tend to consume more housing in terms of its financial value and depreciation than does the middle class. New York's stock of SROs—single room occupancy units— dropped from 127,000 units in 1970 to only 14,000 in 1983. Of course this exacerbated the socalled "homeless problem". The City started using the hotel concept for what turned out to be unsatisfactory, to say the least, temporary shelter during the mid-eighties. The problem is not as bad as it was in 1987 when the City was using 62 hotels to house over 5,000 people. Jonathan Kozol's book Rachel and Her Children described the deplorable situations that existed from that misguided policy. Those so-called welfare hotels are mostly a thing of the past. New York now has what they call Tier Ones, transient shelters, and Tier Twos which are the more long term shelters. New York City reportedly has over 3,000 of those units with plans to build more.

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Alternative #58
Alternative to government rehabilitation of real property. Goal: To add to the housing stock in a cost-efficient manner. How:
1 - Privatization. 2 - Remove government obstacles to rehabilitation. 3 - Do not allow govt to compete with private sector. 4 - Contracting out is less desirable than privatization but preferable to government rehabilitation.

Practical Benefits:
1 - Cost efficient. 2 3 4 5 - Recycles old stock. - Improves neighborhoods. - Provides greater choice in housing. - Tax revenue for communities.

6 - The more people involved the more creativity 7 - Saves tax dollars.

Soft Power Benefits:
1 - Fosters attitude of thrift and husbandry. 2 - Transfers power and wealth from bureaucrats to consumers. 3 4 5 6 - Creates attitude of caring and upward growth. - Fosters self-esteem in groups involved in rehabilitation. - Encourages creativity. - Provides opportunity to realize potential.

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Background for Alternative #58
In New York City, a foreclosed city-owned building is eligible for rehabilitation only after it has stood vacant for a year. Nonprofit organizations and government often spend as much as $74,000 per unit to rehabilitate these old buildings and it often takes two and a half years before units can be rented. The 1986 tax legislation left many real estate investors with a feeling of uncertainty. Many saw the value of their write-offs decline when the top bracket fell from 50% to 28%. Unfortunately private developers and nonprofits are at odds partly because the tax code gives a ten percent priority for non-profits and freezes out privates. Even the GAO (Government Accounting Office) admits the fees private developers must pay are too high and yet the non-profit default rate has been four times the private default rate. Congress, realizing the losers could be millions of low-income people having trouble finding decent, reasonable and secure place to live, decided a tax credit was in order. But nothing too simple; one where the size of the credit depends on the kind of low-income housing. If the units are not financed via government subsidies the maximum credit to build or rehabilitate becomes nine percent of the purchase price taken each year for ten years. If the property is ten years old or more and the construction or rehabilitation is government financed, the maximum credit drops to four percent each year. One more stipulation; in order to qualify for the rehabilitation credit, the owner has to spend at least $2,000 for renovating each unit. 203K is an inner city rehabilitation program— waiver of the seven unit rule—under it developers can complete more than seven units. Just qualifying a project as lowincome housing can be a job. Either twenty percent of the units must be rented to people with incomes below fifty percent of the median income for the locality, or forty percent of the units must be occupied by tenants with incomes below sixty percent of the median. Owners must also meet state and federal guidelines in setting the rents charged to below-median-income tenants. If this were not enough, there are contradictory rules between the Treasury Department and government lenders. This is the first housing program to be administered by Treasury rather than the Department of Housing and Urban Development. Every state is allowed $1.25 of credit per resident per year, ten percent of which must be allocated to non-profit organizations. This is a classic example of the micromanagement that goes on in hundreds of industries and affects millions of American citizens on a daily basis.

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Example: A double rate tax system that would treat improvements, and the land on which they were built as two distinct forms of property has some merits. It was found that over a twenty year period building costs (materials etc.) rose approximately 14 percent a year, house-related labor costs rose anywhere from 11 percent to 15 percent whereas land values increased annually at three or four times times that rate or an average of forty-eight percent. Land used to be ten percent of the cost of a house; now it's 24% to 30% of the cost in many areas. By adopting lower tax rates on structures, tax-relief is given to both owneroccupied and rental housing and the owners have an incentive to improve the buildings. Then taxes are raised on land values, which decreases the profit of holding idle land and slows the growth of land values. This approach would keep housing costs and apartment rentals down and would encourage landlords to make improvements to existing buildings. Many cities in Pennsylvania have been doing this for years and years. What's new is the suggestion that this layered taxation be adopted widely by communities as a way to make housing more affordable. In Pittsburgh structures are taxed at a rate six time higher than land and the average price of new and existing homes is far lower than most cities its size. In 1988 Pittsburgh homes averaged $51,300 versus $183,000 in San Francisco and $229,400 in Boston. Of course there are many reasons completely unrelated to property taxes, for those price differentials., but you've got to admit having low tax rates on buildings encourages, or at least does not discourage, construction as the property tax structure in most cities does. Look at examples of cities in the same general locality. When Scranton, Pennsylvania began taxing structures at only 25 percent of the rate it taxed land, the value of private construction rose 22 percent. Nearby in Wilkes-Barre, which taxed improvements at a higher rate than land, as most cities do, private construction dropped by 44 percent over the same two year time period. And even if you want to discount numbers, look at the other benefits that come from encouraging development in cities: more jobs and reduction of urban sprawl, which means fewer public funds have to be allocated for services to outer-city areas like transit systems and extended sewer lines. On top of that, farmland is preserved. It looks like the only losers would be land speculators who find if they sit tight without developing their holdings their taxes keep rising.

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Alternative #59
Alternative to the idea that the government has an obligation to provide housing for its citizens.
Goal: To reaffirm the fact that this is a capitalist nation and the United States
government has no obligation to provide housing for its citizens as socialist countries may.

How: Recall that the United States of America is a mobile society. The poor are
too often talked about as if they were a class instead of poverty as being a temporary condition which just about any American can find himself in at one time or another. Poverty need not be permanent in this country but government can make it so.

Practical Benefits:
Once we realize that government has no obligation to provide housing for the poor we will be able to proceed with practical solutions to identifiable social problems which may require health care, temporary shelter, affordable housing or custodial care.

Soft Power Benefits:
Once people are viewed as classless but mobile, elitism is weakened and the spirit of community and togetherness is strengthened. Giving the down-and-out credit for having the ability to work their way up from a temporary set back also gives those that have been lucky and successful a chance to dismount from their high horses.

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Background for Alternative #59
Public housing started out in this country as part of our war effort and was only meant to be temporary. The AFDC (Aid to Families With Dependent Children) maximum shelter allowance for a family of four in 1988 was $312 a month in New York when the City was authorized under federal law to pay $ 1,000 a month to keep public assistance families in temporary shelters. Now wouldn't you rather be eligible for three times as much? And they blame fictional cutbacks, greed and all sorts of things for the increase in the number of homeless people around the country. There is an elastic demand for anything that appears to be both good and free. Examples of poor policy: In the early part of 1990 the New York Times reported that "Depending on the shelter, the cost ranges from $105 to $170 per family per day." This was in reference to serving the homeless. Of course the services are the largest cost. Job counseling, child care, education programs, medical treatment, assistance in finding permanent housing—functions all provided by salaried workers. A private-sector provider, or even a non-profit provider, might have paused and reconsidered after realizing for the same price each family could simply be given over $62,000 a year! And as more services were provided the average length of stay in a shelter increased. In the early 1970s it was less than two months, approximately fifteen years later a Policy Analysis by the Washington D.C. based Cato Institute found stays averaged over a year—13.6 months to be exact. The moderate-income working stiff is being played for a sucker! This policy is nonsense! Absolute nonsense! Not long ago New York City had 175,000 families waiting for low-income housing and yet publicly owned property was given to squatters; people who unlawfully occupied and in some cases renovated city owned property. Acorn (Association of Community Organizations for Reform Now) advocates felt justified in disregarding regulations. Squatters knew they were breaking the law and opted to accept the consequences in hopes of changing the law. All well and good—there is a time for arrogance and civil disobedience, but there must be consequences to suffer. Hard decisions were not made by the city of New York whose officials tried to duck the issue and give it a different name. In doing so they fostered a disregard for law and broke faith with the 175,000 families on the low-in come housing waiting list who were playing by the rules. For Acom to say the squatters action was a model for low-income housing is going too far.

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Alternative #60
Alternative to following in the footsteps of other countries.
Goal: To institute policies best suited to the philosophy upon which this nation
was founded.

How: By recalling our heritage and the ideals our forefathers fought to protect
and contrast them with the policies of other countries; policies that we are being urged to adopt.

Practical Benefits:
1 - We will better understand what it means to be an American— duties as well as privileges. 2 - We will be prepared to keep our elected officials from taking us down counter-productive paths. 3 - We will be able to point out the flaws in the policies that many of the countries we are being urged to emulate are themselves turning away from. 4 - We will have a chance at attaining our potential as a nation and as individuals.

Soft Power Benefits:
1 - We will get renewed optimism and vision. 2 - We will be energized to undo the legislation that has taken us farther and farther from the nation's ideals over the past fifty years. 3 - We will realize that soft power is what made this nation great and dedicate ourselves to building it in our children.

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Background for Alternative #60
Social security got its start in the mid-19th century under Bismarck in an attempt to fend off Germany's socialist movement. The U. S. in 1937 was the last industrialized nation to enact a social insurance program. It's as if the U.S. were in a race and being lapped by nations that have already had their go with socialized medicine, socialized child care, a tightly regulated business sector and are coming out of the collectivism tunnel just as we are going in. Could it be that our system of capitalism has worked so well that the rest of the world is starting to give it a try even as our own leaders stumble around looking for a better way? Europe is beginning to benefit from more flexible working hours and looser regulations. In the past European businesses shied away from hiring in good times for fear of being stuck with too many workers when things slowed down. Unions had tried to keep companies from organizing night and weekend shifts. Now companies keep the equipment humming by arranging shifts around the clock. I remember when West Germany had an unemployment rate above eight percent, high payroll taxes, inefficient farmers and a protectionist philosophy which sanctioned budget-busting subsidies to favored industries. Powerful labor unions exerted tight control over hiring, firing and wages. German employers had to go through an expensive and complicated procedure in order to fire any employee who had been on the payroll for at least six months. (What do you think instituting a "training wage" for a six month period would do to the ability of employers to fire anyone in this country?) Luckily the Germans woke up and employers are allowed to hire workers on contracts of up to eighteen months and lay them off at the end of that period without a giant hassle. Of course the unification with East Germany and the turmoil in Eastern Europe has brought its own set of problems. In 1991 the Swedes seem to be looking for alternatives to the bureaucratic welfare state. Sweden has long been known for having the world's most expansive social welfare benefits, most generous sick leave policies (100% paid), fifteen months of mostly paid parental leave, full employment thanks to a huge public sector and high taxes (marginal rate of 72% until 1988 and now 50%). These policies diminished the incentive to work. The government uses sixty-eight percent of the nation's GDP—gross domestic product. This caused many problems in 1990, such as an inflation rate of eleven percent, growth of only one percent and interest on loans of seventeen percent. On September 15, 1991 Sweden voted out the Social Democrats. The socialists had been in power for 53 of the past 59 years. Public expenditures

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consumed 57% of die GDP compared with 34% in USA and 25% in Japan. Capital flight, slow growth and inflation took over as the 1980s came to an end. 70% of workers pay were deducted for taxes or social-insurance. Socialism was the answer to child labor, long working hours and economic inequality. Worker absenteeism in the Netherlands has become a major problem. It seems that the generous sick pay and disability benefits mandated by Dutch law also works against the work ethic. As one factory owner put it, "Our welfare state was meant to provide a safety net, but it has turned into a hammock." A recent study looked at sixty countries over a thirty year period and concluded that free markets need a democracy, that they cannot function in an authoritarian environment. More than democracy is needed. In fact the term "democracy" is used with little recognition of the real problems a true democracy could impose. Unbalanced democracy is in fact a terrible system of government where the majority can vote themselves everything and anything they want at the expense of the minority. Freedom is probably a better term. More and more, educated students and workers demand the freedom they are aware exists in other countries. That used to exist in the United States of America. We have the legacy of socialism —a socialist morality—the idea that inequality is bad in itself. We tax capital and that somehow reduces income inequality. Instead of taxing consumption, which is what we take from society, we tax income, what we contribute to society. Dividends are taxed to corporations that pay them and also to the stockholders who receive them and the public sees no problem. When will our own nation have its fill of bureaucratic welfare-state solutions to social ills and start looking for alternatives? Alternatives such as choice in education, welfare reform and tax cuts. Alternatives which seeks to give the poor more freedom and more responsibility.

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Alternative to redistribution of income as a means of lessening the gap between rich and poor in the USA.

Alter^^ve #61 Alternative #61

Goal: To maintain a large prosperous American middle class.

How: Increase their opportunities for economic advancement through removing
cumbersome regulations and restrictions on their activities and reducing their tax burden. Give workers more opportunities to become equity owners by expansion of ideas like ESOP—employee stock ownership plans developed by the late Louis Kelso.

Practical Benefits:
We will see a resurgence of small businesses as hindrances are removed and a rebirth of creativity like the nation hasn't experienced in a very long time.

Soft Power Benefits:
People will regain self-respect and self-determination. With the ability to care for themselves comes the capacity to care for others.

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Background for Alternative #61
Government began measuring the distribution of income in 1967. Average real income of the bottom twenty percent increased eleven percent in the eighties even though the gap increased between the bottom and the top. Reaganomics was not the culprit, according to U.S. Chamber of Commerce economist Richard Rahn. He claimed the poverty rate went down each year during the Reagan administration. There were two and a half million less people living in poverty in 1989 than there had been in 1979. There were many explanations for the widening gap. Demographics, for instance. Fewer college graduates entering the work force explains some of the gap. Earlier there had been so many college graduates that supply often outstripped demand and wages were lower for white collar workers. This meant the ratio between these higher paid college graduates, relative to their lower paid high-school-only graduates, was narrower. Not because the lower got more, but because the higher got less in the seventies. Professor Frank Levy of the University of Maryland, in researching his book Dollars and Dreams, found that wages increased at an annual rate of 2.5 to 3 percent from the end of the second world war until 1973. Figuring everything in 1985 dollars, an average forty year old made $15,300 in 1947, $28,300 in 1973 and $24,000 in 1985. By 1990 the average weekly paycheck, adjusted for inflation, is now five percent smaller than it was ten years ago. The decrease was due to a variety of circumstances, many going back to 1973. In the July 26,1989 issue of the Wall Street Journal, economists Barry Bluestone of the University of Massachusetts, Frank Levy, of the University of Maryland, Fabian Linden, Executive Director of the Consumer Research Center of the Conference Board and Richard Vedder of Ohio University, discussed whether the USA was becoming more unequal. They agreed that the average earnings per hour did not improve during the eighties, earnings inequality among men had increased, there were fewer elderly and working-poor among the poor and poverty had increased among female-headed families. They agreed that the inequality of male earnings was more dramatic than the inequality of family income. They could not agree whether this was due to the age structure of the population or the changing nature of the American economy's demand for labor. They figured that family incomes grew moderately more equal after the second world war into the mid-sixties; it was during the eighties that the inequalities increased. From 1947-1967 economic growth reduced poverty, but there was little decline in poverty between 1967-1987. Per-capita disposable income rose by a total of 82 percent between 1960-1987, but growth in

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earnings from work slowed down in the mid-1970s. The average family income has risen for all income groups since 1982. Even the incomes of the lowest income group rose twelve percent over eight years (1982-1989). Sure the rich got richer, but so did the poor get richer. Dividing into five income groups the lowest increased by twelve percent, then eleven and a half percent then twelve percent then fourteen percent then twenty-two percent. Every group declined under Jimmy Carter. The choice is have all get poorer or all get richer. On average today's young workers have incomes in real terms 50 percent higher than their parents' at the same age. As these economists pointed out, that's because we now have two-income families with one child, instead of oneincome families with three children. Two-income households increased from thirty percent to thirty-five percent of total households during the eighties. In 1970 half of the families in the top 20 percent of the population had working wives and in 1987 that number had climbed to 66 percent. Without working wives, the entire bottom sixty percent of U.S. households would have experienced a loss of real income between 1979 and 1986. (adjusted for inflation) Without two incomes, there's no doubt we'd have more, not less, inequality. At the upper end when the marginal tax rate went from 70 percent to 28 percent there was an incentive to work —people would get to keep so much more of what they earned—and therefore workforce participation increased for this generally hard working group. During the 1973-74 oil crisis, purchasing power was transferred overseas which hurt this nation's productivity record as measured by the Commerce Department. According to the Bureau of Labor Statistics, between 1965-85 union wages outpaced cumulative inflation by 1.4 percent. Those in auto assembly lines were paid more and thanks to union pressures, $30,000 was not an unheard of wage for sweeping floors! It wasn't until 1984 that union pay hikes fell below the CPI (consumer price index) for the first time. Growth in the labor force was a little over two percent during those years and during the seventies alone, approximately twenty million net new jobs were created. The projection for labor-force growth was only one percent a year between 1990-95. Between 1972-78 real after-tax income per capita was flat but since then it has risen dramatically. However it's true that many new jobs don't pay as well as old ones did, but it varies from industry to industry. In 1983 the average employee in domestic industries made $16,000— in export industries he made $19,000. The new high-tech industries seem to pay either minimum wage for assembly line skills or high salaries for technical knowledge and training—no middle ground. So what we've got on the one hand is the loss of $28,000 /year jobs and the increase of jobs paying under $7,000, or so Professor Levy claimed. He said that more adult males than females were unemployed for the first time in history in 1987. According to the good

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professor the middle class is decreasing and the wealth-poverty pockets are shifting. Statistics can be manipulated to prove anything. During the 1970s the Census Bureau used a consumer price index which overstated inflation and included high interest mortgages, all effectively exaggerating the poverty rate. If food, housing and medicaid benefits and the vagaries of the consumer price index had been considered the number of poor Americans would have been millions less than the official count. Partly due to mistakes made in computing social security benefits back in 1972 (tying benefits to CPI at a time when wages were about to decline) the elderly are no longer at the bottom of the poverty heap, but women and children have taken their place. I'll say it again: statistics can be skewed to show anything you'd like. For example, zero was the median income of individual Americans not long ago (half above and half below) simply because housewives and children didn't show any income at all. In the 1970s the GNP supposedly rose, but if one looks closely at the rapidly increasing income one can see that its cause is nothing to celebrate. What is hidden beneath the healthy looking GNP is the disruption of American families. Unfortunate happenings in society translated to praiseworthy events statistically. More housing, more fast food sales, more use of day-care centers and domestic help, psychiatric and social services of every kind and more job holders are due to divorce and staying single longer. The example of the man who marries his housekeeper is often used to show how GNP can be diminished. In marriage, the money that was previously paid to the housekeeper is now voluntarily shared but is not reportable income and does not show up in GNP statistics as before. Counter arguments Alexander Cockbum, columnist for The Nation and an unabashed Reagan critic, is eager to pin any and all recessions (he'd prefer a nice full blown depression) on Reaganomics and free markets. He refers to two reports by the Economic Policy Institute. The first showed in the last ten years the circumstances of the typical American working family worsened. (What did I say about statistics?) The report maintained that real hourly wages decreased nine percent between 1980-89 and benefits dropped by almost fourteen percent. Mr. Cockbum claims tax reform increased the real income of the wealthiest one percent of the population by 73.9 percent while the poorest twenty percent realized a 4.4 percent decline. The second study showed the deepening debt of American households; equal to ninety-four percent of their annual income. The rich were seen to have bettered themselves by speculating in financial and real estate markets. LBOs meant investment in turnover of

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existing assets rather than financing of new assets. Robert Kuttner's recipe for reversing the decline of the middle class is a more progressive tax policy and stronger unions. He would love to discourage speculation and its chance of "unearned overnight fortunes". Mr. Kuttner wants tax policy to redistribute income and to do away with windfall gains and speculators. He points to S & L speculation to back up his point. He urges "strategies" (central planning) to improve quality of workers and the types of available jobs. He is a strong advocate for more policies that include things like Head Start, a full employment economy, wage subsidies, on-the-job-training. Mr. Kuttner claims there are no hardcore poor in Western Europe because there is no free market. A century ago America, in the robber-baron era was more unequal than now. Mr. Kuttner blames the increasing gap between rich and poor on cheap foreign labor, the poorly paid service economy, demographic changes in the work force, deregulation, anti-unionism and shifts in tax and spending by the federal government. Robert Kuttner says no one wants to believe in a declining middle class, because if it were true it would be an indictment against capitalism. Ronald Reagan is Mr. Kuttner's whipping boy. To him, RR stands for Reverse Robinhood. Instead of an era of greed, as opponents of Reagan's presidency often refer to the eighties, both President Reagan and now President Bush, with his "points of light" agenda, have awakened a sense of individual responsibility in people that hasn' t been apparent since the Kennedy era. The Great Society program and the elevation of the welfare state made most people think government had the welfare of the poor and unfortunate under control. All government seemed to want during the late sixties and through the seventies was our dollars, and they got that with a huge expansion in government spending and entitlement programs. Mr. Kuttner characterizes the 1986 tax reform that was steered through the congress by Dan Rostenkowski and many, many Democrats, as a system that gives special breaks to the very rich and withdraws subsidies from the poor. He believes deregulation can do no good—it provides new opportunities for speculation and makes the rich, richer. Deregulation takes the wrap for exchanging high wage manufacturing jobs for low wage jobs created for the bottom half of the labor force, isolating the underclass even more. Examples or successes But there are things that make people all over the world want to live in America, despite the lamants of detractors like Mr. Kuttner and Mr. Cockbum. The ordinary American can do things that are reserved only for the wealthy in other parts of the world. For instance, it costs about half as much to fly a mile in the USA as in other industrialized countries. $140

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between NYC and DC translates to $260 between London and Paris. Similar examples exist in trucking, securities brokerage and telephone charges. We are still a nation of change and innovation. We hear of failures of large department store chains but not about the booming success of upstart mail order establishments where one American worker can sell by phone and computer more than a whole block of Tokyo mom and pop operations. The number of company employees who work at home during business hours rose thirty-eight percent between 1990-1991 to five and a half million according to Link Resources, a New York research and consulting firm. Rules for working at home are being formulated and at least one insurance company provides a model agreement for the employer and employee to sign covering liability and confidentiality issues. Levi Strauss of San Francisco required at-home-workers to set up a separate work place in their home and to make child-care arrangements just as if they were working in the office. Other companies require that regular work hours be adhered to and that employees come to the office for staff meetings. Efficiency is stimulated by competition and deregulation. Rapid economic growth is the best way to eliminate poverty. Government programs have made many Americans immune to economic growth. Much that is done to help the poor provides incentives which encourage dependency. Like tough love, rather than trying so hard to lighten the burden of poverty, perhaps it should be recognized for what it is; rather than making poverty more palatable, people should be helped to escape from it. The job is to get on with the work of building a society that is open, diverse, and free. That means equal opportunity and allowing results to depend on individual responses to those opportunities.

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Alternative #62
Alternative to the welfare state.
Goal: To find an effective and efficient form of aid for the u n f o r tunate; a way
to express compassion and concern involving less taxes and getting better results.

How: Institute programs that save money while saving people, which means
market oriented programs. Duplicate many of the existing programs like those established by Mimi Silbert of Delancey Street and Lupe Anguiano of that are flexible and give folks choice and a sense of control, and encourage the private sector to experiment with new ones.

Practical Benefits:
Successful programs benefit the country economically and spiritually as people progress from takers to producers.

Soft Power Benefits:
Empowerment. There are countless alternatives to the old way of doing things and we must find those alternatives and put them into practice. It is extremely important to bring power closer and closer to the individual by transferring it whenever possible to a lower rung, as from the federal government to the state, to the county, to the town, to the neighborhood to the family and finally to the individual.

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Background for Alternative #62
The welfare state got a good foothold in England about twenty years before it caught on here with Franklin Delano Roosevelt's New Deal. It took Margaret Thatcher about eight years to subdue it in England, although it is still the hallmark of the British Labour Party. The Reagan Revolution was suppose to trim the welfare state in this country with it's cry of "Government is the problem, not the solution." The media has been claiming for quite some time now that the "Reagan Revolution is dead— and thank goodness". In reality the Reagan Revolution barely got started and never really progressed beyond rhetoric. Our federal welfare system encompasses at least 59 programs incorporating more than 6,000 pages of regulations. One of Ronald Reagan's goals was to turn more of the administration back to the states. Congress sabotaged the plan by heaping mandates on the states without providing funding so that most governors look at plans offering flexibility as an attempt by the federal government to transfer expenses not administration. But states have been experimenting with the administration of the welfare system. The Work Incentive program (WIN) required recipients to register but not necessarily participate in work programs if their children were at least six years old. The Department of Health and Human services proposed a program for FY1988 with the acronym GROW (Greater Opportunities Through Work) which required participation by parents of children over six months of age. About the same time the nation's governors at their meeting in February 1987 proposed a $1 billion program (85 percent to be funded by the federal government) calling for a national standard of need and minimum level of benefits to be adjusted for geographic differences and tied to a percentage of the poverty standard. About fifty years ago many communities operated centers for the whole family. Mothers learned how to cook, had classes, games and care was provided for the young children. A swimming pool and athletic field was available as well as a dental clinic and well-baby clinic. Doctors and dentists gave their day offs, maybe once a month. Then the government came in with their rules and regulations. What thrived under the community (neighborhood) languished and became inefficient under government funding and heavy regulation. We now have sections in the major cities of the USA that are essentially abandoned by the middle class and the working people. I'm not sure that there is any way that the old-fashioned settlement house can solve that problem. But the wholistic approach is recognized again today with churches and family-life centers being die favored

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dispenser of services. Real vision doesn't come from government. A viewer from West Virginia called a C-SPAN interview program in the summer of 1991 claiming she was ninth of seventeen children and the eight above her could read and write and the eight below could not. Her point was the deterioration of our educational system. Her father had a sense of responsibility—the family ate beans and rice and paid for their own broken bones, tonsillectomies, pregnancies and her dad had money set aside to bury his wife, himself and three children. (He died in 1979) Now people won't even pay $30 or $40 dollars a month for a health plan sponsored by the government. She chastised the system but even more the lack of character in the American people. But how do we get character? It is not enough for taxpayers to provide free lunches, free books, subsidized housing when many of the recipients are without hope. Ordinary citizens have to make contact with ghetto residents to provide positive role models. In 1958 the family was the number one influence in a child's life, the number two influence was education and number three was church, with peers bringing up the number four space. TV is the number one influence on all Americans today. In the 1960s and 1970s it was considered cruel to require unfortunate people to work in order to receive help. But in die 1980s the consensus seemed to be that a combination of education and work were essential to encourage sound habits of self-reliance and bolster the morality of the country. Workfare more often means job-search-help rather than actual government jobs. According to Douglas Besharov of the American Enterprise Institute, about half of new entrants to AFDC use the program as a temporary crutch for an average of four years, whereas the other half average almost seven years on the program with a quarter of those receiving aid for ten years or more. Poor Example: In 1988 Massachusetts' workfare program was called ET (Employment and Training Choices). ET provided job training, a year's free child care, a back-towork clothing allowance, a travel allowance and four months of free Medicaid to participants. For each former recipient placed in a job with an average starting salary of $12,000 the state saved almost $8,000 through reduced AFDC, medicaid and food stamp outlays. Despite the increase in benefits afforded by ET, a welfare-rights-advocate group called the Coalition for Basic Human Needs sued Massachusetts to force it to just about double its cash grants to welfare recipients. On January 5, 1987 the Superior Court Judge Charles Grabau of Boston, interpreted a 1913 state statute ensuring adequate shelter, to mean that Mas

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sachusetts must provide benefits sufficient to enable healthy circumstances for raising children. Judge Grabau used that statute to justify his ruling that monthly benefits to a family of three be increased from $491 to $845. Judge Grabau ruled, in effect, that as a matter of compassion, onegroup of citizens could be forced to make another group comfortable. Wanting good things for others is a normal human feeling and should be encouraged, but not by government. In Massachusetts those wants were given the force of law.

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Alternative #63
Alternative to the way we determine poverty.
Goal: Define poverty so that only those in the most dire circumstances are
included and make certain the definition emphasizes mobility.

How: Change the current goal of defining poverty in the broadest terms so that
as many persons as possible qualify for benefits and are encouraged to be counted in the definition. The present practice treats those who qualify as winners.

Practical Benefits:
1 - A change in definition would save taxpayer dollars. 2 - Would encourage people to move out of poverty more quickly. 3 - Would reward effort, not penalize work.

Soft Power Benefits:
People would be encouraged to take more responsibility for their own lives. Some people believe that comfort and aid to one's fellow man should come voluntarily from the community so that both the giver and the recipient can be nourished by the humaneness of the act. They view charity as a moral obligation which should not be legislated by a handful of men but rather something all men should do voluntarily of their own free will and on a personal level.

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Background for Alternative #63
Poverty was one of those subjective words until policymakers stepped in and made it "whatever they want it to mean." Many people are counted as poor who are not deprived in any objective standard, because there is considerable disagreement as to what should be considered in determining poverty. Large trends can be recognized even if actual figures are disputed from time to time. Almost half our population was poor in the 1930s, using the poverty line deflated for 1930s dollars. By 1950 the poverty rate had fallen to thirty percent; to twenty percent by 1964 and to twelve percent by 1969. Poverty thresholds were first set in 1961 when the Social Security Administration, along with the Agricultural Department, determined the income necessary to adequately feed the number of children and adults in any given household and multiplied by three—food took approximately one-third of most people's household budgets back then. Figures for children in poverty were first calculated in 1929. In 1959, the figures stood at 26.9 percent and in 1985 at 20.1 percent meaning that although poverty had declined since the fifties close to 13 million children were living in families below the 1985 government's official poverty line cut-off of $10,989 for a family of four. Of those 13 million children, 43.1 percent were black, 39.6 percent were Hispanic and 15.6 percent white. In 1974, children became the poorest group in our population— whatever in the world that is supposed to mean since children have never had any money and money is what is counted in determining poverty statistics. You might also consider that if children and adults were evenly distributed there wouldn't be a difference in their poverty rates. But, according to Victor Fuchs, Economics Professor at Stanford University, forty percent of all children and nine percent of all adults live in households with three or more children and fifty-seven percent of all adults live in households containing no children. That means even if incomes of adults are similar the per capita income is much lower in homes with children. We certainly didn't need anyone's study to tell us that. Nor is it a surprising discovery that non-labor income attributable to pension and Social Security benefits, has grown more rapidly than labor income, which has in fact declined in recent years. Children are clearly more dependent on the labor income of their parents, which helps account for the statistics showing an increase in childhood poverty in recent years. I guess it's safe to say when it comes to something as arbitrarily defined as poverty, you choose whomever you prefer to believe. Columnist Carl Rowan on May 27,1986 quoted heavily from the questionable Physician's Task Force On Hunger In America which purportedly found that "the prob

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lem of hunger in the United States is now more widespread and serious than at any time in the last ten to fifteen years." And here is James J. Kilpatrick's offering a few days later (6/2/86) "There is not a scintilla of valid evidence to prove that serious malnutrition is a widespread problem in the United States today." The results of a poll were released in the summer of 1991 showing that a very large percentage of the nation's children were going to bed hungry. I remember listening to the questions asked in the polling process and thinking to myself that if asked those same questions when they were young kids, any and all five of our sons could have answered in such a way that they would have been counted as "children going to bed hungry." In fact it was the rare child that wouldn't have. In 1985, non-cash benefits to the poor were valued at $56.2 billion; almost double the $30.2 billion cash benefits. If according to a 1986 study by the Census Bureau, non-cash federal assistance was to be considered, the number of citizens living in poverty might be 11.5 million lower than officially estimated. Every year beginning in 1979, the non-cash portion of public assistance has resulted in a lower number of poor people than officially published. To include even the insurance value of Medicare-Medicaid benefits in counting non-cash aid, would lead to the ridiculous result that in eight states the value of those benefits would put an elderly person with absolutely zero cash income in the "above poverty" level. Counting Medicaid could mean that "the sicker the richer". According to the most recent Census the number of Americans below the poverty line amounted to 13.5 percent of the U. S. population. The poverty figures released in September, 1991 showed the poverty rate for children under the age of six stood at 23.6 percent. The official poverty line, which varies according to such factors as family size and age, averaged $6,652 for an individual and $13,359 for a family of four. But poverty figures are not accurate measures of anything. Families supported by sales and investments often receive large sums of money one year and then nothing for two or three years. If net worth were considered the poverty statistics would be more accurate. They would also show a more accurate picture if housing, health and food subsidies were counted in figuring the poverty level. It is well known that some people are better off financially by being on the dole, than they would be working for low pay. Many low-income families, while their earnings may put them above the poverty level, do not have as high a standard of living as those with lower incomes supplemented by government subsidies. I think everyone agrees the government needs to reward effort, not penalize work as it has been doing by its wrong-headed policies in the past.

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Counter Solution: Patricia Ruggle of the Urban Institute advocates using a new method, which she has developed to measure poverty. She believes today's poverty level is too low because it is estimated using minimum needs. Instead of the 1989 level of $9,885 for a family of three, using her revised levels the poverty rate would be $15,000. She criticized the current level because it leaves no margin for clothes, taxes, transportation, work expenses and health care. If her revised poverty figures were used, the 1988 poverty rate would be 23 percent instead of 13 percent and the rate for children would be 31 percent. The poverty rate for those 65 years old and up would climb from 12 percent to 29 percent. More than 50 million Americans, including 20 million children who would be poor under her criteria.

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Alternative #64
Alternative to government inducements to remain in poverty.
Goal: To remove disincentives to movement out of poverty. How:
1 - Best would be to substitute private for government entitlement programs where qualifications are now publicized and automatic. 2 - Encourage professionals to make services available to all comers for a modest fee with no qualifying requirements. The freeloader problem would be less damaging than the current practice of encouraging poverty. 3 - Do not eliminate or deduct benefits as the poor begin to make headway and pull themselves out of their hole. 4 - Enact many of the tax credits suggested by economist Robert Edmonds in his "Human Investment Tax Credit Program".

Practical Benefits:
People will remain in poverty for shorter periods of time if they see the benefits of leaving are greater than those available if they remain.

Soft Power Benefits:
Honesty and integrity will have a chance. People will not have to hide their extra earnings or lie about "a man in the house" or any money they have been able to save etc. The working poor will not feel cheated as they do now when they see others receive benefits they are too "well off to share. Whenever a "qualifying line" is drawn those just above the cut off will be bitter and those just below will stagnate.

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Background for Alternative #64
Profit motives can be merged with moral imperatives to produce quality services for the disadvantaged. With government agencies continuing to assess needs, set contract standards, and monitor performance, human-service entrepreneurs can relieve government of many of its provider burdens. In March 1987, the Senate Labor and Human Resource Committee proposed legislation that would have given $3,700 to each former welfare recipient who was able to find employment and remain employed for at least three years. The funds were to come from the money saved by removing them from the welfare rolls. Payments would not be made until the actual savings were realized. During a former welfare recipient's first year of employment, the state would receive 75 percent of the benefit that would have been paid to the recipient had he or she still been on welfare. That figure was to drop to 50 percent during the second year and 25 percent in the third year of employment. After three years, the average bonus per ex-welfare recipient was estimated to be about $3,700. Possibly enough to make a person quit and start the three year cycle all over again. The plan may have sounded practical and even paid for itself but what about the philosophy here? The concern seems to be wholly practical with little thought to the ideals of the nation or whether it makes spiritual as well as economic sense. From about 1967 to about 1974, the number of cases on the welfare rolls doubled. As University of Maryland Professor Frank Levy put it: "You'd be a fool not to attribute a good part of that doubling to the raising of benefits and the attachment of food stamps and Medicaid to welfare... In real terms, payments to individuals by the United States government went up from $152 billion (1982 dollars) in 1970 to $405 billion in 1988." For many in the lower half of the income distribution, welfare has been too tempting to pass up. The guaranteed income coupled with food stamps, WIC program food benefits, Medicaid, subsidized housing and other benefits has been irresistible. The medicaid program, all by itself, provides an incentive to remain in poverty.

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Alternative #65
Alternative to AFDC—Aid to Families with Dependent Children. Goal: Fewer single mothers and children in poverty. How:
1 - Either recognize the right of women to bear children with out the benefit of marriage and accept the obligation of society to provide sufficient funds for the single female and her children to live comfortably or 2 - Admit a preference for the peer pressure stigmatization used historically by most societies to avoid this burden and begin to use it. (The kind of pressure we have no qualms about using against smokers!)

Practical Benefits:
Either way there will be fewer women and children in poverty.

Soft Power Benefits:
There is no soft power winner in either of the above proposals. If the first alternative is adopted we would feed discontent and a sense of injustice and oppression and favoritism as thoughtful, disciplined people are forced to support their irresponsible peers. In the second alternative, intolerance and a harsh judgmental edge would be encouraged. This may mean that AFDC with its current emphasis on making the male assume economic support, is the best we can do even though the track record is spotty. It may be time to recognize that while there are no soft-power benefits here, the solution must be soft-power. Youngsters must be taught responsibility, patience, discipline, abstinence, how to delay gratification, concern for others and the meaning of "duty".

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Background for Alternative #65
The Family Support Act, effective October 1988, is legislation which declares that while society owes single mothers support while they acquire the means of self-sufficiency; mothers, in turn, owe society the effort to become self-sufficient. Absent fathers owe child support to both. Mandatory childsupport guidelines are required of every state, something unheard of until the passage of this legislation. Wage withholding for child support payments went into effect nationwide as a consequence of the 1988 Act. But saying something is owed doesn't guarantee payment. In 1963 sixty percent of the men in this country aged 20 to 24 earned enough to keep a family of three out of poverty; by 1984 only forty-two percent could do so. Between 1979 and 1986 wages of those with only a high school education or less, fell seventeen percent. Even though more people went to college the number of young men who actually earned college degrees fell by two percent, to twenty-five percent of all young men. A lot of the young guys who wouldn't normally have gone to college hid out on college campuses during the Viet Nam war. That probably has something to do with a "drop" from an artificially elevated high. Senator Moynihan of New York, over twenty-five years ago, was the first to point out the connection between the curve of unemployment and family dissolution, between family instability and welfare dependency. The welfare system has expanded its services and eligibility requirements even further since then. Mothers with illegitimate babies have had no reason to marry and young men faced with low paying jobs have had no reason to work. The current welfare system is structured primarily to assist non-employed single mothers. Women are given money in our welfare culture as a right which frees men from having to get the same money through hard work. Generation after generation of men have conquered poverty in this mobile society of ours, by working hard and using their wits as well as their brawn. Unfortunately our government antipoverty programs^—to the extent they make the mother's situation better—tend to make the father's situation worse. Who needs a lowincome earning male around when Uncle Sam is there to provide? But most males are low income earners when they start out. The truth is, most men, black or white, work hard out of a combination of love and necessity. The fact that they have dependent wives and children allows them to embrace hardships and make sacrifices that they would never consider out of pure selfish ambition. Their families provide incentive and so even though it is not "politically correct" to admit it, most men have ambivalent feelings about working wives, and when wives earn more, most males lose all incentives. I realize this obser

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vation conflicts with the popular perception that the strain of having insufficient resources and the responsibility of a family are obstacles to economic success. I believe they are the springboards that provide motivation. The current welfare system has strong disincentives for work. Payments-inkind, including medical benefits and food and housing supplements, are taken away as welfare beneficiaries attempt to help themselves kick the habit of welfare by making money. Although payments-in-kind are not counted as income, they have contributed greatly to the economic attractiveness of the welfare alternative. A welfare recipient becomes ineligible for these benefits before he or she (generally she) is able to replace them from earnings produced by hard work. The desire to get ahead is often quelled when a person finds government is willing to provide (as long as she doesn't work) what she is still not capable of providing on her own. A better way might be to expand the earned-income tax credit for families in the $10,000-$20,000 range. Every day there are 2,500 children born out of wedlock, 700 low-birthweight babies are born, 7,000 teenagers become sexually active, 1,1000 teens have abortions, 100 teens contract syphilis or gonorrhea and six teenagers commit suicide. From drug and alcohol abuse stem many of the other problems like abused children leading to foster care; drug habits leading to low-birthweight babies and so forth. As if single-parent families were not enough, society now has to contend with no-parent families in the form of AIDs and crack babies. The 1991 Commission on Children agreed that the message of the last twenty years, that "family structure is irrelevant" or that "no one family configuration is better than any other" is baloney. Such a feel-good philosophy was a nice pacifier designed to help us stop worrying about divorce, single parenting, spending less time with our children and all those things that common sense would normally tell us make a big difference in a child's life. "It's not the quantity of time, it's the quality of time" is thinking that has been discredited. The studies showed that family structure is the single most important factor related to successful outcomes in childhood. They found that half of today's children will spend some time in single parent families before age 16—half of all marriages will end in divorce and half of those will end in a second divorce before these same kids reach age 16. They also found that kids from single parent households exhibit above average rates of suicide, drug use, mental and physical illness and violence. When family configuration was taken into consideration, the relationship between crime and race, and crime and lowincome, completely disappeared.

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But when expert A says "X" and Expert B says "Not X" you can't blame the average bewildered layman for choosing denial. This is something we don't want to face and there are always studies supporting another point of view and assuring us we don't have to pay attention. Those who feel guilty do so because they probably grew up in two parent households with stay-at-home-moms, and feel they should provide their own children with the same kind of childhood. The Commission on Children (chaired by Senator Rockefeller) came up with a whole set of statistics. Parents spent forty percent less time with their children in 1990 than they did in 1965. It was found that twenty percent of the children in two parent families will spend some time in poverty before their tenth birthdays compared to seventy-three percent of children under age ten in single parent homes. Living in a stable two parent family with one or both parents employed is a child's best hope of escaping poverty and having his or her material needs met. Government should therefore encourage work, independence and strong families. The Commission explicitly recommended that abstinence be put on a par with other kinds of birth control. Teenagers are too embarrassed, immature, or for whatever reason, they fail to use contraception, so it only makes sense to encourage abstinence. The final report conceded the importance of morals and values, endorsed two parent families, recognized the need to encourage the formation of more two-parent families and the need for tax codes and welfare reforms to remove negative impacts on two parent families, endorsed school choice, acknowledged that government should permit families to keep more of what they earn and in that vein they recommended a $40 billion tax cut. The media has done a pretty good job of telling us about the one million abused and neglected children, the 400,000 in foster homes and about the one out of five who in 1990 was living in poverty. But what they don't talk about, maybe because it's not news, is the number of children in this country who are doing well. The vast majority of children are being raised by nurturing parents and have their material needs met.

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Altern|^ve #66
Alternative to our current approach to our homeless problem. Goal: To separate the issue into solvable components so that no one is living on
city streets.

How: Institute and or enforce ordinances so that the homeless can be picked up
and questioned by specially trained (not police) officials who would determine how the individual could best be helped and then connect that individual with family members, health facilities, private nonprofit institutions, job training and so forth.

Practical Benefits:
1 - Cost efficient alternative to emergency room care, police surveillance, deterring tourists and shoppers and using police and clean up resources. 2 - Some people may be rehabilitated to become producers in society. 3 - Those who help will get self-esteem and satisfaction from participating in an on-hands-solution to the problem. 4 - Costs can be minimized by recruiting volunteer groups as a first choice and taking bids from private sector contractors as an alternate. Publicize the need and the cost and ask local citizens to decide if they would prefer taxes to pay for everything or would they rather minimize the dollars needed and draft caring volunteers.

Soft Power Benefits:
1 - Being responsible may become fashionable again as the opportunities to show concern multiply. 2 - Community spirit, tolerance, love and understanding will get a shot-in-the arm.

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Background for Alternative #66
In an honest attempt to account for all the homeless, the Census bureau spent $2.7 million and involved 15,000 census workers. Yet an instructor at two California State University campuses blames unsympathetic bureaucrats, politicians and greed for an 'epidemic' of homelessness that he claims is grossly understated. The instructor is a San Francisco man who at age 51 lost his clerical job and didn't make enough working part-time jobs to cover his rent. He moved to Bakersfield where he found employment providing insights into the homeless situation to students from the prospective of a homeless person. According to an October 6, 1991 newspaper account (Associated Press) now age 55, this University lecturer offers classes in homelessness. After a short quiz on poverty, students were given a homework assignment of interacting with homeless people. A few years ago the East Hampton School on Long Island had kids smear mud on their faces and wear tattered clothes and sleep in cardboard boxes to learn about homelessness. It may be impossible to deal with the homeless problem until there is a consensus on what it means to be 'homeless'. Even the census bureau is unable to come up with adequate information when it comes to the number of homeless people in the country. Mitch Snyder, former advocate for the homeless, advised homeless people not to cooperate with the census bureau. He was certain their findings would minimize the count and consequently allow politicians to do little about the homeless problem. Some people claim that in 1986 alone, homelessness nationwide increased by an average of twenty to twenty-five percent and that families with children account for more than thirty percent of the homeless. There are people who work with the homeless who claim that most of them are average Americans; normal people who've led normal lives and held normal jobs until whamo—they found themselves and their families out on the streets. Others claim the homeless are not your typical average American at all, but are drug addicts, alcoholics and the mentally ill. When you speak about the cause of homelessness you'll get as many different opinions as you will when you ask about figures. The truth is the homeless are made up of some of both groups. I'm convinced there are a number of things that led up to the current predicament, not the least of which was the phase-out of approximately 500,000 beds in mental hospitals across the nation and the enactment of stricter laws for involuntary confinement. As with so many policies born

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of good intentions, these that took place in the late sixties didn't have the anticipated results. The idea was to provide more effective community based voluntary care. The trouble is, many people with serious mental disorders refused to volunteer for the care. On top of that, the organization and expense involved in providing services was underestimated. Out of the 2,000 planned federally funded community mental health facilities, only 800 were ever established. Untreated illness, more often than not, led to alienation and life on the streets, and once on the streets, the new laws protected the rights of persons to continue to refuse help. A few years ago the American Psychiatric Association (APA) recommended involuntary confinement as a solution to the homeless problem but only provided the following guidelines were observed, all of which called for judgment calls: the patient must be obviously mentally ill so that he is incompetent to make medical decisions, exhibit mental deterioration involving hallucinations or delusions and show obvious suffering. Furthermore there had to be evidence that the disorder was treatable and facilities available to do an adequate job. The APA insists that adherence to its proposal would result in only the most ill and most likely to be helped ever being confined. Nevertheless civil libertarians were, and remain dead set against paternalistic social intervention and are adamant that the law must prohibit involuntary treatment of any sort, no matter how effective it might claim to be. The only exception would be if the person is deemed dangerous to himself or others. That is also a judgment call. California currently has a law which states that an individual must be so "gravely disabled" that he or she cannot provide for his or her own shelter, food, or clothing before the state can step in. Under such policies society must be prepared to witness an ever increasing number of non-dangerous mentally ill people inhabiting doorways and parks. I read an article in the August3,1990 edition of the Wall Street Journal by J. Douglas Ousley, rector of the Church of the Incarnation in New York City. He asked "Should insane people who roam the streets be confined against their will or should they be allowed to remain free?" He said that he was torn, but finally pinned his reasoning on the definition of "free". He decided a person who had no awareness of what he was doing or who had no control over the inner compulsions that drive him, could not have civil rights that include freedom of movement. Therefore, since no rights would be violated, "we would all be better off if (such people) were confined and had a better chance for a more human existence." The Homeless Person's Survival Act which in June 1986 was the first

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piece of federal legislation specifically addressing homelessness. In March, 1987 Minority House Leader, Bob Michel wanted to prioritize. He was willing to back the Homeless act as long as something else was cut. He insisted that the legislation be revenue neutral. However, his amendment was defeated and so was a similar "deficit awareness" amendment introduced by Robert Walker of Pennsylvania. The attitude of the democratically controlled House was summed up in a stunning performance by Henry Gonzalez of Texas who epitomized the collectivism mentality with these words,".. .the federal government has a legal and moral obligation to feed, clothe and house the homeless of this country." Other members of the opposition argued that such an amendment would mean before they can have a warm bowl of soup or a blanket and a cot the homeless would have to take it from someone else. In the real world every program takes from someone; someone else's priorities are jeopardized anytime congress allocates more money. If not from current taxpayers, then from future generations. The piper must be paid by someone, sometime and we have politicians making sure it happens not only in the future but preferably to voters outside their own districts. But I guess Americans are satisfied—they keep rewriting incumbents to office. Example: Hospitality House in San Francisco allows homeless people to use their address to vote, apply for assistance, receive assistance checks and receive messages. They give people vouchers so they can shop at goodwill and the Salvation Army. It is supported, wholly or partly by the City of SF. Yellow Brick Road is a private group that motivates people and helps them get work and keep a job.

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Alter^ve #67
Alternative to the attitude of doom and gloom that is generally attributed to the poor.
Goal: To highlight Mid encourage the natural optimism that is alive and well in
unlikely places.

How: Publicize successful examples of people or organizations that Me making
a difference and attempt to get others to join with them or duplicate their efforts in their own communities and families.

Practical Benefits:
There will be less need for bureaucratic impersonal solutions to our problems when individuals take charge of their own lives and decide to voluntarily help their neighbor.

Soft Power Benefits
The greatest motivator is hope and optimism and both are catching.

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Background for Alternative #67
It's amazing how optimistic people are. A 1990 Fortune Magazine Poll of 1,000 Americans nationwide, found seventy-five percent believe industry can create opportunities comparable to those of the past periods of growth in America; sixty-six percent thought they had a good chance of advancement; seventy-nine percent thought they are more likely to succeed than their fathers and sixty-six percent believe the next generation's opportunities will be even better than theirs. Seventy percent of blacks thought they have a good chance for advancement compared to sixty-two percent of the whites polled. Eighty-eight percent of blacks think their generation's chances are better for success than their parents chances were and seventy-seven percent of whites feel like that. Seventy-three percent of blacks think their opportunities will continue to expand while only sixty-five percent of whites feel the next generation will be better off than the present one. Ninety-one percent of 18-25 year olds believe they are likely to get ahead. Fifty-nine percent of the sample saw themselves as middle class. We hear so much about poverty and ghettos and so little about positive gains because blacks tend to identify their overall status by those blacks that are the very worst off. Even though the majority may have made progress during the 1980s, they continue to focus on the fortunes of their poorest members. Among black voters, civil-rights is the number one issue, with poor blacks a close second and upward mobility holding third place. Surveys have determined that self-help, drug problems, welfare reform and even family values are all subordinate to the top three issues. A lot of middle class blacks are likely to feel they owe their new status to opportunities created by the federal government. It seems like the well-educated blacks who used federal and state grants and loans to finance their schooling, sometimes end up feeling like they owe their jobs to affirmative action and therefore they are likely to take any threat to these programs as a personal affront. As long as one-third of all blacks are mired in poverty, the rest will not hear of scraping any of the programs they believe was their ticket out of poverty.

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Alternative #68

Alternative to the lack of opportunity for advancement of hard working but uneducated workers.
Goal: To make it possible for citizens to achieve their potential.

How: Change regulations which inadvertently prevent mobility.

Practical Benefits:
The ambitious and hard working will be encouraged and advanced.

Soft Power Benefits:
Hope will gain strength and hope has always been the engine that has driven this nation. Hope is what brought our ancestors here in the first place. Hope, along with freedom is a uniquely American hallmark.

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Background for Alternative #68
With the best of intentions millions of dollars are lavished on anti-dropout campaigns that emphasize the hopelessness of life without school credentials when in truth so-called unqualified employees often perform better than their credentialed co-workers. Every close study has shown that diligence, determination, and the drive to get ahead are most important to productivity. All that Horatio Alger stuff may sound good but when less educated minorities are hired they often run into the problem later in the form of a promotion barrier as credentials generally determine who is to move ahead. A credentialed woman is often chosen over an aggressive and ambitious young man. Without advancement these academic drop-outs understandably become discouraged and withdraw from the work force altogether. What really hurts is when an energetic and ambitious employee sees indifferent and lazy competitors gain promotions on the basis of credentials. This down-plays performance on the job and exalts effort on tests, resulting in, according to George Gilder, the protection of "any schooled but shiftless members of the middle class from the competition of unschooled but aggressively hardworking poor people." Many companies have extensive training programs already because as certain jobs become more refined and specialized they must be learned on the work site with the equipment involved.

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Alteri^^e #69
Alternative to mandates on business which inhibit job creation.
Goal: To encourage the creation of jobs. How:

Decrease the mandates on business.

Practical Benefits:
Small business in particular will be more inclined to expand if they are not afraid of becoming entangled with government paper work, mandates, oversights and possible penalties.

Soft Power Benefits:
If mandates were decreased the pervasive feeling of oppression that is everywhere in the United States today would be lessened.

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Background for Alternative #69
Smaller companies try and avoid any entanglements with government because so many government agencies view small business as a problem beyond their control. Agencies like the Equal Employment Opportunities Commission(EEOC),Occupational Safety and Health Administration(OSHA), Immigration(INS) and Labor Departments (DOL) all find it difficult to supervise small businesses because they are so diverse and so plentiful. Some of the antagonism that many bureaucrats show towards the small business person comes from an ingrained belief that most of them exploit their workers, evade regulations and taxes and gouge their customers. But without small business you'd have a much larger number of unemployed minority workers. Right now four-fifths of all working minorities work for small business and this despite disincentives by government. In 1971 came the infamous employment tests in Griggs v. Duke Power. "If an employment practice which operates to exclude Negroes cannot be shown to be related to job performance, the practice is prohibited." The employment tests had to measure the person for the job and not the person in the abstract. The test had to be job related. That was in 1971 and twenty years later in 1991, a five foot, one inch stewardess won a lawsuit to keep her job. Today an airline is apparently not allowed to hire someone based on job performance. The rationale: since so many Asians are short it would amount to discrimination. Never mind that a five foot one inch lady couldn't begin to reach back in the overhead bin to place or retrieve heavy luggage or handle large passengers that are ill or need help. Is it discrimination to refuse to hire tall or heavy jockeys? How about short basketball players? Do fashion models have to be tall and thin—can't shorter overweight girls sue? Isn't it ok to turn down people who in the employer's judgment may not be able to perform the job properly? How about Jane Doe who is allergic to cats and cigarette smoke —could she sue a veterinarian if she applied for a job and was turned down just because she couldn't handle cats? Could an owner of a bar refuse to hire her just because of her allergy to cigarette smoke? Is this fair? Is this just? A 1984 survey for USA Today found one out of ten whites polled said that he had lost a job opportunity or an educational opportunity as a result of preferential treatment for minorities. Unfortunately the number would be even higher today. This bodes ill for harmonious relations among our citizens.

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Alternative #70
Alternative to unemployment compensation via a government program.
Goal: To ensure the greatest benefits in the most cost effective manner and allow the worker to have the greatest amount of flexibility, control and dignity. How: Transfer the responsibility for putting aside for a rainy day from government to individual workers. Practical Benefits: 1 - Workers should be able to achieve higher returns on their investment. 2 - Their "rainy day savings" would provide capital for investment and growth in the private sector which ultimately leads to more jobs and enhances their chance for future employment. 3 - They gain satisfaction and growth if the money is used to educate them in a second or third profession or skill. 4 - They gain enjoyment while ensuring that a hobby could be a money making "ace in the hole". 5 - They could use the savings as they go to establish a second or home business which would allow them tax breaks under current law and provide employment for members of the family and possibly others. Soft Power Benefits: 1- They avoid standing in long lines and feeling helpless and hopeless. 2 - They gain more control over their lives and have a bettselfesteem. 3 - They have a greater chance of realizing their potential.

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Background for Alternative #70 Unemployment benefits were extended beyond the 26 weeks under Ronald Reagan, but at the time of those payments the unemployment rate was eleven percent. In 1985, when the extended benefits under Reagan were discontinued because the emergency was considered over, the unemployment rates were higher than the seven percent unemployment in the summer of 1991 when a partisan congress was calling "emergency"! Unless an emergency was declared, by the terms of the 1990 budget compromise, off-sets (spending cuts) would have to be made in other programs. The unemployment-compensation trust fund had $7.2 billion in it on October 1990 and continued to build surpluses throughout 1991. The problem is that funds aren't physically present. In a unified budget they are used to off-set other spending by government and to mask the deficit. It's legitimate. Of course everyone realizes when you're discussing government funds, the government can always print the money that is supposed to be there. Now it's only being borrowed. All government trust funds are in the same boat because the government must invest trust funds in treasuries and a treasury is an I.O.U. allowing the government to use the funds. Semantics! Economist Paul Samuelson believes our unemployment system is not providing the stabilizing role that it has in the past. States changed their rules recently and they determine pretty much who qualifies for unemployment benefits and when. Ninety percent of unemployment contributions are distributed by the states and payments are being made, whereas only ten percent goes into the federal extended benefit program. Unemployment insurance is supposed to be an economic stabilizer and added that many transfer systems act in such a manner. Between July 1990 and July 1991 statistics show that 2.3 million unemployed workers exhausted their benefits. When die bill to extend benefits was debated before congress in the summer of 1991 it was asserted that 1.4 million were due to run out of benefits in a few weeks. And even if the economy turned the corner in the summer of 1991, as spokesmen for the Bush administration kept asserting it would in their testimony-Senator Sarbanes point was that the number of long term unemployed would continue to rise. The national unemployment figure was seven percent in June, 1991 and 8.8 million workers were without jobs across the country with 1.4 million out for more than fifteen weeks and 1.2 million of them out of work for more

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than twenty-six weeks. Federal policy had stiffened qualifications for the states to get these benefits from the federal government. New Jersey found that by offering bonuses for rejoining the work force early, taking advantage of short-term training and job-search workshops that participants found jobs sooner than the average unemployment insurance recipient and at higher wages than their previous jobs. The state of Washington pays newly laid-off workers part of their benefits in a lump sum, calling it newbusiness seed money. The Federal Unemployment Insurance Act, like Social Security, was a product of the depression-ridden thirties. Originally benefits were extended only to certain groups of workers and those persons congress felt had been unjustly laid off their jobs through no fault of their own. In 1975 the safety-net was extended to provide farm workers, domestics and others who had been left out when the original Act was implemented. The states, while conforming to federal guide lines, have varying rules for eligibility and benefits. There are over two hundred offices in California alone. Like any insurance policy, money (premium) is paid to the insurer (government) periodically so that it is available to an employee should he find himself without a job. Like some group health insurance policies, the premium is paid by the employer not the employee (beneficiary) who receives the benefits. Unemployment insurance is funded by this mandatory payroll tax. Be aware that even the right industry at the right time with the right employer can end up being a bad choice with the passage of time. Precisely because we don't know what tomorrow will bring we must be prepared for the worst. The best insurance against unemployment may be to have several skills and alternate sources of income. The average citizen has many resources without even knowing it. Chances are if you were once taught, you can teach. You might know something about musical instruments, voice, dance, aerobics, gymnastics, sailing, flying, swimming, high diving, scuba diving, wind surfing, drama, ceramics, art, leather work, woodcarving, ice or roller skating, skiing, archery, sharp-shooting, cooking, sewing, writing, martial arts, boxing and on and on. Not all people make good teachers but talent and kills can be used to provide income in other ways. You can moonlight, testing out skills on nights and weekends to keep them sharp for a rainy day. Or if you are a proficient potter or woodcarver you might find a retailing outlet. And don't forget your skills as a plumber, carpenter, painter, gardener and so forth. When Aristotle was asked the advantages of learning he replied, "It is an ornament to a man in prosperity and a refuge to him in adversity".

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Alternative #71
Alternative to the imperious hand of unions

Goal: Even handed accountable unions.

How: Encourage objectivity and social responsibility.

Practical Benefits:
Progress towards more meaningful solutions to our social problems.

Soft Power Benefits:
Knowledge empowers and makes people more confident and willing to fight for what they truly believe is right.

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Background for Alternative #71
Thomas Geoghegan's book, Which Side Are You On?, laments the decline of unions in this country. He has few kind words for corporate America—he blames the 1947 Taft-Hartley Act, outlawing mass picketing and secondary strikes for unions' decline. The 1935 Wagner Act legalized organizing and established the right to strike. He says when people refer to the triumph of capitalism they mean the mixed economy of pensions, health insurance, cost-ofliving allowances which were won by unions. His book describes how workers lost limbs due to unsafe working conditions and lost pensions due to unscrupulous management. There's no doubt workers had legitimate grievances and unions were responsible for a lot of needed reforms. In the private sector, at least, there is general agreement that there can be too much of a good thing. In the eighties, the education level of new workers continued to rise, but there weren't as many new workers—supply and demand meant their wages rose. Unions lost power because manual labor was not in demand— there was too much supply. As world competition becomes more keen and there is less demand on physical labor, brain power will become even more of a premium. Competition forces companies to offer higher pay for top talent. Also mere is a disparity within professions. For instance the salaries of new lawyers range from $42,000 to $110,000. Electrical engineers start on average at $40,000 and go to $65,000. Of the five largest unions in the nation, the two representing teamsters and food and commercial workers lost members— down 23 percent and 7 percent respectively— and the three representing workers in the public sector, gained members. One teachers' union was up 17 percent, AFSCME (American Federation of State, County and Municipal Employees) jumped 23 percent and the service employees had a whopping increase of 44 percent. The NEA (National Education Association) had 2 million members in 1990. That one union by itself is the largest in the nation with the Teamsters second, weighing in at a trimmed 1.6 million. But if you add the 770,000 AFT (American Federation of Teachers) you can readily see that teachers have more union members than any other trade or profession; 80 percent of all teachers are unionized. Teachers now comprise one third of all unionized government workers and ten percent of all the union workers in the entire country. Their average salaries almost doubled during the eighties. Now organizers are going after two and a half million nonteaching public school workers with the possibility of doubling this membership. Their bargaining partners were not private employers with their own money

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on the line and in competition with other producers. Bureaucrats and politicians, already feeding at the public trough, didn't offer much resistance. Government has a monopoly—it has no competitors so taxpayers, dependent upon and paying for public services, do not have the option to take their business elsewhere as when dealing with the private sector. Across the nation governments are discovering the impact of public sector unions. England let its unions bring it to the brink of economic and social disaster and it took the Iron Lady twelve years to barely turn things around. Federal employees couldn't join unions until John Kennedy signed an executive order giving them that right in 1962. After that, most state and local governments rushed to give their public employees the same right. Now 37 percent of all public employees are unionized compared to only 12 percent of the private work force. The number of state and local government employees has grown twice as fast as the general population and fourteen times as fast in New York—just during the eighties. If New York state employees had grown only at the rate of population the state would have saved more than $2.7 billion dollars between 1980 and 1989. Instead the state added 36 more employees per 10,000 residents during those years. On the municipal level the public sector worker expansion is even more pronounced. New York City has 540 employees per 10,000 residents compared to San Diego whose ratio is 90 to 10,000. Mr. Cook said 1,000 New York City school janitors were unionized yet remained independent contractors. As such they are given a budget from the city to spend as they city fit. That means hiring their own maintenance workers (relatives and friends) and paying themselves an average of $57,000 a year or 46 percent more than the average New York City teacher. All they have to do for this is "sweep the floors every other day, mop the cafeteria once a week and scrub the floors three times a year." You wonder why thousands of people line up for these "custodial jobs"?!

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'()*+,^ve #72
Alternative to the sacrifice* of jobs to environmental concerns.
Goal: To enjoy a vibrant economy without sacrificing the environment.

How: 1 - Rearrange economic incentives so that people don't find polluting or depleting resources easier and cheaper than not doing so. 2 - Reform tort law. 3 - Don't sacrifice technology in a vendetta against mankind. 4 - Privatize—Privatize—Privatize!

Practical Benefits: The kind of country and world we want to live in and leave to our children. A turn towards science and an acknowledgment of mankind's ability to contribute to a better world and away from a misdirected drive back to nature.

Soft Power Benefits: Appreciation of our own goodness and abilities and of the wonders of nature and our responsibility towards our environment and other living things. Accountability and caring will strengthen as we realize it is up to each one of us to become good stewards.

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Background for Alternative #72
In June 1990 the Senate compromised a House bill that would have set aside 1.3 million acres of the Tongass National Forest as protected wilderness and banned all logging with its own version which set aside only 673,000 acres and allowed some logging. Past injunctions have banned the sale of some 3 billion board feet of timber from Northwest federal forests, half the wood normally cut from them each year. This is the primary supply for most independent lumber mills which amounts to about 65 percent of western wood production. In 1989 tight supplies and high log prices closed 39 plants and cost 3,345 jobs. This doesn't help affordable housing! I remember hearing awhile back, that if the 1989 timber-sale bans were to become permanent it was estimated that over 10 percent of the indirect forest jobs would vanish in the Northwest by 1991. Those figures were supposed to be 50 percent higher if the spotted owl was permanently listed as a threatened species. At die end of 1991 the Endangered Species Act was still in the drafting stage. Washington's Senator Slade Gorton was fighting the proposed legislation claiming: The Act essentially considers only a single value. If, under the Act, a species is determined to be threatened, the species must not only be saved, but its numbers must be expanded at the expense of all other values— human, economic, and social. The Forest Service's timber sale program in the state of Washington was already cut from five billion board feet of timber per year to only one billion board feet. Senator Slade pointed out that 800 million of the one billion board feet would come from areas that have nothing to do with the spotted owl. There is a rule of thumb that says one billion board feet equates to 18,000 jobs. When the Forest Service removed four billion board feet of timber from the market they supposedly destroyed 72,000 jobs. I've heard the economic costs of the latest clean air legislation could be over $50 billion and that's not counting its depressing effect on the economy. Senator Symms of Idaho intimated that the legislation flunked any cost-benefit tests. In fact he went further and I quote: This is a blueprint for a mass of regulations coming out of Washington to be imposed on our people. . . All through the

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deliberations on this bill, the Congress has ignored the voices of warning against a bill that is so costly that probably it will do more damage to the economy than the good it may do for the air. As a further depressant to the economy, gas stations, dry cleaners and other chemical based industries are facing stricter clean up mandates. A system of new permits and requirements was established by the Act. As many as 150,000 American businesses, from heavy manufacturing to small print shops will have to secure specific EPA permits for every point source of one or more of 191 pollutants. New permits are required for any change in production processes. New products must pass through EPA filters. Congressman John LaFalce introduced a bill in 1990 that would protect lenders from the large cleanup bills for chemically contaminated sites acquired through foreclosure. Gas stations, electric platters, metal finishers, wood product manufacturers and dry cleaners—all users of hazardous materials in their processes, have found that banks are understandably reluctant to loan money to them or to consider their real estate as collateral. The Maryland Bank & Trust Co. foreclosed on a defaulted $335,000 loan and acquired 117 acres of land. After the foreclosure the EPA found drums of chemicals and contaminated soil on the site and cleaned up the mess, collecting $500,000 from the bank that had nothing whatsoever to do with creating the problem. An Indiana bank told a congressional committee that "recent court decisions on environmental liability could prevent it from financing that community's only auto body shop, its only gas station, its only fuel dealer and much of the area's farm land." A Massachusetts chemical company had to pay $20,000 for soil testing and legal fees before a bank the company had used for 20 years would give it a loan. Environmentalists oppose efforts to limit the liability of lenders. Certain goals, such as safe buildings, adequate water, low density and picturesque surroundings are desirable, but not if the trade-off means keeping citizens weak and dependent on officials for the safety and welfare of themselves and their children and unwilling and unable to take charge of their own lives. Not if the trade-off means wasting the time and intelligence of men and women who sit in judgment rather than turning their energies and abilities to more productive endeavors. Not if the trade-off means wasting the time and intelligence of those who must take time away from home, business, trade or profession to fill out

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forms and appear before numerous hearings and commissions. Not if the trade-off is a tolerance for political corruption—after all, favors for friends and those with an "in" at city hall are natural outgrowths of power. Not if the trade-off is a huge and unnecessary expenditure of money for archaeological reports, EIRs, clearances by engineers, architect plans and so on and so forth whether opinions and skills of these professionals are needed or not. Requirements such as these contribute to high real estate prices, lifting property ownership to heights beyond the average consumer. Who is the better judge? A detached body of individuals or those who are going to invest their time and money in the project? Who has the most at stake?

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Alternative #73
Alternative to losing jobs to low-wage low-tax off-shore bases.

Goal: To protect American jobs and industry from unfair foreign competition
without hurting consumers.

How:
1 - Reciprocal trade. 2 - Deal only with countries that afford us "national treatment". 3 - Do not institute tariffs or quotas which become a tax on all consumers. 4 - Change tax and tort laws and control the deficit to make capital available and inexpensive so that American businesses will find it more attractive to invest and expand in the USA than abroad.

Practical Benefits:
Lower unemployment and a prosperous competitive economy.

Soft Power Benefits:
People will be more optimistic and better supporters of justice if they stop feeling that Americans are being taken advantage of and used as chumps by the rest of the world.

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Background for Alternative #73
If we are worried about losing jobs in America maybe we should stop destroying them via legislation. Maybe we should adopt incentives to American employment along the lines of the following:

Six suggested tax credits to create new jobs
(Reprinted with permission of the Aesop Institute)

1) A $ 1,500 per person tax credit for existing employees. This credit would be limited to $6,000 for an individual and $30,000 for a corporation; 2) A $3,000 per person tax credit to employers for hiring additional people. This credit would be $4,500 per person for those less than 20 years old and would be limited to $30,000 per year for an individual and $ 150,000 for a company. 3) A $1,500 maximum credit per person as a workshare bonus to encourage employees to work short weeks and share available jobs, plus an additional tax credit to the employer for the inconvenience and added paperwork; 4) A $6,000 maximum tax credit for self-employment to encourage individuals to undertake the risks involved more readily; 5) A $1,500 credit per person training credit to employers for training programs in job related skills primarily for small business, (supplanting the existing program); 6) A $ 1,500 credit per employee to corporations to match or stimulate expanded equity ownership to employees. (Mark Berlin-Goldes, head of the Aesop Institute located in Sebastapol, California, adjusted for inflation the preceding figures from the work of the late Robert H. Edmonds)

Examples:
Stanley, a Connecticut firm that produces tools and hardware, (I bet you have one of their tape measures) added 1,600 American jobs during the same ten year period (1980-1990) that it opened up factories in ten new countries. Stanley provides jobs in twenty-one countries, including the USA. The company provides 17,500jobs globally with 11,600of those jobs held by Americans in the USA. But it's not easy to remain competitive. Stanley pays more for capital than its Japanese competitors; in fact capital spending takes four percent of sales. American anti-pollution laws generally add to a company's expenses but in Stanley's case they have also been a source of higher productivity. In an attempt to comply with a requirement to lessen the residue of contaminated water, Stanley discovered a new and cleaner process which uses no water and provides an even stronger more

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durable chrome coat for the cases of its tape measures —at no additional cost. The ideal is to protect American jobs and industry from unfair foreign competition without hurting consumers. When tariffs and quotas are instituted it becomes a subtle tax on all consumers. For instance American consumers paid $15 billion a year extra on shoes in the mid-1980s. The American shoe industry has lost about 100,000 jobs over the past twenty years. Lawmakers worked to save 30,000 jobs at a cost of $50,000 per job. When you consider that the average salary of shoe workers is only $14,000, the policies that came out of the 99th Congress make absolutely no sense.

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Alternative #74

Alternative to being the world's "Sugar Daddy"
Goal: To retain a leadership position in the world without being a fall guy.

How: Insist that other nations pick up a larger share of the tab for defending the world and for maintaining political stability by increasing their contributions to organizations such as the United Nations, World Bank, IMF and so forth. Our private sector should assist Eastern Europe and the new Soviet Republics and old friends, but the United States government should play less of a funding role and assume more of a statesman's position. Our government should not repeat its role in the LDC debt fiasco but let private individuals and entities make their best deals.

Practical Benefits: A more stable world and an enhanced position for the United States.

Soft Power Benefits: Compassion and charity coupled with accountability and determination.

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Background for Alternatives #74
Texas Congressman Richard Armey sees Eastern Europe in the same dilemma faced by developing nations twenty years ago. They have to shed failed institutions and embrace freedom. Western capital is needed by the newly emerging Eastern European countries. Many people believe the USA should help Eastern Europe understand that the essential function of government is to provide a stable political atmosphere that is safe for individuals, a system of private property, a stable monetary system and a reliable system of justice and then learn to trust the people. Foreign aid has always been a target of the general public even though it's portion of our budget is relatively miniscule. The U.S. government provided billions of dollars in taxpayer-guaranteed credits (for grain purchases) just before Iraq invaded Kuwait. At the end of 1990 the Bush Administration decided to do the same thing with the Soviet Union, with guarantees of from $1 billion to $3 billion in farm credits. Additionally the Soviets will have access to US ExportImport Bank loans, equal tariff treatment on their imports and possible investment insurance. However, pouring money into a still unreformed command economy alarms many who believe that financial assistance may well impede rather than accelerate fundamental economic reforms. Russia supposedly needs 5.5 million tons of grain, 800,000 tons of meat, 900,000 tons of sugar and so forth. Altogether $6 billion worth of foodstuffs in humanitarian aid. The Soviets also need incentives to cut back on their military-industrial complex. On die other hand food aid to the former Soviet states may be political not humanitarian. Of the Soviet government's $62 billion foreign debt, private U.S. banks hold only about $500 million or less than one percent. The British and European banks would be the main beneficiaries of any such aid on our part. Eighty percent of British banks' exposure is guaranteed by their government and sixty-five percent of the exposure of German banks is government guaranteed. We should have learned the lesson of the failed Brady Plan. The LDC debt problem would have been solved by individual lenders and debtors if the government of the lenders had stayed out of it. Government should not attempt to manipulate private lenders. In reference to third world debt, private lenders should have made the best deal possible. Not a single underdeveloped country was able to grow its way out of debt despite continual lending by the World Bank, IMF and other multilateral lending institutions. All that happened was that the debt of private banks was transferred to Western taxpayers. If the newly emerging Eastern European countries privatize they will generate internal capital for their own needs.

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There's never a shortage of capital if the incentives for using capital are the right incentives. AID, the Agency for International Development— has a program called Economic Support Funds (ESF). One half of all the foreign aid we provide worldwide goes via ESF. AID is reportedly pressured by Congress to find projects 'which can absorb large amounts of annual funding'. Chile has adopted market oriented reforms. In the last 4-5 years it has had the highest outgrowth of real output per capital in its history— according to records going back 100 years! It is an example for Argentina and Brazil—and the USA, as it proves that the market works far better than government protections and interference. Africa receives aid from 15 countries and 14 multilateral agencies like the IMF and World bank. Failure to properly coordinate has led to untold waste and duplication of effort. The 70% rule gets rid of "free riders". If 70% of creditors agree, a court can order the other 30% to go along. A similar rule may be necessary on an international level but IMF and the World Bank should keep out of it. West Professor Bauer at the London School of Economics claims that aid programs may be doing more harm than good for the recipient countries, in that they obstruct, delay or obscure the need for change. We know price controls and subsidies, state controlled industry and wage and price controls are all detrimental to an economy, but yet we keep supplying the means for countries to follow those harmful practices. Decentralized economic power takes away the power of politicians. We should be substituting foreign investment for foreign aid as the best policy to stimulate self-sufficiency, growth and political reform.

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Alternative #75

Alternative to misconceptions about what constitutes a good job.
Goal: To get unskilled people into the job market.

How:
1 - Change their attitude about what constitutes a good job. 2 - Make working more attractive than not working.

Practical Benefits:
People that might otherwise spend their lives on welfare will gain entry to the job market and learn work habits and skills.

Soft Power Benefits:
1 2 3 4 5 - Self-esteem. - Empowerment. - Motivation. - Determination. - Opportunity to reach their potential.

6 - Responsibility.

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Background for Alternative #75
All too often the expectations of job seekers are too high for the jobs that are available—always available. They may not want to clean houses, or work in restaurants or hotels. They may not think the wages or benefits are worthy of their efforts. What's missing is the incentive, motivation and inspiration—the determination to succeed. Necessity used to provide all that. Now government, with the best of intentions has removed necessity and the nation is suffering for it. New business formation has fallen almost five percent since the beginning of 1989. Slow labor force growth is the main reason unemployment has remained as low as it has in 1991. Looking ahead, it won't take much for the current work-shortage to turn into a labor-shortage. The bottom line is that many Americans earning minimum wage may not be essential to any particular business. Small businesses, who employ most minimum wage earners, may well decide what they could afford at $3.35 an hour is unaffordable at $4.55. After all, does it really matter if no one sweeps sidewalks, picks up trash, scrubs graffiti off a small businessman's walls, washes the windshield and checks the air in your tires or lights your way so you avoid sitting on a stranger's lap in a dark theater? Many of the unskilled will simply swallow their pride and apply for welfare. The nonessential niceties will disappear from American life as more and more marginal jobs disappear. In Ravendale, Michigan on the east-side of Detroit, a violent drug-soaked ghetto by all accounts, a local minister, Eddie Edwards tried to motivate people. Self-help, volunteers managed to get a job for a 20 year old who said "I'm not going to get my hair cut for any job. I'll get my hair cut when I want to." He's still unemployed. In another case a welfare mother remains in her run-down home, lacking the skills and confidence to find a job. She says, "I don't want to scrub floors or do any domestic work. I don't want that." Marginal jobs have always provided an entry into the work force and a place for people to learn good work habits. If we want to adhere to American ideals of a classless society we must not make it too easy for people to opt out of the work force. If we continue to do so we will be in danger of creating a permanent lower class.

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Alterrt^ve #76
Alternative to our treatment of disabled in the workplace.
Goal: To gain recognition of the fact that disabled people can work and perform
well if given the opportunity.

How:
1 - Change, through education, people's misconceptions about citizens with disabilities. 2 - Help people to feel more comfortable around one another by more interaction. 3 - Do not attempt to force acceptance through legislation which only leads to distrust and friction.

Practical Benefits:
Takers are turned into producers. Besides the economic benefits society reaps the products and services that the unleashing of all this otherwise wasted creativity and energy now produces. Without coercion there is less chance of encountering charges of favoritism.

Soft Power Benefits:
1 - Tolerance and appreciation of our differences. 2 - Opportunity for the greater expression of love and concern for one another. 3 - Opportunity for growth and self-expression for more of our citizens. 4 - If hard power tactics are withdrawn disabled individuals will be secure in knowing they are valued for their abilities and not despised for "taking jobs" they do not otherwise deserve.

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Background for Alternative #76
The government has been deciding who is and who is not disabled for years. They had to in order to administer social security programs. Consequently there are more suits surrounding the subject of disability than anything else in this country. The judges are extremely inconsistent with some of them awarding benefits to almost everyone who comes before them and others judging less than twenty percent of their petitioners to be disabled. The Legal Aid Society claims that if someone is unable to hold a job because of an addiction, this should count as a disability under Social Security law. The Social Security definition of disability is more tightly defined than the definition in the new Americans with Disabilities Act. (ADA) But "inability to engage in any substantial gainful activity" is still too loose when you consider that some diseases or abnormalities may hinder some people's abilities to work and not others. Not only that, symptoms can improve or worsen. Following this line of reasoning to its extreme, everything can be included under these definitions of disability. If a person is a thief, is habitually late to work or leaves a couple of hours early on a regular basis, or takes extra long coffee breaks or disrupts other workers—all of these could conceivably be construed as habits interfering with a persons ability to hold a job. I heard of a fireman who won a race to the top of the Empire State Building after retiring from the fire department with a supposedly incapacitating back injury. California lawyers have won cases for clients by pleading "psychological-trauma-disability" caused by the boss's yelling. In 1989 only a little over one-third of the one and a half million people filing for disability benefits under the social security program were found to be disabled. Appeals were filed by 440,000 people who were not judged to be disabled just in 1989 alone. Fifteen percent were granted benefits on appeal. Of those who had their initial decisions reaffirmed, 270,000 got another hearing and in this group, partly because some judges routinely award benefits in as many as ninety percent of cases, 162,000 more were added to the ranks of disabled. From the remaining petitioners roughly half or 50,000 got a fourth review and five percent were granted benefits. Of the 6,000 who took their cases to the fifth level—federal district court—1,680 were rewarded for their persistence. Destroying marginal jobs may mean destroying the newly won independence of thousands of workers whose handicaps may keep them from competing against those with normal IQs.

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Example: Taxpayers supported a man with an IQ of28 (100 is normal) for twenty-five years in a public institution. At age 32 and with three weeks training he was able to bag groceries at minimum wage. A woman with a similar IQ was able to clean offices with the help of a walkman-like device that periodically interrupted the recorded music to ask if the ashtrays and waste baskets had been emptied and reminded her to move on to the next office. In the future there will be fewer workers for low skilled jobs. Nondemanding jobs are just too boring for many people and so the turnover rate is high. Although retarded workers, or workers with other handicaps may not be as fast as so-called normal employees, they are generally more dependable, cheerful and willing to stick with a job. Instead of being treated like a vegetable in some public institution, as would have been their fate in this country only 30 years ago, these workers are happy achievers. Taxpayers are happy because another segment of society becomes a producer rather than a taker. But when we talk of employing the disabled we are not just talking about low-skilled jobs. John Yeh, deaf from birth, founded a software development, telecommunications, office automation and systems engineering company which employs 600 people. About ten percent of IMS employees are deaf and about half of them use sign language----------- like their boss. Soft Power: For policymakers to suggest that tax favors must be extended to encourage the employment of these workers shows an unhealthy skepticism as to the character of the average man. Hiring the retarded is a cost saving idea for business and government. If you tell me employers wouldn't hire the handicapped without first receiving an offer that would fatten their own purses, I tell you that is only because they (like the rest of society) have come to expect and depend on government's bribes. Government's policies are geared to encourage greed rather than altruism. Altruism may not be the province of government, but once involved government better side with altruism than with greed. Best of all, and a goal to shoot for, would be no social manipulation by government.

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Alter^ve #77
Alternative to the present situation where seniors are penalized for working.
Goal: To have everyone working who wants to work and without penalty. How: 1 - Change social security rules. 2 - Change mandates on employers. 3 - Change rules governing medicare. Practical Benefits 1 - The labor force will benefit from the skills and experience of older workers. 2 - People will be producers longer before they become takers. 3 - People who work longer because they want to do so generally live longer, happier, healthier lives than those forced into retirement. Soft Power Benefits: Empowerment, justice, optimism and greater opportunity to reach potential

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Background for Alternative #77
The solution for a labor-shortage is to have more working seniors. Few jobs now require the hard physical labor that led to the adoption of a 65 year retirement age fifty years ago. Payments to seniors already account for a third of federal outlays and will soon account for over fifty percent with the elderly population growing and health care costs rising. Today 32 million retirees collect federal benefits—it will be 53 million in the next twenty-five years. Just raising the eligibility for social security benefits to age sixty-nine by 2020 will save $25 billion (in 1992 dollars) annually. But lobbying groups for the elderly will fight the change. The AARP favors incentives to keep people in the labor force as long as they wish but will not go along with increasing the eligibility age for Social Security or Medicare. Many business groups fear if Medicare doesn't cover workers at age 65 they will be forced to foot the bill and so they have backed Dan Rostenkowski's proposal to lower eligibility for Medicare to age 60! Older people to find or keep employment because employers have to provide them with health insurance This is another government disincentive. Employers are forced to substitute for medicare and become the primary insurer for older workers. There is an increased statistical probability that older employees will increase claims and therefore their premium costs are sky-high. The budget bill passed in December, 1990 will cost employers about $1 billion more in health care costs in 1991. Hidden in it was a provision making it easier for the government to enforce an eight year old requirement that employers provide health insurance to workers over age 65 under plans covering other workers. Before 1981, medicare picked up most of those costs. There are a variety of reasons retirees are returning to work and if the government is reluctant to provide incentives for them to do so it should at least remove the disincentives. Now the only ones who don't worry about losing part of their social security benefits are those above age 70. On January 4,1991 Bob Stump of Arizona tried to change that by introducing a bill to repeal the restriction on how much people between 65 and 70 may earn without losing part of their social security benefits.

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Alternative #78
Alternative to media stereotypes which suggest that all women are alike.
Goal: To recognize, encourage and celebrate differences.

How: The media should attempt to balance the immense amount of coverage
allotted to activist feminist women and their causes.

Practical Benefits:
Women, and especially youngsters, will have role models even if they don't aspire to the paths laid out by forceful feminists.

Soft Power Benefits:
When differences are appreciated all women will have more-selfesteem and be empowered to realize their potential without apology.

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Background for Alternative #78
From 1939 to 1979 women made approximately 49 percent of what males earned whereas in the mid-eighties they were making 65 percent of a male's earnings. Ok —partly because male earnings had dropped about eight percent, but that's still progress, and it's getting better as younger women pick up graduate degrees and professional designations. In 1987 these women between die ages of 21 and 24 were making 86 percent of a male's earnings. In 1960, only four million women held professional, technical, managerial, and administrative jobs; in 1987 there were eleven million women in those jobs. In 1960 women accounted for one out of every three college students and today they're on a parity with men. In fact the 1987 freshman class at Chapel Hill, North Carolina was 63 percent women. Many women today think it is unfair that they should be forced to choose between careers and children when men have always been able to have both. But it need not be an either-or choice. They should realize that women are living more educated, longer, healthier lives today and can have several careers in succession if they choose to do so. To try and have everything all at once harms women, their children, their husbands and may even make society less productive. I have worried about today's youth. We have to instill the idea in our young people that they are needed. You may have heard of the suicide note left by a teenager in an affluent two-earner family a few years ago that read, ' 'You have given me everything to live with and nothing to live for. "Obviously money isn't everything. Politicians try to top one another with early childhood poverty stories—emphasizing their poor-in-dollars-rich-in-spirit years for which they always end up thanking their parents. This allows us to compare their accomplishments with the lives of youngsters who are given things to live with but no philosophy to live by. Numerous polls and surveys have purported to show that children with working moms are more independent, responsible and a host of other good things and that the only problem with a mother working is the mother's guilt. Those polls have been publicized so successfully that the guilt now rests with the stay-at-home mothers who feel compelled to defend their choice constantly. It just goes to show people will believe anything if they want to badly enough.

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Alter^ve #79
Alternative to forced morality.
Goal: To have a truly color-blind, creed-blind, race-blind, sex-blind society.

How: Change the goal from achieving equality through force to achieving equality by appealing to the best instincts in the population.

Practical Benefits: The nation needs to pull together to compete in the global market place of the 21st century. It can not afford to waste energy and abilities in bitter racial strifes.

Soft Power Benefits: 1 - A sense of fairness and justice will prevail when all people are judged according to the "content of their character". 2 - The diversity of groups often leads to strife and weakens the nation whereas the diversity of individuals is our strength. America has always been a nation of individuals; appreciation of the diversity of individuals is the uniqueness of our political heritage and the beauty of our culture. All members of any race and sex are not alike. 3 - Equal opportunity when achieved through faith and trust in the basic goodness of mankind is more likely to be genuine and enduring.

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Background for Alternative #79
Brown v. Board of Education (1954) was a landmark decision. Thurgood Marshall invoked the ideas of Locke and natural rights as the foundation on which this country was founded in knocking down the separate but equal doctrine. He based his attack on the belief that the "Constitution is color-blind". Martin Luther King recognized that our Declaration of Independence was based on Locke's insights "that there are certain basic rights that are neither conferred by nor derived from the state "... and that this principle is the distinguishing characteristic of the United States of America, setting her apart "from systems of government which make the state an end within itself." Marshall was influenced by Martin Luther King but he also had another hero at that time. He liked to quote the lone dissenter in Plessy v. Ferguson, Justice John Harlan who in 1896 wrote that, "The law regards man as man, and takes no account of his surroundings or of his color when his civil rights as guaranteed by the supreme law of the land are involved." Justice Harlan was dismayed that the majority in the court "reached the conclusion that it is competent for a state to regulate the enjoyment by citizens of their civil rights solely upon the basis of race." If Thurgood Marshall had had his way the decision would have been based on legal and constitutional sources, not sociological assertions focusing on environment. In Mr. Marshall's briefs on Brown he referred to natural rights and the belief that man is endowed by his creator—that is a more enduring guarantee of equality than sociological tests. In looking to the original intent of the framers of the Constitution it is easy to see that individual liberty is protected but group rights are not. There are a lot of people out there that believe color-blind policies might cool racial passions but NAACP executive director Benjamin Hooks is not one of them. In a New York Times article in November 1985, he declared to the world that "the U. S. Constitution Was Never Color-Blind". Redlining is a pattern of discrimination in which financial institutions refuse to make mortgage-loans, regardless of the condition of the property or credit of the loan applicant but simply because the property falls into an economically depressed neighborhood. Lenders used to outline these areas with a red pencil. Federal legislation was passed outlawing such practices and has expanded the definition to include discrimination on the basis of race, income and gender as well as location. As one of the provisions in the 1989 savings and loan bailout legislation, lenders were required to docu

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ment, for the first time in 1990, the race, gender and income of of mortgage-loan applicants. This information was lacking in earlier studies. A Federal Reserve study released in October, 1991 and showing a bias against minorities by lenders was based on this new information. But police power is not the answer. Understanding and goodwill is. The solution to the problem depends on what you think about people. I believe it is both desirable and possible to solve most of society's ills by voluntary cooperation and with the police power of government only being called upon to correct or punish abuses. Ordinary people, through their innate goodness and creativity, I believe will come up with more and better solutions than all your stilted and "one-kind-fits-all" pieces of legislation. No doubt some banking practices need to be scrutinized by society and the banking industry, such as the self-serving practice of the larger reputable banks of extending credit to high-interest lenders and then purchasing their notes on the secondary market. Like godfathers, they make collections through henchmen without getting their own hands dirty. Many cut-throat mortgage lenders couldn't make it without backing from the reputable banks and access to the legitimate secondary mortgage market. The banks don't want to look beyond the high profit to the misery the transaction may encompass. This is passive neglect on their part, rather than active wrong doing. Fleet, the largest bank in New England recently stopped doing business with 38 high-rate lenders and set up an $11 million fund to refinance 550 outrageous mortgages in the Boston area. Most of the mortgages were part of the portfolio taken over when Fleet absorbed the Bank of New England. Fleet is careful to evaluate the mortgage lenders with whom it does business. Although it looks for profitable companies it severs its relationship immediately with any company it determines is operating unethically. John Strickland, president of the unit which purchases home-equity loans and second mortgage said, according to the Wall Street Journal (10-21-91)77ie higher the risk, the higher the rate. It's not illegal to
make a profit. (But bankers) can't control what customers do with the money they borrow.

When all the abuse and misery came to light, most banks admitted they were sloppy in looking only at mortgage yields and not checking into the real life situations that were represented by the paper. I believe if the men and women who run these larger institutions were enlightened, most would refuse to play, and even, as Fleet did, attempt to do something constructive about the problem.

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Alternative #80
mm

Alternative to laws that hurt those they purport to help.
Goal: To have as few laws as possible and to do away with harmful legislation
entirely.

How:
1 - Elect people to office who believe that humans are basically good not evil. 2 - Elect legislators that are dedicated to retiring more laws than they pass. 3 - Let your legislators know that the number of laws we now live under is oppressive and their sheer number makes it is impossible to abide by them all.

Practical Benefits:
1 - We would be more efficient. 2 - We would be more law abiding. 3 - We would be more willing to negotiate and come to new understandings.

Soft Power Benefits:
1 - Freedom would gain a new meaning. Free men and women are happier and more productive. 2 - People would become more responsible for their actions. 3 - People would become more aware of the consequences of their actions and inactions. 4 - People would become more concerned and involved because they would be acting from inner motivation not outside oppression.

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Background for Alternative #80
In the spring of 1990, Texas Representative Dick Armey argued for the right of public-housing tenants to fix up their own apartments- "to put sweat equity into their own homes, just as you and I do." He argued that private home owners quickly learn how to become part-time handy persons and there's nothing but discouraging laws preventing public-housing tenants from doing the same thing. But Representative Bruce Morrison from Connecticut offered legislation which prevented removal of the restrictions placed on public-housing managers and for keeping the current Davis-Bacon mandates in effect. Davis-Bacon mandates that union workers must perform all work in public projects. Jim Kolbe of Arizona argued in favor of allowing public housing managers to hire low-income, hardcore unemployed inner-city residents to perform on-site maintenance in their own housing projects and to thereby gain greater control over their lives. A delegation of black public-housing residents asked the Black Caucus to vote against Morrison's law. Bruce Vento of Minnesota argued against empowering many of the people he most wants to help when he said, "We have plumbing problems. We have electrical problems. We have carpentry problems that need to be addressed. Are the tenants that are living in assisted housing the skilled mechanics that can take on these tasks of doing the electrical rewiring of a multi-complex housing unit? Are they the glaziers that will hang out there and put a piece of glass into a window? I think on its face it is obvious that they cannot do that." The hard fact is no one else is making repairs on their units and it is in the interest of tenants to get these jobs done. Poor people aren't stupid, even if the laws they are forced to live under are! Just a couple years ago previously unskilled criminal offenders were able to complete a magnificent building right here in San Francisco under the leadership of Mimi Silbert. She heads the Delancey Street Foundation, a successful rehabilitation program.. Robert Woodson, a respected activist who empowers blacks and residents of low-income neighborhoods, has been pushing for a revision of the infamous Davis-Bacon legislation which has kept blacks suppressed for too many years. But California Representatives Ron Dellums, Julian Dixon and Mervyn Dymally voted against low-income blacks and with labor, to retain the bureaucratic porkbarreling of the Morrison provision, as did John Conyers and George Crockett, both of Michigan, Gus Savage of Illinois and Louis Stokes of Ohio. These congressmen appear to be subordinating the interests of the poor to the interests of organized labor. According to Irving Welfeld, in his 1988 book Where We Live, fifty

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percent of New York City's landlords were born outside the United States and almost that percentage are minority (black, Hispanic or Asian) owners. Historically it's not affluent, retired, passive investors, but relatively young people with energy and ambition and lots of sweat equity that renovate and manage older properties . I did the same thing in Berkeley when I was in my twenties, only that was before rent control and the tangles and layers of regulation. What surprised me is Welfeld's finding that half of New York City's landlords never graduated from high school. They find themselves no match for the college educated bureaucrats and so-called public interest attorneys and so they often don't even bother to wade through all the red tape entailed in applying for rent increases. There are many people willing to work hard in exchange for an opportunity to improve their current situations and leave something to help their kids skip a couple rungs on the ladder. A lot of well intentioned projects simply don't make it, like the low-income buildings run by two New York entrepreneurs. They agreed to provide shelter at greatly reduced rents for 15 homeless men in return for a one-time incentive payment of $2,500 for each man. The only trouble was the city only came up with half the incentive and fell behind in the rental payments. On top of that vandals flooded floors directly above newly renovated kitchens, stoves were destroyed, apparently so tenants could qualify for city welfare department restaurant allowances, and parts of a furnace were stolen and they were sued by the tenants. The "black codes" were regulations on employment and labor contracts; an attempt to keep the emancipated slaves from "making it" economically. Republicans responded with the civil rights act of 1866 which was an effort to protect individual rights, with an emphasis on economic rights, from infringement by state government. That legislation was vetoed by President Andrew Johnson but the congress overrode the veto. Because many politicians feared the civil rights act might later be overturned, the 14th amendment was proposed as a permanent addition to the Constitution and was finally ratified in July 1868. If Lincoln had lived the story of blacks and civil rights might have been different, but as it was, both the Johnson and Grant administrations had more than their share of incompetence and corruption and the civil rights of blacks were never given much of a chance. The "separate but equal" doctrine was the result of the better known 1896 case, Plessy v Ferguson which has had long lasting implications and bears some responsibility for the racial problems we are facing today. Plessy justified government's reliance on special "racial facts" as a basis for

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legislation and allowed the classification of people by race as long as the classifications were reasonable. That was bad enough but the earlier 1873 ruling went beyond race to favoritism in general. It allows government to continue its damaging policy of granting favors to one group of people at the expense of others. Earl Warren's opinion in Brown was based on doubtful data which supposedly showed that black students learn better when white children are in the classroom. As a Justice on the Supreme Court, Thurgood Marshall championed racial classifications. In the eighties he trivialized his old hero, John Harlan, pointing out that the idea that the U.S. Constitution is colorblind was held by only one Justice in 1894. Reagan's Justice Department, under William Bradford Reynolds, tried to get rid of group entitlement and equal results and move toward equal opportunity. In its 1989 case the court began saying if you charge discrimination then prove discrimination and include specific injury and then the remedies better not discriminate against anyone else. The Reagan administration felt strongly that employing coercive racial preference, in an attempt to make amends for past racism, did more harm than good. Reynolds used to infuriate his opponents when he quoted Martin Luther King Jr. who maintained that the Constitution should be racially neutral. Reynolds tried to use the victim specificity doctrine to invalidate affirmative action, but big business, afraid of negative publicity, sabotaged the administration's efforts right from the beginning and government agencies shared their fears. The Civil Rights Division asked 56 government employers with court-ordered or privately negotiated affirmative action programs to fight them in court. Only three agreed to do so. It seems that large corporations and local governments had grown comfortable with voluntary or court-supervised programs that guarantee members of identifiable minority groups a portion of their available jobs. In fact the National Association of Manufacturers and other business organizations praised affirmative action mandates, asserting that goals and timetables were an effective means of bringing minorities into the workforce and they let the Reagan Administration know that they had no desire to attack affirmative action programs. The National Association of Manufacturers spokesman even went so far as to insist that voluntary compliance would not work. In 1989 the cases began to proliferate. In Martin vs Wilks the Court swerved and ruled 5-4 in favor of workers filing new lawsuits claiming reverse discrimination under court-approved affirmative-action plans. The 5-4 decision in the Patterson case said that the 1866 civil rights law giving the right to contract equally to all citizens doesn't permit lawsuits involv

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ing harassment on the job or other conditions of employment. The City of Richmond vs Croson limited the power of government to favor women and minorities in public contracts. In that case Justice O'Connor said race-conscious remedies must be subjected to strict scrutiny. In Richmond, Virginia, minority participation in city employment contracts fell from 32 percent before the Croson decision to 11 percent in the fall of 1990. Many people think the Croson ruling was too narrowly defined, leaving us with the possibility of good and bad discrimination. Federal set-asides for black contractors are good but municipal set-asides for black contractors are bad. Croson was pretty much a reversal of the Slaughter-House cases and the justification for governments' playing favorites. I've heard some civil rights lawyers spend months combing through state constitutions, statutes and city ordinances looking for ways to make governments provide housing, or extend other benefits to specific groups of citizens. Legislators give birth to new law, but these practitioners seek to deliver entitlements by twisting and turning the old laws, hoping a judge will be able, through their contortions, to make out what was formerly not there------ a brand new right—the right to shelter for instance. But twist as they will, so far no one has been able to set a nationwide precedent by finding a right to housing in our federal constitution. In 1983, federal court Judge Leo Glasser of Brooklyn, ruled that if "a state promises to provide emergency shelter to eligible families as part of its agreement with the federal government to administer social security benefits, it is illegal to fail to provide housing." There may not originally be an obligation to do something, but once undertaken, in this case, once a government entity decided to administer benefits voluntarily, a duty arises to do it well and completely. In the field of education, ex-students have been known to sue school districts because of the poor results that were achieved in their education. In order to get passerby physicians to help accident victims, Good Samaritan laws were instituted holding a doctor blameless from the results of such emergency administrations.

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Alternative #81
Alternative to the inequalities in earning power among the races. Goal: To have people judged, compensated and given opportunities for
advancement based on their abilities.

How:
1 - Make sure opportunities for education are available to all citizens who can qualify on the basis of ability. 2 - Encourage families, friends and voluntary groups to pool their capital resources in order to start their own enterprises and not depend on advancement through others. (Delancey Street as a wonderful role model.) 3 - Dismantle regulations that make it hard for people to start up new businesses. 4 - Get rid of licensing and permit requirements whose main purpose is to keep newcomers from competing with those already established entrepreneurs or practitioners.

Practical Benefits:
1 - The nation will advance as more and more citizens are able to use their abilities and attempt to fulfill their potential. 2 - The nation needs a more educated workforce. 3 - The nation needs a more motivated workforce. 4 - The more producers the fewer takers and the more able society is to focus on the needs of the underemployed and needy.

Soft Power Benefits:
1 - It is good to live in a place where a sense of fairness prevails. 2 - The opportunity to reach potential is the highest order of good any society can offer. 3 - It is good to know that you and your neighbors will achieve and be advanced and/or set back on the basis of effort, ability, discipline, persistence and so forth rather than by manipulation of laws and favors from high places.

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Background for Alternative #81
There is a great disparity among blacks today. As the economy shifted from goods to services, blacks with college degrees were set further apart from the black high school drop outs whose main opportunity lay in manufacturing. Manufacturing was hit hard by the high dollar and the decline of unions whereas the need for services put a premium on advanced education. Many economists believe inequality would have evened out if legislators had backed off. But public policy distorted the market and added its own incentives and disincentives. Medicaid, food stamps, WIC benefits and so forth had an adverse impact on the participation of low-income Americans in the work force. Statistics show annual wage and salary income for 25-34 year old black men increased from forty-seven percent to sixty percent of that of white men between 1940-1960 and from sixty percent to seventy-five percent between 1960-1980! By 1982 12 percent of prime-age black males were unemployed compared to only 5 percent of white males. That was definitely a slip backwards in terms of black unemployment rates. Doug Wilder, Governor of Virginia delivered a speech at the end of March, 1991 in which he recited statistics: one in four black males ages 20 to 29 are in the wrong end of the criminal justice system as opposed to one in sixteen whites and one in ten Hispanic males. The leading cause of death for black males ages 15 to 24 is violence. With drug pushers as role models so what can you expect? Fifty-one percent of black families with children under age 18 are headed by single mothers. "These young men and women want to have a future, it is imperative that they embrace the ultimate precaution: abstinence." Columnist, William Raspberry admonished members of his race with the same type rhetoric claiming blacks blame their shortcomings on racism whereas Asian Americans believe their own efforts can make the difference and they approach society with the attitude that they are going to succeed "no matter what white people think". If people vote their pocket books the Republican party should expect to attract more blacks because the black middle class has grown by nearly a third since 1980 and is now for the first time ever, the dominant income group in black America. A survey published in 1986 by the Joint Center for Political Studies, a black political DC think tank, two-thirds of blacks said they had kept pace economically or moved ahead during the Reagan years. These perceptions are backed by government statistics but are not widely broadcast. More blacks were working in the eighties and at higher wages than ever before. Black family incomes were at an all-time high

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having increased by roughly six percent in real terms over an eight year period. The number of black professionals has increased an amazing sixty-three percent since 1980. Black managers and officers in corporate America increased in number by thirty percent over the same time span. According to a 1990 poll, most blacks thought they were moving forward, not slipping back, contradicting what we hear and read so often in the popular media. In fact from 1967 to 1987 black households earning $50,000 or more rose from 212,000 to 764,000—a 360 percent increase, having doubled between 1982 and 1987—the Reagan years! The total income of America's 28 million blacks was $237 billion just in 1988 which is larger than die gross domestic product of all but ten nations in the world! One of the main causes of poverty, black and white, is disintegration of the family. According to Martin Peretz, editor of the New Republic, the central problem of race relations is one of social and economic differences. There are proportionately twice as many black as white single men. The number of black households headed by married couples has fallen almost 20 percentage points from 20 years ago, from fifty-five percent to thirty-six percent. Prior to 1960 the black family was largely composed of married-couples. If the differences between blacks and whites are corrected for marital status, the gap between the earnings of black and white males of truly comparable family background and credentials completely disappears. Blacks excel in the political arena and in the public sector work force. But that might not be a reason to rejoice. A government paycheck symbolizes security whereas all successful groups have had to encourage risk-taking at some stage of their ascent. Of all the European immigrants, the Irish were the slowest to climb out of poverty and they were the ones that cast their fortunes with political patronage. As George Gilder so aptly put it, Wealth comes from the competitive honing of skills and enterprises, from mastery of modern machines and technology, from a willingness to venture and create, from a sense of the margins of profit and loss... Government jobs allow immediate consumption but not investment and savings... The truth is, many liberals are afraid that blacks cannot prevail in a truly free competition. In his monumental book, Wealth and Poverty, George Gilder presented an array of information showing that without discrimination, present and past, blacks would achieve earnings comparable to whites. I've seen figures which show that during the twenty-five years since the massive dismantling of legal barriers against them, blacks have indeed performed far better than other Americans—catching up from far behind and in some areas leaving

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the white majority in the dust. There are some seldom discussed facts that have a bearing here. Some of the income difference between black and white populations simply reflects the fact that the black population is younger—blacks average 22 years versus 29 for whites. In 1980 families headed by 22 year olds, both white and black, had median incomes approximately $5,000 dollars less than families headed by 33 year olds. Also about fifty percent of the black population lives in the South, the nation's poorest region in terms of income. Blacks in New York City earned almost two and a half times what blacks make in Mississippi and one-third more than blacks in Atlanta. But even taking age and location into consideration, (which most studies and reports fail to do) there remains a difference of about twenty percent between the income of the two groups. As a percentage of their respective groups there are about twice as many single black males than single white males. Mr. Gilder claims If the differences between blacks and whites are corrected for marital status, the gap between the earnings of black and white males of truly comparable family background and credentials completely disappears. Family background and credentials are the key—no doubt about it—but I think you might be surprised to learn that between blacks and whites with top credentials, incomes of blacks surpass that of whites. The law of supply and demand, coupled with civil rights mandates, put a premium on minority excellence. As for black women, between 1957-1977 they improved their median incomes, occupational status and entry into highlevel positions at a rate more than three times as fast as black men did. In fact George Gilder found, in researching his 1982 book Wealth and Poverty, that college educated and professional black women earned 125 percent as much as their white counterparts. Sixty percent of babies born to unwed mothers are born to black mothers. But that doesn't mean there has been an increase in the birth rates of young black unmarried women. Instead of a rise in the rate of illegitimate black babies, such births have actually declined by thirteen percent since 1970. The misconception occurs because married black women's child-bearing rates have dropped sharply, (over 38%) so the statistics show an increase in the proportion of total births to unwed mothers. Examples like these should put us on guard and make us aware of the illusions that surround us.

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Alternative #82
Alternative to the poor role models available to youth.
Goal: To inspire young people of all races. How:
1 - Beef up police protection and neighborhood watches. Acknowledge that protection from physical force is one of the few legitimate functions of government We must insist that no citizen is left to live in terror of gangs and drug dealers. Whatever it takes to ensure a crime free neighborhood must be done—within constitutional safeguards. 2 - Provide opportunities for success and publicize the accomplishments of those who overcome great odds 3 - Get successful role models to go into ghetto communities. 4 - Exercise discrimination in patronizing artists and events so those that promote constructive rols will flourish.

Practical Benefits:
1 - The nation can benefit from all the energy and ability its citizens can muster. 2 - People who have a stake in "the good life" are able to fight crime and the destructive elements of society.

Soft Power Benefits:
1 - Inspiration from the example of others stirs inner motivation which is the essence of soft power. 2 - Knowing dreams are possible encourages self-discipline, determination, provides hope and strengthens character.

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Background for Alternative #82
William Haskins, vice president of the National Urban League, proposed a national clearinghouse for mentors. He would like to see successful blacks smooth the way and break ground for newcomers, as in any "good 'ol boy" network. He called for a Domestic Marshall Plan to provide jobs for the inner city. The real problem is lack of role models, or even worse, the predominance of poor role models in the backgrounds of many of today's impoverished minorities. Most black male role models are involved with sports or entertainment. Of course there are notable exceptions like General Colin Powell, Virginia's Governor Doug Wilder, Health & Human Services Secretary Louis Sullivan, Justice Clarence Thomas and newspaper editor and commentator Robert Maynard. There are numerous professors and social commentators such as Carl Rowan, Walter Williams, Thomas Sowed, Glenn Loury, Shelby Steele, William Allen and William Raspberry. John Johnson is an excellent role model. He came from the welfare rolls of Chicago and now heads a publishing company estimated to be worth $ 150 million. He got an idea for a magazine directed at blacks and pawned his mother's furniture for seed money. He credits his success to his desire, ambition and willingness to take risks. Professor Shelby Steele of San Jose State believes highlighting black racial identity, victimization and entitlement has placed blacks in an adversarial position to the mainstream. He criticizes affirmative action programs and many black leaders whom he feels promote what he calls a disabling victim psychology in blacks, that equates victim status with virtue and permits individuals to avoid self-examination and to rationalize failure. He claims that remedies of affirmative action programs stigmatize recipients, subject them to self-doubt and reinforce dependency and a feeling of inequality. Having borne such indignities it is little wonder that some black achievers are turning against those programs, seeing in them the perpetuation of victimization—and urging young blacks to make it on their own. Stanley Crouch echos Professor Steele's approach to civil rights in his own writing. Mr. Crouch makes fun of what he calls the Frankensteinian conception of life where the white man is Dr. Frankenstein and blacks are monsters, not responsible for their lives because they may have been made imperfectly by Dr. Frankenstein. The following quote prompted the feeling of a kindred spirit between myself and Mr. Crouch: " I ' m not going to submit to racism, I don't care whose version of it I happen to come in contact with; I'm not going to submit to superficial thinking about people; I'm not going to submit to any ideas that reduce the rich possibility of human life... Too

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many people are sold on defeatist philosophy. Too many people are told they can't get anything done before they ever get there. That's really dangerous. That's un-American," Mr. Crouch endorses programs to develop people and communities and seeks answers in partnerships between the mainstream and the ghettos. From what I've read he seems to think blacks need to take responsibility— which is nothing new --------early black leaders such as Booker T. Washington and W.E.B. Dubois called for individual self-determination. Nevertheless, blacks can't solve the problem of drugs, crime, poverty and despair of the inner cities without outside help. In the past it was possible to make up, by dint of effort and ambition, for a lack of finances and educational qualifications ---------- if one were somehow inspired to do so. Other ethnic groups have overcome similar barriers by entering business, studying at night, working at more than one job and finding employers who value leadership and productivity more than years at school. In the real world, motivation is often the best teacher. I obviously am a fan of Stanley Crouch and would be no matter what his color. I think his message is equally relevant to all races. Happiness and satisfaction can be achieved by pursuing ideals and ideals can be achieved by overcoming temptation and weakness. Of course overcoming anything is archaic and rarely considered worthwhile anymore. Younger Americans seem unaware that ideals are not instantly achieved and discarded but rather demand time, work and discipline. As the late chaplain of the Senate, Peter Marshall was fond of saying, "Unless we stand for something we shall fall for anything."

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Alternative #83
Alternative to quotas and affirmative action.
Goal: To have employers, landlords, shopkeepers and literally all Americans accept one another without reference to race, gender, creed or ethnic origin. How: By appealing to the highest instincts in mankind (soft power) and depending on societal pressure rather than law (hard power) to promote the desired behavior. Practical Benefits: The nation needs to pull together to compete in the global market place of the 21st century. It can not afford to waste energy and abilities in bitter racial strifes. Soft Power Benefits: 1 - A sense of fairness and justice will prevail when all people Me judged according to the "content of their character". 2 - The diversity of groups often leads to strife and weakens the nation whereas the diversity of individuals is our strength. America has always been a nation of individuals; appreciation of the diversity of individuals is the uniqueness of our political heritage and the beauty of our culture. All members of any race and sex Me not alike. 3 - Equal opportunity when achieved through faith and trust in the basic goodness of mankind is more likely to be genuine and enduring.

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Background for Alternative #83
In 1971 the University of Wisconsin law school rejected a white male whose test scores were higher than 36 percent of the minority applicants who were accepted. In 1974 the Supreme Court declared the same case moot as the plaintiff was finishing school. In 1978 the Court ruled Alan Bakke must be admitted to UC Davis medical school but also said some consideration in admission may be given to race. Although the reverse discrimination controversies began over school admissions, it seems like the squabble spread pretty quickly to the workplace and hiring practices. In 1979 Brian Weber lost his suit against the steel companies who were reserving half their training slots for blacks, and in 1980 Earl Fullilove sued over contracts reserved for minorities and lost. The Court explicitly upheld raceconscious remedies in the Fullilove case. Then in 1984 the Memphis Firefighters sued because of lay-offs based on race not seniority. The plaintiffs won the reverse discrimination case but the court approved the principle of raceconscious remedies. This is also called the Stotts case, famous for the "victim specificity doctrine". Although the Court ruled that affirmative action concerns would have to give way to seniority rights, this would not be the case if an individual could show that discrimination was directed at him or her personally. The victim of provable discrimination would be awarded the seniority otherwise denied. Then it could be said that seniority still governed lay-off decisions. This became the victim specificity doctrine and it required complainants to prove that they were the victims of intentional discrimination before a remedy could be implemented. In 1986 a Michigan schoolteacher, Wendy Wygant, was faced with layoffs based on race not seniority. The Court ruled as in the Memphis firefighter case but added discrimination in hiring can be tolerated because, as Justice Powell wrote, "racial exclusion in applying for a job is not as intrusive as loss of an existing job". The case pit the school board's well-meaning but race-conscious policy against the teachers' constitutional right to be treated as individuals. The school board maintained that schools wouldn't be truly desegregated until faculties were. That case was in May and in July of 1986 in the Sheet Metal Workers case the Court upheld a lower court order that required a New York union local to attain 29.23 percent nonwhite membership by August 1987 as a remedy for past discrimination. The court also approved a consent decree in which Cleveland agreed to settle a discrimination suit by giving blacks and Hispanics priority for promotions as city fire fighters. The 1986 rulings by the Supreme Court

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made it legal for white males to be subject to racial and sexual discrimination in favor of people who have never personally suffered from it in the past. Naturally this increased resentment. It looked as if the affirmative action forces were definitely gaining ground. U.S. vs Paradise continued the trend in favor of reverse discrimination. The issue before the Supreme Court in 1987 was whether equal protection of the law was now being denied to whites. Were racial quotas permissible under the U.S. Constitution? After getting no response to his repeated orders to integrate the Alabama State Troopers beginning as far back as 1972, an Alabama judge ordered that for a period of time, at least 50 percent of the promotions to corporal in the state troopers be awarded to blacks if qualified black candidates were available. In February 1984 the state complied and then appealed to the Supreme Court. The 1987 decision was 5-4 in favor of quotas. Actually quotas can be traced back to 1965 and President Johnson's executive order #11246 which expanded upon a 1941 executive order prohibiting discrimination by defense contractors during the second world war. Executive order #11246 prohibited discrimination by any federal contractor and required contractors receiving federal monies to keep records on minority employment and to adhere to goals and timetables showing that the contractor was eliminating imbalances in hiring and to show good faith efforts were being made to meet those goals. First it covered defense contractors and then it was expanded to federal contractors and any contractor receiving federal money. Unfortunately the Nixon Administration shifted to a numerical approach in deciding whether contractors were in compliance with executive order #11246. That's what really got the quota idea going. No one alive today would be surprised to know that these mandates resulted in tons of red tape with time squandered under piles of paperwork. Resentment grew even though executive order #11246 was suppose to be a call for strong steps to eradicate discrimination rather than for race-based favoritism. It wasn't until the seventies that many civil rights activists switched their focus from equality of opportunity based on a color-blind theory, to equality of results which is a highly color-conscious notion that weighs the relative achievements of various racial groups. Clarence Pendleton, Jr., former head of the U.S. Commission on Civil Rights under George Bush, didn't believe the 1964 Civil Rights Act and the 14th Amendment to the Constitution demand preferential treatment. Mr. Pendleton campaigned around the country in an effort to eliminate quotas as demeaning to minorities and punitive to the majority. He has said that the civil rights law of 1964 was never given a chance to work because in 1965 we quickly added affirmative action laws and in 1970 goals and timetables were added by Richard Nixon.

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Alternative #84
Alternative to the feeling that many minorities share of being left out of the political process.
Goal: To have all Americans feel that they are part of the power structure and
that they make a difference and their voices are being heard where legislation is made.

How:
1 - Encourage more minorities to run for office. 2 - Publicize the best minority politicians so that they receive recognition from the entire population. 3 - Encourage diversity and flexibility

Practical Benefits:
1 - The nation needs the input of all its citizens. 2 - Minorities know best what legislation is helpful and which harmful to the advancement of their populations. 3 - There will be fewer people feeling disenfranchised and tearing society down.

Soft Power Benefits:
1 - People who feel they have power are likely to be constructive. 2 - People are more likely to be optimistic and energetic when they feel that they have an outlet for grievances. 3 - People are more likely to attempt bigger things when they have visible role models to follow.

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Background for Alternative #84
I've said elsewhere that blacks have excelled in politics. On September 12, 1991 Kweisi Mfume, congressman from Maryland spoke eloquently during a Special Order: "I'm convinced that this nation still stands before the world as perhaps the last expression of the possibility of man devising a social order where justice is the supreme ruler and law is but its instrument. Where freedom is the dominant creed and order but its principle. Where equity is the common practice and fraternity the common human condition." By 2020 the number of nonwhite U.S. residents will have more than doubled to nearly 115 million, while the white population will not be increasing at all. Once this country was a microcosm of Europe; it is fast becoming a microcosm of the world. By 2056 the average U.S. resident will trace his or her lineage to the Hispanic world, the Pacific Islands, Asia, Africa, Arabia or almost anywhere except Europe. Indians began coming here in considerable numbers in 1965 and their population has increased by over 180 percent in the last ten years. However, most Indians are highly educated when the immigrate to this country. Already in the state of New York 40 percent of public school students are ethnic minorities, whereas in California white students are already the minority. I heard the following speech given by John Jacobs of the Urban League in July 1991 and broadcast via C-SPAN. It is a beautiful illustration of what is best about America—it allows everyone his or her own vision. Our America needs to recapture the vision of itself that has inspired people all around the world for over 200 years. It is a vision of a diverse people, living together in harmony and respect with liberty and justice for all. That's the vision that separates the United States from all other nations in the world. And that American vision of freedom and democracy and opportunity still inspires the world's people. It is a vision that drives the hopes of little black children in Atlanta, a vision dear to people in far away lands, struggling to be free. A vision that flourishes in the minds and hearts of people of all races and all cultures. It is a strong vision. It has to be to have survived the contradictions of its birth in a slave nation. It is a vision that has been tarnished by injustice and violated by unfairness. It is a vision that has been abused by racism, tattered by exploitation, trampled by discrimination. But as much as we are disappointed and saddened by the way that noble vision has been violated, more often than it has been followed, we are not disappointed in the vision itself. Much as we are frustrated at

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the way that vision has been applied to others more than ourselves, we are not frustrated at the vision itself. And as much as we deplore the failure of Americans to revive and cherish that unique vision, we do not deplore the vision itself—rather we' re inspired by it—by the vision of a land of diverse peoples living together in mutual respect. That vision may be old in years, but it is young in its meaning for a nation struggling to achieve equality for all, of people grappling with the terrors of racism, a land of diverse people entering an unknown future. And it is a vision, to which we of the Urban League movement holdfast. For ours is a struggle to help our society fulfill its vision even as it often drifts away from the best of its heritage. We of the Urban League live daily with the shattered by violations of the American vision. With the children victimized by drug gangs and bad schools; with the adults who don't have work, don't have food, don't have hope. But we in the Urban League carry on, with faith in the vision articulated by the founding fathers who gathered together to birth a nation based on the revolutionary principle that we the people of the United States, create a government to establish justice,promote the general welfare and secure the blessings of liberty for ourselves and prosperity. Not to decry America, but to purify it; not to separate America, but to become part of it. This is our land. Here we have risen from slavery to freedom and here we will rise from poverty to prosperity. This is our land.

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Alternative #85
Alternative to the 1991 Civil Rights Act.
Goal: Fair treatment and equal opportunities for all people. How: Distinguish between private and public. Rewrite civil rights legislation to cover congress and any entity that receives taxpayer support. Respect private property rights including the right of individuals to hire, fire, rent, sell or service whomever they chose. The only reason not to do this is the fear that well meaning people have that discrimination is more prevalent in society than I believe it is. The longer we fail to take this risk the longer we postpone getting real acceptance of each others differences. The longer inner motivation is refused a chance, the more likely people are to chafe under the oppression of force from without. The real end of discrimination will only come when people voluntarily accept it because it is the right thing to do, not because they will be punished by the state if they don't. It's time to try soft power. The world may be pleasantly surprised if we ever find the courage to take this step. I believe hard power has done it's job and that the level of tolerance in the society for those who would chose to discriminate is such that they would be written about, talked about, picketed and generally forced out of business and onto a higher plane by the force of public opinion. Practical Benefits: 1 - Racial tensions would subside as real, not forced progress is finally allowed to take place. 2 - We would know, rather than guess, at the amount of prejudice that really exists in this nation. Of course I am betting it is much, smaller than generally believed. Soft Power Benefits: We would be taking the first obvious big step towards becoming a nation that exercises soft-power, the power that we need to cultivate if we wish to maintain a position of leadership in the 21st century.

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Background for Alternative #85
Under the amended 1991 civil rights law (H.R. 1), racial minorities who are victims of discrimination can sue to recover damages for medical and emotional injuries or to punish offenders. Women, however, have no right to a jury trial, and are only allowed to sue for back pay and job reinstatement. Most of the congresswomen attempted to pass an amendment to H.R. 1 which would have allowed women the same right to compensatory damages as the final proposal allowed minorities. They argued that companies need to be hit hard in the pocket book or they won't change. Victor Schachter, a San Francisco business attorney cites California's experience after compensatory and punitive damages became available in 1980 in wrongful discharge cases. The average jury verdict in 1987, before the state Supreme Court limited such damages, was $482,697. Quite a burden to get businesses to behave "correctly". At one point "comparable worth" was part of the proposed civil rights legislation. These "pay equity" bills were passed in the House during the 98th., 99th., and 100th congresses but that is as far as they got on their journey towards becoming binding law. In fact Section 202 of the civil rights legislation passed by the House in June of 1991 included a comparable worth or pay equity provision in order to attract women. It was called the Civil Rights and Women's Equity in the Workplace Act. However it contained no provision for a bureaucracy to establish wages . The 1991 civil rights billed passed in the Senate with a 93-5 margin on October 30,1991. President Bush, feeling perhaps pressured by the racial tensions and the fallout to Republicans from David Duke's forceful candidacy, withheld his veto. The 1991 legislation was prompted by a series of Supreme Court decisions culminating in 1989, which made it harder for workers to prove they were victims of job discrimination. Documented disparities between employment patterns and the make up of local populations were once considered sufficient to create a presumption against the legality of employment practices that have a disparate impact on various groups. Then the court changed the burden of proof so that mere statistical imbalance would not automatically mean that plaintiffs would prevail. This meant that hiring practices could be invalidated only for discriminatory motives or for statistical consequences that could not be explained by legitimate business considerations such as hiring or promotion by merit. But since this is difficult to prove, proponents of the new legislation argue it is wrong. They would love to be able to offer plaintiffs' successes as the proof of justice.

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And they would no doubt be happy if employers started practicing a little reverse discrimination as insurance against ruinous litigation. There is one good thing. Proponents want to shift the burden to make employers prove a disparate impact is related to effective job performance. Originally the burden was to prove it was essential to effective job performance. Either way employers are forced to protect themselves, and as we've said over and over, the best way to do that is to hire by the numbers. This is essentially adopting quotas. Litigation is a game of chance that costs the employees little to find out if they are winners and leaves the employer with the possibility of losing everything. The bill's sponsors claim neutral employment practices work to create a "statistically unbalanced workplace" in terms of race, sex and religious orientation. But Hoover Institution fellow, Thomas Sowed, counters that nonsense to my satisfaction in a piece he did for the 'Wall Street Journal published March 6,1990 : "The fatal fallacy of affirmative action policies is to assume as a norm a condition of even or random distribution of groups that is seldom if ever found on the planet." The assumption that different racial or ethnic groups would be evenly or randomly represented in institutions "but for" discrimination is unsupported by evidence. Sowed uses an abundance of statistics to back up his contention that imbalances are common all around the world. He claims disparate impact occurs whenever racial, sex or other statistics fail to meet the preconceptions of policy makers. And there's no doubt disparate impact is at the heart of the legislation. The 1990 civil rights act would have penalized employment practices that have a disparate impact upon blacks as compared with whites. Opponents argued, successfully I thought, that disparities are bound to exist unless at some time in the future occupational slots are assigned at birth by sex, race and religion. Some say the disparate impact tests would force employers to make certain their employees were balanced by religious beliefs. It would have been dangerous to require workers to have high school diplomas and in general made it more difficult for employers to set high standards in this competitive world. The court ruled that applicant testing and job qualifications must be significantly related to successful job performance, must fulfill a genuine business need and have a manifest relationship to the employment in question— business necessity was the key! But the term business necessity was vaguely defined so that employers, in order to protect themselves from litigation, would be forced to hire anyone who could do a successful job as opposed to hiring the best possible worker. The Civil Rights Act is a bonanza for lawyers because it will no doubt encourage litigation. The legislation was too ambiguous and set aside past

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precedents. Even the lawmakers themselves couldn't agree. Senator Kassebaum admitted it was unclear whether or not it would actually lead to a quota system and Senator Jeffords said there was disagreement on the degree of discrimination to be permitted regarding business necessity. Opponents claimed that employers would hire by the numbers, which ipso facto amounts to a quota bill, because of the fear of being sued. Senator Jeffords asked, "What should business be allowed to get away with under the guise of business necessity?" Both sides want to shift the burden of proving "business necessity" to the owner. The administration would like to define "business necessity" as showing a manifest relationship to employment or practices which have legitimate goals, whereas the majority of Democrats want to see proof of a significant relationship. The administration is afraid employers won't be able to hire to achieve "optimal performance" and the Democrats are afraid all sorts of things could be justified as "legitimate goals". Today neither Republicans nor Democrats advocate a color-blind society, which I see as the only way to achieve harmonious relations among various groups in this country. The 1990 and 1991 proposed amendments to the 1964 civil rights act would amount to quota bills because a prudent employer would favor minorities in order to avoid costly lawsuits. The Senate bill was not that different from the House bill. It too was an attempt to strengthen civil rights laws that prohibit discrimination in employment by negating several 1989 Supreme Court decisions. Very briefly I '11 mention the reason politicians want to overturn each of the following cases: The Patterson case dealt with businesses with less than 15 employees and didn't ban racial harassment on the job nor prevent discrimination after a contract was made. Wards Cove said it was up to the employee, not the employer, to prove discriminatory business practices are not significantly related to a legitimate business objective. Hopkins ruled it was ok if prejudice enters into employment decisions as long as the decisions would have been the same without discrimination. Wilks said a potential plaintiff who sits on the sidelines could later challenge a consent decree settling a job discrimination suit in a separate lawsuit later. The Lorance case held plaintiffs have to challenge discriminatory practices when they occur not when the harm begins. Crawford and Zipes cut back on fees available to prevailing parties. The ruling in the Wards Cove case was 5 -4 in favor of imposing tougher standards on the use of statistics by employees in their attempts to prove discrimination. The Court said workers must bear the burden of discrediting employer's justification for hiring practices. Senator Gorton saw the same relevance you see in the Wards Cove ruling and asked regarding "business

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necessity", "Should courts penalize employers who have no intention whatsoever to discriminate as in the Wards Cove case?" He claimed the bill was not about whether people will get jobs but rather on what basis shall people get jobs. On the basis of race, religion, sex? In the 1971 Griggs ruling, the Supreme Court said if some hiring practices have a "disparate impact" on minorities —that is if they result in statistical underrepresentation of minorities or women—they must be justified by " business necessity" According to the proposed 1991 amendments, "business necessity" must be a hiring practice which bears a significant and manifest relationship to the requirements for effective job performance. The problem again is in defining o "significant" and "manifest" and in determining what constitutes "effective" performance? These are actually the same questions we tried to answer earlier and this discussion proves the point that opponents of the legislation make, that this legislation is a lawyer's dream—all these terms are open to interpretation and must be proven. As Charles Stenholm, Democratic Congressman from Texas, argued in his opposition to the Brooks-Fish amendment to the 1991 civil rights bill, "'manifest' and 'significant' will become big things." The degree of difference in those two terms relates to the degree of difficulty an employer would have in proving he was not practicing discrimination. Politicians of both parties rely on Griggs and want to overturn, by legislation, the Supreme Court decision reached in the Wards Cove case. That ruling made it more difficult for workers to prove racial discrimination simply by citing statistics that show that a group is under represented in a work force and put the burden of that proof on the plaintiff employee. Wyoming's Senator Alan Simpson resented the fact that if you failed to support the 1991 civil rights bill you would automatically be labeled a racist. He called it a vicious innuendo and denounced the legislation as an attempt to micromanage the nation's employers. If you can get into court and be sued by the numbers you'll naturally end up hiring by the numbers. That's a quota bid.

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Alterative #86
Alternative to crime-ridden ghettos.
Goal: To ensure that no citizens are terrorized. To ensure that no one in this country is abandoned and forced to live with fear. To ensure that crime is controlled in everyone's neighborhood. How: 1 - Using the latest technological advances in crime control. 2 - Establishing crime prevention programs in susceptible neighborhoods. 3 - Stepped up police presence and new sub stations. 4 - Citizen neighborhood watches and trained participation in prevention and reporting. 5 - Funds should be sought first from private sector sources such as corporations and nonprofit foundations. These groups can be shown that there is no greater disadvantage to a human being than to be forced to live in fear—no better use for their charitable dollars than to eradicate crime and free people to open businesses and get an education and play and plant and construct without fear. Practical Benefits: 1 - Restoration of neighborhoods and appreciation of real property. 2 - Rise in the standard of living and an expanded gross domestic product. 3 - Less unemployment and fewer people needing welfare checks. 4 - Creation of new businesses and jobs. 5 - Generation of more tax renewal. Soft Power Benefits: 1 - Freedom for residents to make something of their lives. 2 - The restoration of hope which makes all things possible. 3 - A goodwill and optimism which would be a by-product for those who would realize they had not been forgotten and those that would know they did not look the other way but they cared about the plight of their fellows. A renewed sense of community spirit.

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Background for Alternative #86
The Heritage Foundation came out with a turnabout theory recently that attempts to show that economic conditions in a neighborhood depend on the presence or absence of crime and not as generally believed, that crime depends on the economy. They claimed crime causes poverty more than poverty causes crime. To grow economically, preserve property values, and attract investments, a community must be safe. Clean neighborhoods deters criminals because it shows residents care and are more likely to report crimes. Too often minor crimes, that do the most to spread a sense of lawlessness throughout a community, like vandalism, petty theft, juvenile drug and weapon possession, are left unpunished. According to James K. Stewart, former director of die National Institute for Justice, "Crime is the ultimate tax on enterprise. It must be reduced or eliminated before poor people can fully share in the American Dream." The report wasn't news to the people who live in crime ridden areas. Isn't their first question to any politicking official, "What can be done to help minority communities plagued by violence and crime?" State and local government have had little success in their attempts to change conditions in these neighborhoods, so in many cases residents have taken the task into their own hands. A megatrial in Chicago where 38 gang members would be tried on 22 counts of murder and numerous offenses could cost $1.6 million just for courtappointed attorneys who would end up sitting around for long stretches of the time. Since courts and police protection are two of the truly legitimate functions of government, they would get top priority in my book. Ira Glasser of the ACLU said on April 2, 1991 that 36 million crimes were committed in 1990 and there were only 3 million arrests. CA returned almost 40,000 technical parole violators to prison in 1989 more than all the other states combined. Only 19% of those who left prison in 1989 completed parole successfully compared with 43% nationwide. Some blame problem on lack of spending for half-way houses, assistance on job searches and rehabilitation programs. Instead we spend $$ to build more prisons. Parole officers often have 75 cases at one time. Why are there so many criminals? Largely because our society depends on individual control. Mob psychology, not individual control, can be found in the college students who were found to be throwing dog feces in children's Halloween bags and setting them on fire. Others out of control have taken to putting razor blades in Halloween candy making it necessary to set up x-ray stations around the country where children can get their treats tested.

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How can we expect self control from teenagers if spiritual-moral leaders have none? Look at the cases of Jimmy Swaggart and Jim and Tammy Bakker? Are we a nation of jelly-fish where discipline is seen as troublesome and old fashioned? No one can deny the lack of accountability and and little sense of obligation at all levels in America today. Restraint and character are no longer fashionable; excesses and excuses are the rule. We are without doubt, an undisciplined nation; strangers to morality. Crime fell by 90 percent in six months when the police barricaded streets to keep suspicious people out of a neighborhood and put up gates with signs saying "Open to Residents Only". Under operation "cul de sac" in Los Angeles student attendance in neighborhood schools increased dramatically. When the barricades came down crime moved in again almost immediately. Without crime control you can forget the schools. An expert at the American Enterprise Institute found that each year about three million crimes are attempted or completed on or around school grounds. Good teachers may not be willing to risk bodily harm. Fear of being beaten or robbed can make it impossible for even residents of crime infested areas to become productive employees or entrepreneurs. And forget entering the middle class through the professions. I guess no one's going to go to night school if they can be murdered on the way home. Nowadays they refer to just about anything that prevents crime as opposed to investigating after the fact, as "community oriented policing". That would entail a lot of things, citizen unarmed voluntary patrols for one. In Washington D.C. there are 130 volunteer groups involving 6,000 residents who relay information regarding drugs and other crimes to the police. The use of private security guards soared from 400,000 to 1.4 million in the same short time span that the uniformed regular police force across the nation rose from 400,000 to 600,000. Regular police cost a lot more and spend only about 2 percent of their time actively patrolling while the bulk of their time goes to testifying in court, wading through masses of paperwork and responding to calls. Private security guards spend 90 percent of their time patrolling and have managed to cut back crime significantly in those areas that use their services. Public housing projects have an extremely high crime rate. About three or four times higher than the crime rate of the neighborhoods at large. The Department of Housing and Urban Development modified eviction procedures in about forty states that used to take at least two years to get rid of drug dealers and violent criminals. Police have had good results working closely with tenants in housing projects in Orlando, Florida and Savannah, Georgia

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and even serve as a kind-of big- brother-role-model to kids who they take to ball games and other events. Examples: Finally people who know the facts, because they are the targets of crime, are speaking out. For years the Los Angeles NAACP protested that crime was caused primarily by racial discrimination. In 1989 it came around and its president said "the related problem of gang activities and the selling and use of drugs is something to be condemned as a civil wrong in the community. When we constantly talk about excuses for this kind of behavior, we simply make it worse. .. We've got to apply the same pressure to civil wrongs that we applied in seeking our civil rights." In March 1989 Pat Moore, a black mother, organized an impromptu march of 100 people in Compton, California protesting lack of protection against criminals. That was in response to the death of a two-year old boy caught in gun fire. Another Los Angeles ghetto mother was extremely incensed by a complaining letter to the Herald Examiner by a suburban father who felt his rights were being infringed when school authorities forbade his son to wear an earring to school. Earrings had been banned along with other gang-associated garb, in an attempt to reduce theft, robbery and other crimes. The need to have something to believe in is greater today than ever before in our history. Nature abhors a vacuum, so if this basic need in man is not filled by things positive and uplifting it will be filled by things negative and destructive and our courts and prisons will continue to overflow.

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Alternative #87
Alternative to oppressing citizens with an inordinate number of regulations.

Goal: To free people from micromanagement by government and allow
Americans to be as productive and creative as possible.

How:
1 - Sunset existing regulations. 2 - Make it harder to enact new legislation. 3 - Get citizens to become aware of this excessive regulation and to rebel against it.

Practical Benefits:
1 - It will be easier to get things done. 2 - Money and time will be saved. 3 - The nation will become more productive.

Soft Power Benefits:
1 - People will gain greater control over thier lives. 2 - It will be easier to fulfill potential. 3 - Self-reliance and responsibility will be more easily achieved.

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Background for Alternative #87
The concerns about the federal budget deficit have made it hard for members of Congress to expand their influence through programs which require spending, so they have turned to regulation. Every new rule purports to serve some noble goal, making the private-sector members who oppose the regulation appear selfish, even though often in the process of carrying out the goal funds are diverted from other, perhaps more worthwhile causes. When institutions do a lousy job regulating themselves, government steps in. Regulating is the easy part; everyone loves to tell everyone else how to act. The hard part is deregulation. I have "the mother of all ridiculous proposals". It seems that pedestrians struck by cars are often killed when they land on the metal hoods. The proposal would require a rubber hood to cushion the blow, with a sandpaper surface to keep victims from bouncing very far off. In order to sell hot-dogs on the streets of San Francisco first you would need a $8,000 stainless-steel cart, a state-approved commissary to garage it in and a truck to move it with, a city business license, a state sales-tax permit and three city permits. Then you must make certain there is more than 600 feet between you and another hot-dog vender. In June of 1991 there was talk in San Francisco of forcing night-spot owners to make peep show booths accessible to wheelchairs. Also in June 1991, a young couple and their five-week-old son were evicted form a townhouse near Miami, along with about seventy other homeowners because their houses were judged incapable of withstanding the area's hurricanes. You would think the county's standards would have been enforced before the subdivision was occupied rather than after. Unless the developer was shown to have acted fraudulently, I would dunk the city would have some reimbursing to do if they go ahead and order the homes demolished as the news report suggested. After Hurricane Hugo hit the east coast, about 50 North Carolinians and 151 property owners in South Carolina found they were restricted in their rebuilding efforts. For instance a hotel owner was told he must relocate his swimming pool farther inland which would mean eliminating parking spaces in violation of his city's strict regulations. To comply with city regulations he would have to eliminate the swimming pool which he

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believes would cost him 40 percent of his business. He was damned if he did and damned if he didn't. An article in a Monterey, California newspaper in January 1991, lamented the regulation of the height of windmills, color of water tanks, number of cats and dogs a farmer can keep and even the new need for permits to hunt and fish on private farms and ranches. A committee of incensed citizens took six months and decided these were not matters to be regulated by law. Their outcry was against a local ordinance, referred to as Tide 21, which took away the property rights of many county residents. The ordinance was a guide to land use in all unincorporated areas of the county, required by the state to reflect the county's general plan and eight area plans. The citizens' committee said enough is enough and recommended the supervisors and planning commission cut back on their control over design, and size of houses and all kinds of things. They proposed that anyone who initiates the termination of a legal nonconforming use to pay all of the landowner's legal costs if the termination is later overturned in court. The Association of Monterey Bay Area Governments (AMBAG) who apparently took a page from the South Coast Air Quality Management District discussed on page _______. In a report they suggested requiring businesses to order employees to car pool, ride the bus or work at home to reduce air pollution. Every business would have on-site employee transportation system coordinators who would prepare trip reduction plans, annually determine the percentage of employees who drive alone and make sure that number never rises above sixty percent. It would be phased in starting in 1992 for employers with at least one hundred workers and in 1993 for those with at least fifty workers. The report recommends similar regulations for high school and college students with no more than fifty percent being permitted to drive alone by 1994. It also suggests increasing the minimum driving age to eighteen. To further discourage the use of cars, the report suggests raising parking fees and reducing parking areas downtown, in shopping centers, tourist areas and all commercial and industrial areas. Shuttles would eventually run between Cannery Row and Fisherman's Wharf. They would cost an estimated $2,461 per day on peak days, which in true micromanagement fashion was equated to a cost of $35 per pound of air emissions reduced. Cost of these and a whole host of measures is only estimated to cost about $1.7 million each year. Meanwhile in tiny Carmel-by-the-Sea the powers-that-be wouldn't allow singing in a restaurant, and delayed deciding whether it would rezone from "limited commercial use to service commercial use" even though not

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to do so would force a restaurant out of business. It was apparently a tough decision for these elected officials even though five restaurants had left the area since 1984 when zoning was changed. Somehow they managed to rule against singing and against letting private property owners convert garages to apartments. An article in the Wall Street Journal told of one new proposal from the EPA to tighten rules for disposing of low-level nuclear waste that would save from three to thirteen deaths over 10,000 years with one death prevented in the first 500 years. It had been nick named the Christopher Columbus rule because jokesters reasoned if the bill had been enacted back in 1492 we'd be about to save our first cancer victim today. In the spring of 1990 hundreds of millions of dollars were diverted from medical research to build new cages and ensure that air is recycled more times each day than even human hospitals require in an effort to treat animals more humanely in laboratories. Proposals for tougher new air quality standards included one for sulfur dioxide pollution which a pundit in Washington D.C. claimed was designed for " an asthmatic, exercising near a power plant, without medication, during peak emissions." Those operating homeless shelters have been prevented from asking health questions or getting an urinalysis which would help them help the many substance abusers that make the rounds of the shelters without ever really receiving die help they need. Other regulations prevent restaurants and grocery stores from getting healthy food to the needy. $4 billion is spent every year on the homeless which according to one activist amounts to $18,000 for each homeless person (depends on how many homeless you think there are—this is about 250,000 but could be double that amount). There are 3 million vacant housing units but government policy has kept them from being marketable. There are 17 different federal agencies serving the homeless which is a bureaucracy too big for even the average person to navigate. Too many advocates believe that resources to provide affordable housing, jobs and health care is the answer. Resources can't do the job. Behavior is the problem and behavior can't be changed by money— change must come from within individuals. Delancey Street and Mimi Silbert is the shining example of what can be accomplished by motivated ex-cons and former substance abusers. So is Lupe Anguiano and her ability to find jobs for welfare mothers. (See examples)

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Alternative #88 Alternative #88

Alternative to burdening business with excessive regulations. Goal: To make business as productive as possible. How:
1 - Remove or modify existing regulations that may be either needless excessive or unnecessary. 2 - Make it more difficult to impose additional regulations on business. 3 - Provide incentives for business and industry to regulate themselves.

Practical Benefits:
1 - The more productive and profitable business and industry become the more jobs, the more tax revenue and the better off our society becomes. 2 - Many of the current disincentives to innovation and bringing new products to market would be removed.

Soft Power Benefits:
1 - Freedom would flourish as oppressive excess regulations are lifted. 2 - Creative impulses would be unleashed. 3 - People would develop the habit of policing themselves from within rather than waiting for the hard power of the state to be imposed on them from the outside. 4 - Character would be reintroduced into a society where honor rules are recognized. 5 - People would learn to depend on their own judgments and not wait for government to assure them that something is safe or good etc.

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Background for #88
The Americans With Disabilities Act (ADA) which seeks to end job discrimination, is a perfect example of well intentioned legislation gone awry. The Act specifies how new or remodeled restaurants, banks, theaters, stores and other public accommodations will have to be designed to be "readily accessible to and usable by individuals with disabilities." Talk about ambiguity! In 1991 there were forty-three definitions of disability used by the federal government, not to mention the hundreds more used by state and local governments. Just to decide what constitutes disability could keep attorneys busy for years. In the meantime valuable resources will be diverted from severely disabled people as those with less severe disabilities are weeded out by cadres of medical and vocational experts. The reason for ADA in the first place is that two-thirds of the disabled want to work and are capable of working. Some companies have excellent recruiting and hiring programs already, but, like the U. S. Post Office, many have very poor records when it comes to hiring the disabled. This has been said although there are currently 36,000 disabled persons working in the Postal Service—out of a workforce of 750,000. The ADA definition of disability extends civil rights protections if a person is "substantially limited" in "major life activities". That can include alcoholics, drug addicts and people with AIDS and a myriad of diseases. I think many businesses understandably have a problem with such a broad definition. In fact you might want to ask Mary Kay, a cosmetics firm sued under this legislation by a former employee who was fired because of alcoholism. Mary Kay is a Texas company. Ohio, Minnesota, New Jersey, and Wisconsin have ad ruled that drug abuse and alcoholism are physical disabilities that fall within the legal definition of "handicapped" but Texas law makes no provision for alcoholism as a handicap and you're right, that is where the firing took place. The suit claimed the employer had an obligation to help the employee obtain treatment. The Americans with Disabilities Act requires businesses with more than 25 employees to treat alcoholism and drug abuse as a handicap starting in July 1992 anyway. The intent of the anti-discrimination law is to prevent bias in the workplace against alcoholics and those who abuse drugs as long as they are not current users. Not only that, the legislation extends to anyone who is "associated" with disabled persons—they can also seek relief. No one quite knows what that means! Any way you look at it, this legislation is going to be expensive. Before ADA, the federal government was already spending $75 billion a year on the disabled.

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We've been concentrating on the definition of "disability" and ignoring the employer's role. Under the ADA the employer has a duty to make "reasonable accommodation" for the disabled. That can mean hiring additional help or equipment to compensate for the employee's disability, adjusting responsibilities, work schedules or redesigning the facilities and work station. Of course employers must bear the costs of accommodating members of the now protected class and can find themselves deep in expensive litigation if they fail to hire them because of something frivolous like not wanting to forgo output or management time or because they find the term "reasonable accommodation" ambiguous. To be fair, the act isn't completely ambiguous, some things are specified. I understood, for instance, that "reasonable accommodation" would require all new buildings higher than two stories to have elevators, would mandate listening devices for the deaf on office telephone systems as well as requiring special computer equipment. That will be expensive for the employers -------especially the special computer equipment. Mainstream, Inc., a nonprofit group, advises small businesses trying to comply with the legislation that most state vocational rehabilitation organizations will pay all or part of the cost to help a company or individual comply with ADA. No matter what you do you cannot please certain activists—they just expand their wish list. In 1986 an amendment was proposed to the Rehabilitation Act. The Rehabilitation Act is legislation passed by congress in 1973. The relevant parts of the act are Sections 503 and 504 which outlawed discrimination against the disabled by government contractors and other recipients of federal monies. The 1986 amendment decreed the amount of time an employer should be given after hiring a disabled worker, before doing whatever it takes to ensure that the new worker is promoted. In the FY 1990 budget there was a user fee on employers who maintain pension plans for their employees. Employers prematurely terminate pension plans to recover excess monies. Pension plans supplement social security and are not meant to benefit corporations. Since 1981 $21 billion worth of pension money has been converted to other purposes. On the other hand, employees are being hurt due to incessant tampering by Congress. Employers are leaving the defined benefit system and shifting risk to the employee. Cass Ballenger, a businessman and representative from North Carolina, set up a pension plan for his own employees. He spoke from experience when he told his colleagues that these "amendments are going to force underfunding of current plans and destroy incentive for new plans." (Know

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your enemies?) With ERISA (Employee Retirement Security Act of 1974) Mr. Ballenger changed his own employees to an ESOP (employee stock ownership plan). He bought into my preachment that people always act in their self interest when he cautioned that if an employer can't get out any excess funds he will make dam sure he doesn't put any in and the PBGC will take the brunt. (PBGC=Pension Benefit Guaranty Corporation—government insurer of private pension plans=YOU!) Marge Roukema of New Jersey was also against the pension amendments, claiming they would disrupt private plans and change ERISA law. In her words, "These amendments violate the bipartisan nature of pension law." She was alarmed that non-germane amendments were hitching a ride on a budget agreement. Business should be everyone's interest and so should fairness. She was trying her darndest to prevent the imposition of more regulation and costs on the backs of small business people. She warned against an amendment which would require employee representation on any board of trustees, against prohibiting reversion to employers of excess pension monies and against new ERISA report filing fees of $200 per each employee, which she said was another tax! Mrs. Roukema claimed no advance notice was given of hearings on these reforms and that to change the present fiduciary pension laws would put labor management relations in a turmoil. She insisted that what was being proposed was a very radical change and she predicted if these amendments became law, the public would be more enraged than they were when they got wind of the catastrophic-health-care bill. There has been a lot of criticism about deregulation which is said to have permitted unsound and even deceptive enterprises to flourish. But there will always be things to criticize, but deregulation per se is not the cause of our imperfections. I realize it's fashionable to claim that as a society, we have just emerged from a decade of greed and callousness and the moral bankruptcy which accompanied it. In reality just the opposite is true. In 1980, before Ronald Reagan took office, total giving in the US A totaled $49 billion and was on a downward track; by 1984 it was up to $75 billion and rising. People give more when they have hope and an optimistic outlook on the future. President Reagan persuaded people that they were needed, they they could make a difference and that's why volunteerism and charitable giving rose. Under Ronald Reagan the nation had the longest peacetime economic expansion in its history, defeated the Soviet Union in the cold war by engaging in military and economic competition, restored failing national morale and inspired a revival of market economics abroad, pioneered tax cuts, lowered inflation and interest rates, increased economic growth and added millions of jobs, houses, cars VCRs, personal computers, consumer

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goods, new companies, original technologies and modem industries to our economy. The whole point of planning commissions and master plans is to look ahead and prevent damage. Many people believe planning is an improvement over a free market, but I don't for a moment think that is true. For one thing the tradeoffs (loss of freedom and productivity) are too great to be considered an improvement in my estimation. We are reverting to a static time in history when scarcity was rampant and it was commonplace to ask "May I please be granted the ability to do what I desire with my property?" What else are permits? There has been a very real failure both to define and uphold property rights. A lot of our problems are caused by the absence of the principles of property rights, free markets and individual accountability. For example the Hyatt Corp. spent eleven years to get approval to build a 400 room hotel on a one-time oil field a few miles north of Santa Barbara. The process included 1,000 pages of environmental analysis and public consideration of alternative sites for the hotel. Local activists wanted studies of locations that didn't have zoning for visitor use or weren't even owned by Hyatt—any ploy to stop the company. Thank goodness the California Supreme Court found the procedure ridiculous. It said "Rules regulating the protection of the environment must not be subverted into an instrument for the oppression and delay of social, economic or recreational development and advancement." I say bravo! At the end of 1990 the San Francisco Board of Supervisors, passed a resolution which has got to be considered big time intervention; in fact it amounts to mammoth micromanaging of the workplace. In an attempt to alleviate straining and neck injuries by employees, the new law would mandate the type, size and height of chairs and video displays for workers in every business with more than 15 employees. These publicly elected supervisors have decided that employees of private companies must have a fifteen minute break every two hours. Would you call this a social good? I would call it a misuse and inexcusable expansion of power. How will the resolution be enforced? It brings the promise of more law suits and adds one more disincentive to employment. One company (Pacific Telesis) paid $3.5 million in business tax to San Francisco which amounted to $720 per employee. That compared to a tax per employee in Los Angeles of $240, in Oakland of $120 and in San Jose of only $10! Who can be surprised that in the 1980s San Francisco's economy grew more slowly than that of any large city in California, losing approximately 46,000 jobs. It costs a firm with 500 employees about $4 million a year in rent and local business taxes to locate in San Francisco

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compared to $3 million in Oakland and $2 million in Concord according to BPA Economics. Fees for transit, affordable housing, public art, child care and so forth add about fifteen percent to the cost of any building built in San Francisco. The city's own payroll tax is a penalty for creating jobs. Philadelphia found that a doubling of its payroll tax to 4.3 percent over a twenty year period was directly responsible for the loss of 136,000 jobs. But San Francisco's payroll tax is still small in comparison—1.5 percent— and doesn't touch firms with payrolls under $167,000. But even the smallest firms pay a $150 "registration fee and depending on the type of business, all sorts of other "fees" are imposed, making business taxes in San Francisco the highest in the state and right up there on a nationwide comparison also. You'd think these high taxes would be accompanied by a high level of services. But I happen to know that many businesses hire private street sweepers. Sure, they pay the city, but they get few and poor services in return. The permit process is another obstacle to business. Chevron found it would take four or five years to build in San Francisco so it relocated its building to Contra Costa county where it took less than half die time. Proposition M, which restricted new construction in San Francisco, passed in 1986. (During Diane Feinstein tenure as Mayor) Then in 1989 Sacramento imposed fees on developers of commercial real estate in order to help fund low income housing. The fees were expected to raise $3.6 million a year but in two years only $1.9 million had been collected. You might ask if we really want social engineering from the planning department. Arbitrariness and favoritism is automatically built into any permit-approval process. To get business on the move again, regulations that slow productivity will have to be eliminated. Anti-trust laws will have to be modified where they inhibit competition. Recent costly legislation will have to be reevaluated. The Clean Air Bill 1990 amendments will cost business upwards of $100 billion by some estimates. The Disability Act adds higher costs to doing business and the threat of suits from restrictions and regulations, like those embedded in the Civil Rights Act, are another deterrent to business expansion. Large established corporations are only too anxious to burden smaller businesses with mandatory health care, child care, parental leave and insurance for their employees since many of them have been providing these benefits for years. The amendment to the civil rights bill which passed in 1991 affects business as if it were a quota bid. The legislation was written so that a disgruntled employee would not need to prove that any specific practice by the employer resulted in dismissal due to discrimination. The burden was

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shifted by this law, to employers who must in all instances prove their innocence. Many businesses will find it easier to institute a de facto quota system than to live in fear of costly litigation. It is tantamount to malpractice for lawyers to fail to advise employers to hire strictly by the numbers. The surest way for employers to avoid lawsuits would be to hire those who are minimally effective which would not be good for their business nor the nation's economy. In 1991, according to George Bush, regulations were being churned out in Washington, DC at a rate of 150 a week. In the spring of 1992, the production was down to 25 a week. Perhaps legislators were too busy getting reelected. But it's a sad day when 25 new regulations a week is something to cheer about. President Bush told the Detroit Economic Club in March, 1992 that he would veto any mandates that are likely to make business less productive. He promised to veto tax increases and to fight for free trade. He agreed that the country is burdened with too much debt, too much regulation and too many lawsuits. Consumers are best equipped to decide what will or will not sell. Regulators may be better informed, but consumers know what they want and what kinds of risk they are willing to take. But consumers can't judge those risks unless they have access to and the education to interpret technical knowledge about which even highly trained scientists disagree. James Strock, an officer of the Environmental Protection Agency, favors "a new rule requiring lenders to determine the potential environmental liability on property before making a loan. Of course this will impose one more burden on the already heavily burdened business sector. It will slow up the economy in terms of time and money as inspection services emerge to exact another toll on our overregulated society. Mr. Strock thinks the LaFalce bid offers blanket immunity to lenders. Many service station owners have recently complied with mandates to replace single with double-bottomed tanks for health and safety reasons. That was costly but they complied. Since there was no big furor the government should once again sock it to the same group of citizens by forcing them to carry alternative fuels? The SDA (Station Dealers Association) reports that the average net worth of small dealers is $81,000. It costs anywhere from $50,000 to $ 120,000 across the nation to install the double walled tanks. Additionally, handling methanol means exposure to Superfund liabilities and a hike in insurance premiums and cut-off from commercial bank loans.

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Even though President Bush asked them to restrain prices, small Gasoline Dealers had to raise them due to the Mid East crisis. However the name brands were able to sell below wholesale prices. The big oil companies used the crisis to capture market share. In 1990 motorists had a little over 100,000 service stations to choose from compared to 225,000 in 1972 before the first oil crisis. Good Stuff Food Co,, a Los Angeles bakery, got a $245,000 penalty for failing to come up with an employee ride-sharing plan. As settlement their attorney agreed to hasten conversion of delivery vehicles to propane. Los Angeles and San Diego smog agencies are using major employers to control the habits of individual motorists. It is estimated that 2/3 of Los Angeles' pollution is caused by cars. They are requiring rush-hour car pooling and limiting parking-lot spaces. California has about 26 million registered autos and that's not counting those unregistered. Approximately 1.8 million people have jobs nationwide in auto manufacturing or selling. What happens to the UAW pensions if auto companies fail? All the restrictions might result in less wear and tear on our roads and cleaner air, but what about the decline in revenue and need for government assistance if the auto industry is harmed? Car dealers are the biggest source of sales taxes. Licenses fees in Los Angeles county are close to $400 million a year. Excise tax revenue comes from luxury cars and tires and then the gasoline tax itself comes to about 30 cents a gallon in most jurisdictions.

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Alternative #89 Alternative #89

Alternative to obtaining so many permits and licenses.
Goal: To have as free a society as possible with opportunity for everyone to
fulfill their potential without unnecessary restrictions.

How: Cut back on the number of permits and licenses required by government
of its citizens.

Practical Benefits:
1 - More people will be able to make a living and provide for themselves and their families. 2 - Consumers will learn to rely on their own judgement or the judgment of self-policing industries or private evaluators or better still the reputation of those offering goods and services before purchasing them where the purveyor has not be licensed or tested by an agency of the state. 3 - Goods and services can be offered to consumers at a cheaper price because of the time, energy and money saved in going through endless, sometimes moronic and needless government red tape.

Soft Power Benefits:
1 - People will learn to depend on their own judgment and realize that they are responsible for their own decisions and welfare. 2 - Business entities will realize that in order to prosper it is not enough to gain approval from some amorphous government agency but that they must perform well to win the trust of the consumer and to develop a reputation which will become the determining factor in success or failure.

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Background for Alternative #89
Most of us take licensing and permits for granted but to me the concept is un-american. Most forms of licensing are continuations of the old guild and mercantile system that our founding fathers purposely guarded against. ! Regulating occupations through fees an^examinations is not protection for the consumer as is Maimed, but is protection from competition the established practitioners. Regulations limit the consumers' choice, raise prices, depriving the poor of adequate service, and restrict opportunities for newcomers—all without any proven improvement in quality and safety. A bacterium was developed in 1982 to prevent frost damage on crops but it wasn't even tested for five years. Under the Toxic Substances Control Act a company must obtain approval from the Environmental Protection Agency before manufacturing or marketing a new chemical but old chemicals and pesticides were grandfathered in. We have a situation with no regulation as far as selective breeding of plants and animals is concerned but genetic engineering—which achieves identical results far more economically and precisely by using recombinant DNA—is regulated with obsessive zeal by all kinds of federal and state agencies. The inertia of government bureaucracy weighs in favor of the old and against the new. Rational risk comparisons are no longer possible in today's fearful climate where safety is always given as justification for denial or delay. I've heard there are fewer and fewer small investors in the market and that the institution managers don't require assistance or the watch-dogging provided by the old myriad of overseers. Small investors have been leaving the stock market for the last two decades and have been investing in large investment funds or pension plans. The regulatory agencies were originally created to protect the small individual investor and their number and complexity rival any Soviet bureaucracy: the Securities Exchange Commission to guard against fraud and insider information, the New York Stock Exchange to oversee sales practices and capital adequacy, the Federal Reserve Board to regulate margin credit, the Chicago Board Options Exchange and Municipal Securities Rulemaking Board, the Commodities Futures Trading Commission, the individual state regulations over penny stocks and individual brokers. The regulatory expenses of all these agencies plus the compliance costs of the brokerage firms totaled almost $1 billion just for 1990. A New York lawyer figured the cost was over $ 10,000 a year to regulate each of the approximately 80,000 active stock brokers in the country.

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Alternative #90

Alternative to uninformed assumptions about practices in other countries in relation to our own practices.
Goal: To gain a more objective outlook on business practices in the United States compared with other countries. How: Keep an open mind and try to read articles and books from a perspective different than the one most commonly touted in the popular media. Practical Benefits: 1 - When objective facts are available for analysis better decisions can be made as to the causes of our problems. 2 - A more informed electorate will force our policy makers to be accountable for decisions and fewer will be made in a rash manner.

Soft Power Benefits: 1 - Citizens will become less dependent on philosopher kings and more able to determine the lightness and wrongness of a course of action themselves. 2 - Government will become the servant not the ruler of free men as it was meant to be. 3 - Citizens will develop strength of will, mind and character asthey take on more responsibility for themselves and their loved ones and leave less to politicians and bureaucrats.

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Background for Alternative #90
The Japanese live under a law designed to protect small retailers from large. The large retailers must apply to the government for permission to build a new store, expand an existing store, and even to change their hours of operation. Proposals for stores larger than 1,500 feet are first submitted to MITT (Ministry of International Trade and Industry) which only approves the plans if local retailers unanimously agree—which of course they don't because who wants to encourage their competitor? It generally takes years and years to get anything done in Japan. Of the 1.6 million retailers, 83 percent employ less than five workers. The Japanese get around the letter of the law by opening several small stores side by side, all under the 500 square-meter limit which requires permission. In this country we have stereotyped the Japanese as rather passive and law abiding. The behavior you described sounds very much like the type of games we play with our own law makers. In 1987 the government privatized the money-losing Japan National Railway and divided it into six smaller private entities which diversified their activities so as not to be totally dependent on the railway for revenue. The government railroad was heavily overstaffed but 40,000 old employees were retrained for jobs at hotels, construction outfits, restaurants, retail stores, landscaping and so forth. More than a thousand workers were displaced but they were put to work at the subsidiaries of one of the six smaller companies. The new companies were making profits in three or four years and one of the largest of the new companies is developing a magnetically levitated train that can travel at speeds of 320 mph.

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Alternative #91

Alternative to government programs that protect citizens from themselves looking after citizens "for their own good".

Goal: To allow people the freedom to do what they want to do as longas it does not cause direct observable harm to an individual.

How: 1 - Gradually transfer responsibility for adhering to many of the laws and regulations enacted to protect society to the persons or industries the laws were meant to monitor. 2 - Society would not be harmed in its collective pocketbook if it did not undertake to provide services which cost taxpayers dollars and would-be-violators their freedom.

Practical Benefits: 1 - We will save the expense of many useless regulatory agencies. 2 - We will save the expense of attempting to enforce these laws and regulations.

Soft Power Benefits: 1 - We will remove one more enticement to dishonesty as people will no longer have to circumvent a law they have no intention of honoring. 2 - We will show we respect thes right of self-determination.

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Background for Alternative #91
California has a new law requiring motorcyclists to wear helmets. I loved the rally that was held in protest on Mother's Day, 1991 to point out to legislators that motorcycle riders already have mothers and don't need another one in Sacramento. Protestors carried saying things right up your alley like, "If You Ride, You Should Decide", "Land of the Free ----------Let's Keep It That Way" and "My Body—My Decision". This is an issue that has been debated for years only this time there was no George Deukmejian in the Governor's seat to deflect legislative action with a veto. Renowned economist, Milton Friedman is another California who is bound to be disappointed with the new law. I remember years ago Ralph Nader and Milton Friedman squaring off with Professor Friedman championing the individual's freedom of choice and Mr. Nader insisting those who ride motorcycles be required to wear helmets in order to reduce their chance of injury. He reasoned that since taxpayers foot the bill for public ambulances, highway patrol and emergency medical facilities, they have the right to make such a demand. The stupidity of refusing to wear a helmet was not to be tolerated in Mr. Nader's protective society. Alexis de Tocqueville wrote: A government that provides total security for its people, foresees and supplies their necessities, manages their principal concerns, directs their industry, regulates the descent of property and subdivides their inheritance— what remains but to spare them all the care of thinking, and all the trouble of living.

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Alternative #92
Alternative to government subsidized transportation systems.
Goal: To have the most efficient means of transportation available to citizens,
avoiding duplication and ensuring cost-effective choices.

How:
1 - The simplest way to privatize transit would be to let the public systems declare bankruptcy. This would void all existing labor agreements and allow private operators to purchase the bankrupt systems and start providing services in a competitive environment. 2 - Separate the role of policy-maker from provider. 3 - End monopolies. 4 - Encourage new innovations and the greatest variety possible. 5 - Get creative by enticing investors with tax shenanigans (as long as we're going to have them anyway) like accelerated depreciation, investment tax credits and industrial development bonds.

Practical Benefits: Allowing the private sector to compete would reduce cost, provide more variety and introduce innovations. Soft Power Benefits: 1 - Sense of fairness is reestablished when die government stops competing against the private sector. 2 - People regain enthusiasm for saving and carefully managing their own assets when the government doesn't throw their tax dollars around so carelessly. 3 - People have some hope of getting ahead and a greater sense of empowerment when government is less intrusive.

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Background for Alternative #92
California boasts more private-sector involvement in transit than any other state and it has a pretty good system, as public systems go. The state gives the counties funds and when a county reaches a specified level of transit service, any state funds left over can be used for streets and highways. This gives the individual counties an incentive to cut transit costs by using private contractors. Public systems cannot even pay for themselves. Why does it take a crew of 77 men to remove 344 miles of track in the same amount of time and under the same conditions that Amtrak, with a crew of 129 can remove less than 72 miles? Why do municipal mass-transit systems require, on average, that sixty percent of their operating expenses be covered by taxpayer subsidies? Public transit in this country carried 17.2 billion passengers annually in the 1950s and less than 9 billion by 1961. To survive, bus companies knew what they had to do. They had to raise fares, adopt distance-based pricing and eliminate low-ridership routes. But guess what? The federal government prevented this with more regulations and price controls forcing 194 companies out of business between 1954 and 1963 and leaving the rest as easy prey for takeovers by state and local government. I remember the privately operated Key System in the San Francisco bay area in the fifties. I also recall the federal government passing some legislation in the mid-sixties which really brought about a lot of changes. Innovation and flexibility may be the key to success. In Phoenix, Arizona, the city sets routes and determines quality and frequency of service, but private operators save 62 percent over what it would cost the city to provide the service. The city claims another savings of $700,000 a year by substituting taxis for its regular Sunday fixed-route services. The Tidewater Regional Transit Authority of Virginia is able to manage public transportation services in a five-city area without tax subsidies. The innovation here was to encourage the formation of private citizen-operated-vanpool services carrying about 1,000 persons to and from work. If the authority had provided instead of managed the service they would have needed to buy 25 buses and the taxpayers would have had to come up with more than $3 million a year. Not only that, they found private companies could provide better vehicle maintenance and higher labor productivity. In 1985 Dallas contracted with private companies; one to operate 204 buses, another to maintain the buses and a third to manage the system. Westchester County, New York has eleven private companies running 323 buses a day. But even with the county setting fares and schedules, operation costs a few years ago were $3.26 a mile. This compared favorably to the

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$4.27 a mile operating costs for a neighboring publicly operated system. Employees belonged to the same union and therefore received almost identical salary and benefits. Both systems also carried about the same number of passengers, yet privately operated Westchester needed $9.1 million in local tax subsidies compared to $17.8 million needed by the publicly operated system. One of Westchester's innovations was to locate a private company to finance, install and maintain bus-passenger shelters at 252 locations, free of charge to the county because it make its money by selling advertising space on two panels of each shelter. The Reagan administration tried to encourage more private involvement. The FY 1987 budget proposed combining mass-transit capital funds and a portion of federal aid to highways into one urban-mobility block grant. The idea was to give local officials flexibility in determining whether to invest in bridges and highways, or to buy buses or build rail lines. The hope was to avoid duplication and force cost-effective infrastructure choices. There is no end to the diverse solutions Americans can bring to problems. Chicago commuters proved that American ingenuity hadn't died when they responded to a transit strike and a fare increase a few years ago with car pools, shared vans, chartered buses and taxis. People who cannot even afford to ride Amtrak subsidize it through their taxes. Those who can afford the price of a subsidized ticket and who make the greatest use of the service, members of congress for instance, have incomes far above the average taxpayer. Amtrak's revenues barely coverits daily operating costs, let alone provide funds for maintenance. Taxpayers have subsidized Amtrak to the tune of about $800 million a year. Between 1972 and 1987 $16 billion in taxes went into it although it is promoted as self-sufficient. Congress even gave it an interest-free 99-year renewable loan which, if counted, could make the losses twice as large. Three times a week the Cardinal, runs between D.C. and Chicago with half its seats empty. Since it goes through West Virginia, Senator Robert Byrd has seen that the service has not been cut even though the route fads to meet the minimum-ridership requirements Congress itself mandated. For too long we have allowed government to stifle innovation in transportation systems with its web of regulations. As Randall Fitzgerald has written in his highly recommended book When Government Goes Private, government has effectively "encouraged waste and duplication, created massive boondoggles and driven deficits up and ridership down." I know I'm beginning to sound like a parrot with my endless recommendations for a free-market with lots of competition, but by golly it works. We know it works! Other nations see that it works and are coming around to it. Why not here?

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Alternative #93
Alternative to sanctioning taxicab monopolies.
Goal: To allow citizens to choose the most convenient means of transportation
at the lowest possible cost from among the greatest variety possible.

How: Realize that setting rates and selling "taxi medallions" is government
sanctioned price fixing and government support of a monopoly—no matter the guise. Reform!

Practical Benefits:
If private companies, groups and individuals were allowed to devise tailor-made solutions to the transportation problems of their constituents the public would be well served and some-new businesses would be established and innovations would emerge—innovations that otherwise might never see the light of day.

Soft Power Benefits:
1 - Sense of fairness is reestablished when the government stops competing against the private sector. 2 - People should regain enthusiasm for saving and carefully managing their own assets when the government stops throwing their tax dollars around so carelessly. 3 - People have some hope of getting ahead and a greater sense of empowerment when government is less intrusive.

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Background for Alternative #93
In the late 19th century a single street railway company was granted a franchise to operate, creating a monopoly in virtually every American city. In 1914 the jitney bus came on the scene. Jitney is a slang term for a nickle; then the price of a ride. The jitney was a modified model T Ford which carried up to a dozen passengers. It got its start in Los Angeles by offering higher speeds and more flexible routes than the street railway system. Jitneys became too popular for their own good. They began to take business from the streetcars— the same streetcars that city governments had come to depend on for tax revenues. Jitney's were outlawed and competition in urban transportation almost disappeared. For about twenty-five years streetcars had the urban transportation market pretty much to themselves. But by 1944 strictly regulated bus lines were carrying more passengers than streetcars. And then taxis came along and were strictly regulated as to number, kind of service they were allowed to provide, fares charged, number and kind of passengers they could serve. But taxi companies welcomed the regulations which assured them of monopoly privileges where fares were stabilized and parttime drivers were forbidden. Only the consumers were harmed. In New York City the price of a taxi medallion, needed to do business, reached $100,000 way back in 1985. Setting taxi rates is price fixing under the guise that regulations ensure public safety and so forth. But the real reason is to protect taxi operators from competition and gain revenue for the local government. Nevertheless jitneys are coming back in various disguises. Commuter vans have multiplied across the country in recent years, providing some of the flexibility and with about the same capacity of the old jitneys. In 1982 Indianapolis allowed the operation of seven 14-passenger jitney vans. San Diego in 1983 placed 326 jitneys in service. Homeowner associations have started their own transportation services to supplement or avoid the local public-transit systems. In some places apartment complexes charge each resident a small annual fee and operate shuttle buses. The El Segundo Employers Association in Los Angeles has van pools serving local neighborhoods which transport the 65,000 employees of participating firms. Alfredo Santos was prohibited from operating a jitney service in Houston by a sixty-eight year old law designed to protect streetcars. Mr. Santos had a five mile route through a poor Hispanic area where public transportation was inadequate and many residents didn't have automobiles. For one dollar he would pickup and drop off passengers anywhere along the route. I've heard of other jitneys that offer the added convenience of door to door service.

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Alterna^^^ #94
Alternative to enduring our current airline problems.
Goal: As safe, efficient and inexpensive airline travel as possible. How:
1 - Not re-regulation! Encourage competition via open markets. 2 - Consider private ownership of more airports. 3 - If government owned consider discontinuing the "majority in interest" clause in current airport contracts which give certain airlines the ability to prevent airport expansion by restricting the use of fees. 4 - Consider auctioning landing slots at airports, 5 - Consider pricing landing slots based on the time of day. 6 - Discourage long leases. 7 - Base service charges closer to the true cost per plane. 8 - Separate FAA's regulatory functions from its other roles. 9 - Consider privatizing the air-traffic control system.

Practical Benefits:
1 - Consumers could save money without sacrificing safety. 2 - Less flight delays with more airports. 3 - Newcomers would have a chance if shorter leases were used.

Soft Power Benefits:
1 - Airlines will realize that in order to prosper they can no longer manipulate the bureaucracy but they must perform well to win the trust of the consumer. Reputation and service will be re established as the determining factor in success or failure. 2 - Consumers and competitors will feel more fairly treated.

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Background for Alternative #94
There's no doubt airline deregulation in 1978 increased air traffic significantly, but look at the bright side. According to a 1990 study by the Brookings Institution, consumers save $6 billion a year without sacrificing safety. Re-regulating the airlines would hurt the vast majority of the population, especially the young and die old who travel at reduced fares, and would only help a small elite group. If you consider business and leisure travel together you will find that tickets today are as cheap as at any time in the last fifteen years and that besides there are more scheduling options. There may be more flight delays today, but that is because there are too few airports and more people traveling thanks to deregulation bringing tickets within the reach of the average citizen. All in all consumers are better off and there is as much competition among airlines today than before deregulation took place in 1978. In 1977 United Airlines had a 14.5 percent share of the market; the largest share. In 1991 Texas Air, without Eastern, held the largest share of the market, which amounted to 14 percent. In 1977 the three largest airlines together controlled 40 percent of the market and the three largest controlled 44 percent in 1988. At twenty-one of the fifty largest airports, concentration actually decreased between 1977 and 1987. It would seem that passengers exercise more choice than commonly supposed. We need to encourage competition via open markets for starters. Now there are legal barriers to non-U.S. airlines. Not only are foreign airlines prevented from competing with American airliners within the U.S., but even on the routes they have been awarded, they are often forced to fly the final leg of the journey without being allowed to pickup new passengers. For instance on British Airway's London to Detroit route via New York City, British Airways is not allowed to carry passengers from New York City to Detroit but has to fly that final leg almost empty. If it could pick up New York to Detroit fares, the economics would result in lower prices for American passengers. Also it is likely Britain and other countries would reciprocate by allowing American airlines to offer service between their cities on a competitive basis. With air travel estimated to increase by 72 percent by the end of the century there is bound to be overcrowding and delays at airports unless more are built. The last major airport project in this country was the Dallas-Ft. Worth expansion in 1974. Noise and environmental concerns have curtailed expansion but so has government finances. That's why it makes sense to consider private ownership and management of airports here in the United States.

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At the very least the "majority in interest" clause which is found in current airport contracts should be discontinued. It gives those airlines with die largest concentration at an airport the ability to restrict the use of fees and prevent their use for airport expansion. The shortage of landing slots and gates at some airports could be corrected by auctioning the slots instead of continuing with restrictions by the federal government as is currently the practice. FAA is foolishly prevented by Congress from pricing landing slots based on the time of day. If slots were priced according to the time of day, it would give airport users an incentive to economize and encourage airlines to operate only high-priority flights into major airports during peak user-times. This kind of market pricing would reduce airline landing and departure delays. Now airline charges are calculated by aircraft weight. As for the gates, long leases should be discouraged to allow newcomers a chance, and the fees should vary with the most popular times costing more and the off-hours being offered at bargain prices to make them more palatable. Congress sets aviation user taxes and congress oversees the aviation trust fund. In late 1986 the aviation trust fund had a $4.3 billion surplus; money that Congress refused to spend on needed aviation improvements so it could use the fund as part of general revenues to make the federal deficit appear smaller. Fuel and ticket taxes represent severe pricing inequities that encourage airtraffic congestion. It costs just as much to guide a Learjet carrying two or three people as it does to guide a jumbo DC-10, yet the Learjet pays a tiny fraction of what the DC-10 must pay. Users must face the true cost of the service, that is the only way supply can meet demand. Perhaps FAA's regulatory functions should be separated from its other roles. In 1935 the first air-traffic-control system was privately operated with charges divided proportionately among airlines according to their airport use. A private firm provided controllers to the military in Vietnam, successfully. Switzerland uses a private nonprofit corporation to operate its air-traffic-control system which is funded by user fees. Example: In the eighties, Midwest ATC Services of Kansas, began operating the tower in Farmington New Mexico for $99,000 a year contrasted with a cost of $287,000 a year under FAA operation. After the 1981 air traffic controller strike, 15 towers reopened nationwide under private management and their costs dropped by one-third. In 1969 the air-traffic controllers' union suggested resigning en masse in order to set up a corporation and then contract with the government to operate its system.

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Alternative #95
Alternative to heavily subsidized mass transit systems.
Goal: To use taxpayer dollars for what people want instead of what officials
think they should want. To prioritze wants!

How:
1 - Make transit systems conform to the market. 2 - Stop local officials from looking on transit subsidies as an entitlement.

Practical Benefits:
Expensive systems that cannot be justified will not be built.

Soft Power Benefits:
1 - More accountability from operators of transit systems once government subsidies are removed. 2 - Tax payers should feel less "ripped off!

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Background for Alternative #95
The Urban Mass Transportation Act of 1964, known without affection as UMTA, provided federal grants to enable cities to buy their local transit companies. Private monopolies became public monopolies and before long over 90 percent of transportation became government owned and operated. It looks like socialism, it sounds like socialism and it sure behaves like socialism. The nationwide transit deficit which amounted to $880,000 in 1963 climbed above half a billion dollars in less than a decade. Unfortunately more help was on the way and UMTA added federal subsidies which worsened the problem so that the annual deficit hit $2 billion in 1978 and went on to triple to $6 billion by 1985. Everything was justified by the state's acknowledgment of an obligation to provide transportation for the poor who, at least in the fifties, often didn't own an automobile. The irony is that a 1983 study revealed that only 23 percent of operating subsidies benefited persons below the poverty level, or about a 12-cent subsidy per trip for poor riders, compared to a 20-cent subsidy for persons with annual incomes over $50,000. The heavily subsidized subway and commuter rail systems reach out into the suburbs and are used most by upper-income persons. If the poor are to be subsidized, it would be cheaper and fairer to use vouchers or another form of direct-user subsidy than to have a low-fare structure that would subsidize all passengers, those able to pay and those not. However the subsidies allowed an escalation in wages for local transit workers. 73 percent of the federal subsidies between 1970-1980 went for increased employee compensation where wages rose faster than labor costs in comparable occupations and faster than other public-sector job categories. Entry level stock clerks earning $30,000 their first year with the Washington D.C. Metro system which meant the wage of transit stock clerks was substantially more than firstyear policemen and firemen who, I assume you agree, have more responsibility and training. In many cities, transit bus drivers were earning more than $35,500 and token sellers in New York City were making $21,888/year in 1978, while higher skilled tellers in nearby banks were making under $12,000. The wage explosion can be traced directly to Section 13c of the UMTA. That section protects local transit employees from any adverse effects of programs involving federal capital or operating subsidies. This, in effect, gave unions a veto power over ad local transit decisions. It is theoretically possible for transit systems to use cheaper part-time drivers during the peak ridership periods and save the high operating costs

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of employing more full time drivers. But not surprisingly unions have prevented contracting-out of any services, or die hiring of part-time drivers and anything else that might save labor and cut costs. Transit systems were forced to turn to larger vehicles in order to get as much out of each driver as possible. But having them drive one 60-seat bus instead of three 20-seat buses means the frequency of service has to decline, and with that added inconvenience, ridership dropped even further. Studies have found that riders are twice as responsive to convenient service, like more frequent scheduling, than they are to lower fares. Apparently they will leave their cars for convenient service, they will pay for convenient service but government laws and regulations prevents the willing and able private sector from providing convenient service. Not only that, Uncle Sam's subsidies relieve mass transit operators from accountability. A report by the Joint Center for Urban Mobility Research found federal subsidies encouraged city officials to expand services into low-density areas and do a lot of other things without weighing the economic consequences. Miami residents turned down a penny increase in their sales tax to help pay for their Metrorail by a vote of almost two-to-one. Despite this repudiation by the resident-voters, local officials built the subway anyway, using mostly federal funds. There was no local commitment. In 1973 Detroit estimated the cost of a 2.9 mile elevated rail "People Mover" at $30 million. By 1979 that figure had reached $110 million. In 1981 the Reagan administration attempted to withdraw federal participation in the "People Mover" only to have Congress appropriate the money anyway. By 1986 the costs had risen to $210 million. Detroit had a $50 million annual transit deficit already with no money in its budget to operate a "People Mover". With the federal government picking up most of the capital expenses, projects that couldn't be justified, and clearly would have been stopped except for Uncle Sam's piggy bank, were built. Some local officials have come to regard future transit funding as an entitlement in the league with Social Security. The Urban Mass Transportation Administration (UMTA) has given local transit systems nearly $50 billion over 20 years. Unfortunately, years of federal operating subsidies encouraged inefficiency, high operating costs and further insulated public-transit monopolies from the cost-effectiveness a healthy dose of private-sector competition would bring.

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Alterna^^^ #96

Alternative to business-academia-government partnerships.
Goal: To educate persons of all ages, train or retrain workers, support and share
research and development information and to generally guide the country in developing key industries— but stopping short of an outright industrial policy.

How:
1 - Realize that government is an unequal partner who always has final say—whose word is law. With such a partner there is no flexibility, there is no equality. 2 - Risk-takers are the primary source of the advancement of knowledge. Bureaucrats are not risk-takers, therefore they tend to be a brake on progress. Our culture allows entrepreneurs to fail. 3 - The primary barriers to entrepreneurism are controls on the start-up—preventative regulations, like licenses and zoning restrictions.

Practical Benefits:
Getting rid of restrictive regulations will allow more business start ups and other creative endeavors to proceed.

Soft Power Benefits:
Freedom , flexibility, creativity, optimism, responsibility, self-control will flourish.

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Background for Alternative #96
In March 1991, the Council on Competitiveness, a DC coalition of business, labor and academia published the first private enterprise consensus on how the U.S. is doing in technologies that drive its industrial performance. The two-year study identified 94 technologies deemed essential to the future of most industries and found the USA was weak in 33 of the categories. In the fall of 1991 NTI—National Technology Initiative—was born in the Commerce Department. This is another bridge between business, academia and government. Three symposiums, hosted by the U.S. Department of Commerce were held in February and March 1992 where business was given advice and examples of how to market new technology Sematech was started in 1987 and gets half of its annual budget, $100 million, from the federal government. Sematech conducts research on methods, materials and equipment for making advanced semiconductors. According to T. J. Rodgers, founder of Cypress Semiconductor in San Jose, a company that produces specialized chips, Sematech is an unnecessary boondoggle. Stanford's Professor Brian Arthur and his colleagues have developed what one might call a new theory of high-tech economics. It suggests that high-tech industries don't respond to free markets the way commodities do. Usually, after a certain point, extra investment yields diminishing returns. Cheaper costs stimulate demand which leads to even cheaper costs and so forth. The new idea is that the demand for knowledge-based technologies is not finite in the sense that commodities are. Getting a jump on die market or having the most capital to invest generally determines market share in the high-tech field. It is no longer enough to play the old game of being best. The concept of "increasing returns" maintains that the opposite may be true in high-tech industries. Although large investments are needed to produce semiconductors and computers, for instance, per-unit production costs fall as output rises. In fact it seems quite probable that carefully timed intervention by government is not only desirable, but may be crucial in maintaining a nation's competitiveness in the global marketplace where highly technical products abound. Isabell Sawhill of the Urban Institute located in the District of Columbia, says public investment and private investment are complementary. She believes it's impossible to achieve good private returns without good public investment. Business Week says "Economic distress has forced government and business to expand their social roles before." They claim we were saved in the thirties by the sacrifice of the free market. However it was the

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activity generated by the second world war that pulled us out of depression, not the sacrifice of the free market, a mistake this country still hasn't recovered from, in my opinion. In his 1965 book, Unsafe at Any Speed, Ralph Nader concluded that corporate greed was responsible for any number of ills and that the solution was government intervention. He didn't mention a few facts, which Hoover Institution economist Thomas Sowell brought to the public's attention, namely that between 1926 and 1947 the greedy automotive industry was able to cut fatality rates per passenger-mile in half while increasing speed. In 1956 the death rate was further reduced to a mere third of what it had been in 1926 and this before the National Highway Transportation Administration had taken charge. Much of government's interference in the private business sector over the past fifty years has done more harm than good. Unfortunately it has become fashionable to let management take the blame for a lot of government's mistakes. Government manipulated the auto industry via the Corporate Average Fuel Economy (CAFE) standards, which it enacted in 1975. It was meant to conserve gasoline and reduce pollution but it also reduced the availability of large cars. After 1981 the real cost of gasoline fell by more than thirty percent which increased the demand for larger, less fuel-efficient cars. According to one point of view if citizens want clean air and large cars there is a market price to pay. Cleaning up pollution via the gasoline tax makes sense. The larger and more polluting the car the more gasoline consumption and therefor the larger share of clean-up costs. But that overlooks the country's desire to conserve fuel. As Mr. Sowell pointed out, everyone seems to overlook the fact that market pressures, by themselves, had already resulted in some cars that got 20 miles per gallon in 1978 when congress mandated 18 miles per gallon. Lighter cars get more miles per gallon but they also increase the risk of injury. Government mandated safer and more fuel efficient cars. The average weight of an automobile was reduced by 23 percent since 1974, which translated to approximately 2,000 more deaths over the life of each model year's fleet of automobiles. Thomas Sowell called this trading blood for oil and objected strongly to such decisions being taken out of the marketplace and out of the hands of the people and put into the hands of politicians. He pointed to the ridiculous and seldom mentioned fact that demands for higher gasoline mileage coincided with increases in the world's known petroleum reserves.

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Blanket and costly requirements to reduce automobile emissions have been imposed on all cars, even though just 10% of these cars produce roughly half of all the emissions. As the price of automobiles has been driven up by changes demanded by politicians, rather than consumers, people have waited longer to replace their old cars, adding to safety problems, emission problems and the economic problems of the industry. In a 1988 speech Governor Clinton saw a labor shortage by 1995 which could bid up wages, an increase in manufacturing productivity which could transfer into other sectors in the economy and a lower dollar to spur exports. The biggest problem was our waste of time, money and human capacity. He went over our high teen pregnancy rate, high infant mortality, high number of kids dropping out of school, high drug abuse and high adult illiteracy. He warned that we will have to import workers from other parts of the world to perform the high paying jobs. Governor Clinton accepted that our structural federal deficit will mean fewer government resources and that state and local governments and most of ad the private sector will have to focus on our social and economic problems. I found myself agreeing with the Governor up to this point, but then he began to find all kinds of things for the federal government to do, which I did not, and do not feel is the proper role for government. He proposed panels, task forces and advisory boards to deal with quality, productivity, research and development, targeted investments—ad things that are best left to the business of business and not run by smug politicians, professors and bureaucrats who have never had to make a product or improve a technology in their lives. Some things the Governor advocated were absolutely wrong-headed in my opinion. Using public money—the majority of taxes are from middle class workers, and he freely admits his programs mean higher taxes—he wants every state to invest seed capital in small high technology businesses. Every state should set aside a portion of its pension fund for reinvestment in the state. Arkansas has a development bank. This is not a legitimate role for government. Let Bill Clinton get out of government and I will applaud his going about and doing these good things with his own money or money voluntarily risked by private investors but not taken from taxpayers. Investment banking is not government business! Such elitist advisory or partnership programs will encourage a class system far more harmful to America's character than any distinction between rich and poor or labor and management. The peril of establishing a gulf between the ruling and the ruled cannot be overemphasized!

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Alternative #97

Alternative to tighter restrictions on immigration.
Goal: A bigger economic pie for all people. How:
1 - Recognize that new immigrants provide more jobs with their purchasing power than they take. 2 - Recognize that immigrants are generally young and healthy and use less welfare services and other subsidies given to the aged in our society. 3 - Recognize that about 46% of immigrants are in the early working and contributing years (ages 20-39) whereas the corresponding figure is 26% for the native laborforce. 4 - Recognize that since much of the construction of new schools and other pubic facilities is paid for by bonds and taxes, immigrants pay enough "rent" on such facilities to cover their cost. 5 - Recognize that immigrants generally pay more taxes than native families, contributing on average $2,500 annually, enabling a native breadwinner to retire two years earlier than otherwise. Immigration lightens the Social Security burden of the aging U.S. population. The proportion of immigrants with post-graduate education is far higher than the average of the native labor force. The foreign born population in the United States is only six percent, less than half of what it used to be in this country.

Practical Benefits:
The nation will prosper.

Soft Power Benefits:
A sense of fairness, justice and brotherhood will prevail when all people are recognized for their abilities and given an opportunity to be the best that they can be.

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Background for Alternative #97
Many people see the whole issue of immigration as central to our competitiveness in the world. Most people, especially during a recession and especially in a border state like California, are anxious to curtail immigration. In fact immigrants have recently become the scapegoat for a lot of our domestic problems. There are always burdens with more people in the very short run but it is not long before these people give back more than they take. The average immigrant family pays more in taxes and uses less welfare services than does the average native family. Immigrants usually arrive when they are young, strong and producing. Let's talk about Senator Simpson, co-sponsor of the recent overhaul of our immigration policy. In October, 1990, he wanted an unbreakable quota of 630,000 immigrants a year. The House bill at that time would have permitted 775,000 (up from 540,000) and made the number flexible. Senator Simpson wanted technical provisions that could reduce immigration from Mexico and the Philippines. He also proposed I. D. cards, good for all fifty states, as a means to control illegal immigration. The Reagan administration opposed the concept of a national identity card, partly because a national I. D. would make it easier for people to be tracked by the authorities. It is highly unlikely that it would be used just for employment purposes. It could be used to deal with terrorism, gun control, civil disturbances, tax evasion, draft evasion, failure to pay child support, voter fraud, welfare fraud, to track spies, communicable diseases and multiple drug prescriptions. It would be useful to government but a major threat to privacy. The House bill that actually passed congress called for 700,000 new immigrants in 1992,1993,1994 and then 675,000 each year thereafter. The I.D. cards weren't part of the legislation. But in the interest of both compliance and cost control, employers are likely to become a major constituency for a simplified means of identification -----------such as a national identity card. The 1990 revisions to the new immigration law shrank visas for low-skilled workers from 18,000 to 10,000 per year and increased the number of visas based on job skills dramatically from 54,000 to 140,000. The desire to choose potential immigrants according to their skills is based on the belief that the more highly skilled immigrants are more likely to make more positive contributions to the country. However it is impossible to know what person and what skills are going to make the greatest contributions to the nation. Ten thousand visas are available to investor immigrants who will put $1 million into a new enterprise that will create jobs for Americans. Three thousand of these visas are set aside for

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rural or distressed areas and use 1.5 times die local unemployment rate for eligibility. In these cases the threshold is $500,000 instead of $1 million. This is an innovative way to pump large sums of money into developing this country without costing the American taxpayer anything. Relaxing immigration controls is necessary in order to ensure the dynamics of the free market which is fostered by a succession of hungry immigrants coming in and re-energizing the system. Immigrants are natural risk-takers and voluntary immigration has been one of this nation's greatest strengths. Immigrants bring with them new talent, energy, determination and most of all hope; all responsible for this nations past successes. High tech companies plan to import thousands of highly skilled foreign workers. The idea is to support innovation and growth. There is a provision that employers attest that no equally capable American could be found to do the job at comparable pay. But restaurants, hotels, poultry processing plants, health care institutions and at-home child care rely on low skilled immigrant workers and these jobs in the economy will go begging. Current immigration policy is an example of well meaning but detrimental micromanagement. But more than one "philosopher king" disagrees. A Representative from Connecticut congratulated himself and his congressional colleagues saying, "We've taken an appropriately moderate course in not cutting off completely unskilled workers, but focusing most of the visas on people with skills." But skilled workers are affected too. In 1990 there was no cap on the total number of skilled workers that employers could import on temporary visas. However the revised law puts a cap of 65,000 on such workers per year. This is one more example of government not trusting citizens. What employer would import someone for a job if a willing worker lived down the street? The provision you are referring to is hard to prove, but the real question, as I see it, is whether citizens should have to prove it. Where's the trust? I find this Big Brother mentality offensive. The attestation requirement muddies what should be a clear and predictable law and it should be removed. The United States could justifiably treat Mexico and Canada differently from other countries when it comes to immigration policy. Providing Mexican citizens greater access to our labor markets may be something we can negotiate in return for more open movement of capital. The welfare state has made us wary of immigration that has benefited this country in the past. Regulations whipsaw businesses between immigration laws that penalize them for demanding excessive documentation from possibly foreign job applicants, and laws that require documentation.

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From 1901 to 1910 this country welcomed 8.8 million immigrants. In the 1980s, legal immigrants numbered 5.9 million and, according to the 1980 census, the undocumented resident population in the United States amounted to between 2.5 to 3.5 million—making immigration in the eighties almost the same as in the first decade of the twentieth century. The USA has welcomed more immigrants since 1970 than the rest of the entire world. However while prior generations of immigrants realized they had to learn English quickly as a matter of survival, many Hispanics now maintain that the Spanish language is inseparable from their ethnic and cultural identity and seek to remain bilingual, if not primarily Spanish-speaking, for life. I would like to try and influence these new immigrants to identify as Americans. Not Hispanic Americans, not female Americans, not rich or poor Americans, not elderly Americans, not Catholic or agnostic Americans ------- just Americans who speak English because that is what Americans speak. They supposedly came to this country of their own free will and if they wish to adopt this country as their own, for the good of the country, for their own good and the good of their children, they should assimilate. But unlike the European immigrants of die 1900s, new immigrants don't want to assimilate—in Los Angeles you can find many third generation residents who speak only Spanish. Los Angeles: Capital of the Third World by David Rieff is about the effects of immigration—traffic, water shortages, over-building, poor education etc. The author views immigration from a different prospective, pointing out, for example, that there are more non-tax-paying inhabitants in Los Angeles than there are taxpayers but that they all use public services. He refers to Los Angeles as the home of the illegal alien. You be the judge!

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Alternative #98

Alternative to protectionist policies.
Goal: Free, fair and prosperous world trade with a level playing field for U.S.
companies

How:
1 - Add teeth to the enforcement portion of our trade policies to ensure reciprocal treatment from our trading partners. 2 - Develop a North American free trade zone with Canada and Mexico. 3 - Encourage the two-thirds of U.S. companies that could be, but aren't exporting, to do so. 4 - Some might call the following a protectionist policy but I call it a reciprocal policy. Restrict the activities in this country of foreign banks who refuse to abide by a principle called "national treatment" which means that foreign firms must have the same rights given domestic firms. Japan doesn't abide by it. American firms must be accorded fair treatment from the countries whose firms we treat fairly here.

Practical Benefits:
Freer and fairer trade is good for the entire world. Abolishing trade barriers with Mexico would unleash a flood of new investment that would create thousands of jobs on both sides of the border and curb the flow of illegals. A University of Maryland study predicts that our own economy would gain 44,500 jobs in the first five years of such a freetrade pact.

Soft Power Benefits:
Goodwill on a global basis and the possibility for all peoples to fulfill their potential. Trade increases the standard of living of all who engage in it. The notion of fairness permeates the society and makes all citizens feel more confident.

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Background for Alternative #98
Texas Senator Lloyd Bentsen told a meeting of the Democratic Leadership Council in March 1989 that our total exports were growing at half the growth rate of the 1970s. He said we simply did not have enough trade and that we were engaging in one fourth of what we did in the 1960s. He claimed that in 1988 the Pacific Rim and Europeans paid $100 million to lobbyist to influence that year's mammoth trade legislation. In reality during the 1980s the USA increased its share of global exports, manufacturing output and GNP. When Clayton Yeutter became U. S. trade representative in 1985, the trade deficit was $170 billion, in 1991 it was down to $60 billion. We've been more aggressive in demanding equal treatment and opening markets and today our export level are at record highs. The USA could weather a trade war better than any other nation because it would be starting from a higher position and is the largest most homogeneous market in the world. However, the loss of the US market would be disastrous for other nations. But that doesn't change the fact that approximately twelve percent of our GNP comes from exports. Those same exports account for 75 percent of our manufacturing growth. The huge 1988 bill made it easier for us to retaliate against unfair trading practices without going through GATT—the General Agreement on Tariffs and Trade. Never mind our own unfair practices. In 1989 we extended quotas on steel and the push for restrictions on textile imports continues. In global markets U.S. companies are more competitive than ever. Strong exports boosted GNP by .4% in 1991, which is better than the average decline of .8% in previous economic rebounds. We have a total share somewhere between twenty and twenty- five percent, which is very respectable considering the competitive atmosphere of the 1990s. Unfortunately only one third of USA companies that could be exporting are actually doing so. The American Business Conference reports that of one hundred mid-size corporations, those with operations abroad added U. S. workers thirty percent faster than companies with no offshore base. The Reagan administration waged a continuous and visible war against protectionists in congress. But the U.S. doesn't practice what it preaches. Under die Reagan administration, quotas and other restraints on imports increased. In 1980 restrictions covered 12.5 percent of imports. Those restrictions covered 25 percent of imports in 1989. H.R.3275— the bill to extend the limitation on imports of steel is one example. Mexico has reduced tariffs and licensing requirements which benefited our own steel industry. There are no quotas on steel imports in Mexico even though they

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are also exporters of steel. Our exports increased by 74 percent to Mexico in 1988 alone. Europe and Japan have what is called managed trade or strategic trade, such as the European subsidy of Airbus and Japan's protection of its 16K memory chip producers. These practices hurt US corporations. But in a manner of speaking American consumers gained because the Airbus meant increased competition in aircraft production. European and Japanese consumers lost in both cases, because of their need to subsidize their industries. Managed or strategic trade practices sacrifice the living standards of citizens who must pay more for travel, food and taxes. Unfortunately politicians understand the loss of jobs better than they understand the benefits of free trade. Adam Smith' s invisible hand moving capital, technology and workers is a harder sell. Japanese consumers pay more than double what Americans pay for parts which allows Japanese suppliers to reap large profits. Those profits are an incentive to see that phony restrictions are continuously fabricated in order to keep American competitors to a bare minimum. A free-trade policy without subsidies would separate the strong from the weak industries and allow the former to flourish. We should practice free, but reciprocal trade! President Bush's chief economist Michael Boskin offered the following comparison: 1981-2 exports fell by over $30 billion at an annual rate which accounted for thirty percent of the entire 1981 decline. By contrast in 1990 exports rose by $53 billion. He observed that declines in world wide growth could hurt our exports and that must be recognized as a potential problem. The twelve nations of the European Community (EC), the American bloc including USA, Canada, Mexico and countries in South America and the Pacific bloc made up of Japan and the 4 Tigers, Hong Kong, Taiwan, Singapore and the Koreas have been heralded as a step to better world trade relations. But the idea behind the regional alliances is to give preferential treatment to members and set up barriers to "outsiders". Trading blocs might discourage efficiency. It would only be natural to encourage trade among bloc members, even those who might be less efficient than nonmembers. Consumers could suffer. After the second world war tariffs were cut from an average of 40 percent to under five percent over the years. Why is the world shying away from free trade at this time? Trade accounts for twenty percent of the entire world's gross product. Anything that steps away, even temporarily, from a commitment to universal worldwide free trade is a mistake. Regionalism is sort of like our team

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against your team instead of one world team cooperating so that all members can be winners. It's one more variation of the destructive zero-sum philosophy. I don't like the bunker-type mentality it breeds in world relations. Trading blocs are based on politics rather than economics and not all policymakers in all countries see free trade as being in their national interest. Protective barriers are an easy solution. But when competition is removed, producers within the protected bloc tend to become lethargic and monopolistic. During the eighties the EC was losing economic power in relation to Japan and the U. S. and feared Soviet military power. Now that both those fears have diminished there may not be the same urgency for the European countries to band together. A North American free-trade zone would unite three nations with 360 million consumers and over a $6 trillion market. A North American free-trade zone would be 32 percent larger than the EC—European Community. But opponents are afraid the free-trade agreement with Mexico could cause devastating job losses and hasten the end of U.S. manufacturing. Manufacturing jobs accounted for 35 percent of all American jobs right after the second world war and now accounts for only 17 percent. Inventories are lean in the fall of 1991 so a slight rise in domestic spending could revive manufacturing and companies would start hiring again. Florida could expect to lose 8,700 agricultural jobs and billions of dollars if a free-trade agreement comes to pass. Jobs in other states will also be ripe for export. For instance a poultry farmer in Arkansas ships chicken legs to a subsidiary plant in Mexico where they are processed for $40 a week instead of $7 an hour. They are sold in Japan as frozen yakatori. The argument is made that Mexican workers make $2.32 an hour versus $14.31 for the average American worker. Even though the wages of Mexican workers are lower and the promise of low wages will bring increased business to Mexico, the Mexican workers are far less productive. Employment in the furniture industry in this country fell ten percent in 1990 as 28 companies were lured by cheap labor and moved across the border. Opponents of free trade claim Mexico has less stringent environmental laws and by encouraging our businesses to manufacture in that country we would be working against the environment. They forget that in 1988 Mexico passed environmental laws stiffer than some of ours. The problem is enforcement and they are working on it. President Bush, in June 1991, promised that the issues of environment, rules of origin covering foreign investors in Mexico, and programs for displaced workers, would be addressed before any agreements with Mexico were signed.

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Mexico had enormous tariffs to make our goods too high priced for most of their citizens. In the past the Mexican government has discouraged direct foreign investment and insisted that Americans have Mexican partners in order to operate a business in Mexico. But there have been massive reforms. Right now the 2,000 maquiladoras (American businesses on the Mexican side of the border) employ almost half a million Mexican workers. 400,000 Hispanics owned businesses in the USA in 1991 which created 500,000 jobs and pumped $25 billion into our economy. 300,000 jobs were created in the export market due to Mexico's changed trade policies. President Salinas instituted many reforms and offered 1,155 inefficient state-owned companies for sale to private bidders. Mexico has slashed its maximum tariff rates, which were 100 percent in 1986, down to 20 percent in 1991 and its average tariff from 25 percent to l0 percent. One billion in exports equates to 20,000 USA jobs. The Japanese could take advantage of cheap Mexican labor and stage a new onslaught on the USA markets via exporting from Mexico. Mexican President Salinas has often said he welcomes Asian investors. Foreign investors could be encouraged to export to third world countries, certain percentages of what they produce in Mexico. Mexico no longer discourages direct foreign investment and border businesses (maquiladoras) are booming. Now agriculture-type ventures are flourishing in addition to the already established manufacturing assembly plants. To take advantage of the warm weather and cheaper labor, seeds or stock plants are shipped from the states and nurtured in Mexico, then marketed throughout the world. When so many Americans are being laid off it is only natural to want to keep American jobs at home. In 1992 there is a real demand for tariffs and barriers to the import of foreign goods and the export of American jobs. Trade protectionism is a reward to interest groups which costs each American family the equivalent of hundreds of dollars every year in higher cost of goods—protectionist policies are a hidden tax with the benefits going to favored industries. Robert Reich, a Harvard political economist, in his new book The Work of Nations, defines U.S. competitiveness in terms of "our skids, education, insights, and capability to add value." He insists that twenty percent of American workers are competitive and the other eighty percent are facing shrinking opportunities. He warns against protectionism, noting that IBM is the largest exporter of computers from Japan.

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Alternative Alternative #99

!"

#99

Alternative to tax code manipulations. Goal:
Expansion of business and job creation. How: 1 - Insist on a continuity and permanence in our tax code so that investors and business people can know the decisions they make today will not turn into disasters tomorrow. 2 - Corporate taxes and capital gains rates would need to be eliminated or cut to furnish financing and incentives for new business. 3 - Level the global playing field. Countries without corporate or capital gains taxes give their business people a definite advantage in the global marketplace.

Practical Benefits:
The nation would be more prosperous and the people more content.

Soft Power Benefits:
People will feel more confident in their abilities and not be afraid to make long range plans once they realize the powers that-be will not pull the rug out from under them with a moments notice.

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Background for Alternative #99
Some legislators advocate tax shenanigans to discourage American businesses from doing business abroad and to encourage foreign businesses to use more American parts in the assembly of goods on U.S. soil whether for sale in this country or for export. Others believe our tax code currently penalizes exports and subsidizes imports. Tariffs and agreements are bound and would cause retaliation but our tax system is not bound and such a change would put us more on a par with other countries who add a value added tax to all our imported goods. Investment credits and government loans or guarantees may be on their agenda. Frank Guarini of New Jersey was on the verge of reinstating usury laws in order to limit how much a company can pay in interest. He also wanted to pass a law mandating that advance notice be given by raiders. Add to the high cost of capital, the environmental and bureaucratic regulations, together with the liability caused by our greatly expanded tort laws, and you've got a real brake on business in the USA. Any activist group can sue to countermand permits even after they are granted. This sort of 'podution prevention' could signal the death knell for competitive economic growth according to Ernie Rosenberg of Occidental Petroleum, a former EPA regulator and one of industry's most respected lobbyists. Process or product changes are made monthly or even weekly in order to meet Asian competition in the aerospace, electronics and photographic industries. This law will make it impossible. You want to talk anti-competitive? Pollution control mandated by this legislation will cost 2.3 percent of GNP. That's three times the burden borne by Western European and Japanese manufacturers. Capital gains will not affect the sale of homes as they are already deferred if the seller buys a house of equal or greater value or if over age 55 gets a $125,000 non-taxed profit on the sale of a home (one time). Many policy makers think those gains should be excluded from the figures in an attempt to give a fairer picture. Senator Roth pointed out that capital gains reduction would help farmers and small business persons, not just the wealthy as everyone claims. Oppressive capital-gains taxes penalize those frugal enough to make even a modest investment or two during their lifetime—it penalizes the prudent! Lawrence Chimerine, Senior Economic Advisor to DRI-McGraw Hill would tike to see the tax on capital gains reduced on a sliding scale, with the

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highest tax falling on short term gains, bringing the tax rate down to almost zero on long term gains. The reductions would be reserved for new investments and only if they are geared toward production, as with tax credits. Things like rare coins and second homes would not receive favorable capital gains treatment. The idea is to steer the country towards long-term outlooks. In the past we've taxed inflation and we don't want to do that again either. It looks like there is a definite correlation between raising the capital gains tax in 1986 and a loss of jobs and revenue. Even policy makers in Czechoslovakia are reluctant to tax capital twice like we do in this country. Dividend income is taxed three, even four times in some cases. We should work towards a system that taxes up front once and leaves any tax on labor and capital low enough so as not to discourage them. In many cases a capital gains tax just taxes individual profits which have already been taxed once at the corporate level. As far as I know the Four Tigers still have no capital gains tax, although I believe Japan recently instituted a small one. The 1991 recession seemed worse than the recession of the early 1980s. Thrifts and banks were failing in unprecedented numbers, and there was a record national debt. Any more tinkering with the tax code, even to provide breaks as incentives to the economy, would cancel out because of the uncertainty and holding back by business people when the tax code is constantly changing. Tax manipulations always cause a slow down in growth. It might be more than coincidental that Michigan with a nine percent unemployment rate, produces luxury automobiles whereas luxury boats used to be a thriving business in Massachusetts, the state with a nine and a half unemployment rate. Anyone can see the luxury tax hurt. The luxury tax cost 9,000 jobs by the summer of 1991. According to Texas Congressman Dick Armey, the Treasury lost $5 for every $1 it took in because of this luxury tax. And if that weren't enough damage, congress is also discussing a new gasoline tax.

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Alternative #100
Alternative to selected areas for enterprise zones. Goal:
Encourage risk-taking and the expansion of business. How: 1 - Make the entire country an enterprise zone. If it works miracles on small business capital formation why not apply it to the entire country? - Allow stock to be treated as a personal deduction and exempt certain investments from capital gains. - Deductions or credits might also be used to reduce hiring and operating costs and to spur local involvement. - Make changes in the tax code (better still, replace it gradually over time on a political schedule). - Beef up crime control.

2 3 4 5

Practical Benefits:
1 - More jobs mean a broadening of the tax base as takers become producers. This means more revenue to reduce the national debt without raising taxes. 2 - Removing bureaucratic obstacles means more efficiency and more people willing to risk new enterprises. 3 - Breaks and incentives in the tax code encourage investment.

Soft Power Benefits:
As people get a taste of what it would be like without excessive regulations and taxation they may be inspired to demand their freedom. Anything that promotes self-reliant, self-sufficient home-grown employment and encourages experimentation on the local level is preferable to bureaucrats doling out incentives, hoping to get predetermined responses. That kind of behavior and conditioning is dehumanizing.

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Background for Alternative #100
On March 10,1989 President Bush claimed he wanted to give American business some advantages. In his speech to a small-business audience, he advocated giving tax breaks to anyone starting a business in a large city— a version of the enterprise zone idea. The president wants to encourage risktaking. Tax and regulatory relief would help restore an area's tax base. Betweenl982-1985 at least nineteen states created 450 zones where 50,000jobs were either saved or created and $2 billion was invested. That's according to HUD—the Department of Housing and Urban Development. Several states even transferred unused public property to resident associations within specific zones. Others offered tax credits to businesses that provided new jobs or businesses were allowed property-tax abatements and exemptions from sales taxes on any materials that were used for construction within the enterprise zone. Stuart Butler of the Heritage Foundation testified at a July, 1991 Senate hearing. He believes government, through enterprise zones, can remove many of the obstacles which a small business person would otherwise encounter in setting up shop in ghetto areas. Of course he would hope bureaucrats would escape the temptation to micromanage the situation, but would rather encourage local people, as opposed to outsiders, to get involved. Of course "encourage" means incorporating things to make it more attractive for investors to come into these "zones". New York, under Governor Mario Cuomo, instituted "Opportunity Zones" which took tax incentives one step farther. Taxpayers subsidized low-cost power and picked up the tab for the wages paid to public-assistance recipients hired in the zones. By 1991 thirty-seven states had their own version of die enterprise-zone. The trick is to avoid making enterprise zones low-wage zones. LBOs (leveraged buy outs) were used to maximize the value of a corporation and its assets, taking advantage of the tax code's discriminatory treatment of equity vs debt. Interest is deductible but corporate dividends are not. This is the advantage in substituting debt for equity—in borrowing instead of issuing new stock. Removing the burden of a thirty-four percent tax rate from a corporation's income stream can arithmetically increase the value of a corporation's capital. Treasury Secretary, Nicholas Brady once declared that "LBOs are the free market's answer to the double taxation of dividends." He also said, about the time that restrictions were being considered, "We have a habit in this country of correcting things that go wrong just as they are about to correct themselves."

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Double taxation is the issue. Limiting tax deductions would only raise the cost of capital. It is the double tax on corporate income that makes American corporations less competitive in the world market. Many of our major trading partners have corporate taxes but most allow shareholders full credit for any corporate taxes paid. Sometimes it looks like consumer debt is rising because when interest rates are lowered, as they were at the end of 1991, home mortgages are refinanced or new ones are taken out and credit cards are used "to get by" rather than for consumption. Any government stimulation of the economy by getting banks to lower their standards and make more loans during recessionary times would make consumers, bankers and the financial markets in general that much more on edge. Uncertainty is the enemy. It is natural to hang back and take a timid attitude when government intervention can strike and ruin plans without notice. Consider for instance what you would do if there was talk of reducing the tax on capital gains or instituting a nice credit for first time home buyers, or reinstituting the investment tax credit? You'd delay your plans in the hopes that by waiting for the legislation to be enacted you would save money. Government action or inaction skews decisions and puts a brake on the economy.

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Alternative #101
Alternative to our failure to invest in infrastructure.
Goal: To increase the nation' s productivity and raise the standard of living.

How: Repair or replace highways, bridges, tunnels, high-voltage transmission
lines and power plants. U.S. scientists, supported by the National Research Council's Strategic Highway Research Program have made a breakthrough and hope to manufacture a superior asphalt soon. New break throughs in energy may be right around the corner.

Practical Benefits:
By repairing our infrastructure it is estimated we will save America $50 billion a year in otherwise lost productivity.

Soft Power Benefits:
We will feel better about ourselves and our country. We will recover the sense of achievement and pride, lost when past achievements are neglected and allowed to decay.

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Background for Alternative #101
The average gasoline tax, including state and federal, is 30 cents in USA and $2.48 in Europe. A five cents a gallon gasoline tax should bring in about $6.6 billion a year. A dangerous precedent was set in 1990 when members of congress and the administration agreed to allow the gasoline tax to be divided between the general revenue and the highway trust fund. The last "Nickle for America" was used to mask, not reduce, the deficit and the infrastructure got short changed. Our highways, bridges and tunnels need repair and because of the heavy congestion in some areas, new ones need to be built. It is estimated that sixty percent of the miles in this country need repair—the roads are congested. This time 100 percent of the nickle must go directly and immediately to transportation or the people will rebel. The best plan would be to get $33 billion each year and spend it immediately with no trust fund involved. In the 1950s states eagerly accepted federal money (ninety percent of the cost) to build new interstate highways, giving little thought to maintenance costs. It wasn't until 1976 that Congress voted to chip in any federal funds for maintenance and by then the roads were already twenty years old. A lot of people are getting angry because the money collected for the maintenance of our infrastructure is constantly siphoned off for other more flashy government projects. As one pundit put it, "Nobody cuts ribbons over pot holes." I remember in 1983 right after the collapse of the Mianus River Bridge on Interstate 95 a reporter commented that Connecticut had the fifth highest gasoline tax in the nation and ranked near the bottom on highway spending. A lot of people have suggested privatizing bridges and as examples the Ambassador Bridge linking Windsor, Canada with Detroit and the DetroitWindsor Tunnel are both well maintained yet profitable private structures. I know there are also three private bridges over the Rio Grande River. A private company in Florida owns the two-mile-long bridge and causeway connecting Bocca Grande to the mainland. Infrastructure is a high priority in California. The Glen Anderson freeway in Southern California has a high tech train running up the middle and cost taxpayers $ 1 million per mile. There have been other experimental freeways in Southern California with electronic sensors built into the pavement on which smart cars receive information on how to use the congested freeways more efficiently. The Irvine Company in Orange County, California provided 60 million dollars for three freeway off-ramps, two parkways, a new interchange and 14 traffic-control projects in order to develop a 480 acre complex. In California it is generally not much of a choice; developers either ante up or

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forget their project. Developers of the 1,500-acre Rancho Carmel in the San Diego area had to ante up close to 58 million dollars for overpasses, interchanges and arterial roads. If it is in their own self interest to do these things then they would do them without force. In 1986 Texas started its "Adopt-a-Highway" program which attracted 2,200 service clubs, including untold scout troops and other organizations who signed up to keep a two-mile stretch of highway free of liter. The last I heard Texas had 4,000 miles of highway under private maintenance. California has followed suit. We are 25 percent more energy efficient today than we were in 1975. But putting new construction out of the picture entirely for a moment, we have a real need to replace older generating equipment. We should already be constructing 20,000 miles of new high-voltage transmission lines. Not to do so is to court disaster by possibly shortchanging the nation when it comes to the amount of energy needed to run the country. Utility managers are trying to plan long range but are thwarted by the regulators and the environmentalists. Some people thrive on other people's fear. They use this fear to promote their own agendas. The agenda of many environmental activists includes stopping industrial progress, or at least slowing it, by redirecting it into uneconomic alternatives. Government regulators and environmentalists have joined forces to make new construction of nuclear plants for the purpose of generating electricity in this country almost impossible. The licensing process can take as long as twenty years and all the restrictions and requirements have raised building costs to such intolerable levels that many utilities have been forced to abandon plants before they opened. Blackouts may not be in our future but the cost of electricity is likely to skyrocket and everything in the economy that is dependent upon it. There are still individuals capable of looking out for their own interests, or the interests of the companies entrusted to them. These individuals can foresee difficulties ahead just as we can. They will simply move their manufacturing to areas where power shortages will not be a problem. It is quite likely that Americans will be faced with the highest-electricity costs in the world which will lessen our competitiveness. Irwin Stelzer, director of regulatory policy studies at the American Enterprise Institute claims it is impossible for America to produce the amount of energy it consumes, and if it could it would be stupid to do so at any rate. But he reminds us that calls to self-sufficiency have attracted supporters who feel such a policy is necessary for our national security. They believe

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it is important to minimize our dependence on foreign sources of energy. Mr. Stelzer alleges, calls for self-sufficiency are useful to a wide variety of groups, ranging from Texas oil producers to dewy-eyed conservationists who use national security arguments to garner support for subsidizing indigenous energy sources such as solar and wind power. Alan Reynolds is another realists who claims no matter how much we try we can't isolate ourselves from global shocks to world trade. I n both 1980 and 1990, Britain, which is self-sufficient in oil, sank into deep recession; Japan which imports virtually all non-nuclear power, was unscathed. Master planners and philosopher kings take note: the country you would expect to be the most vulnerable was not.

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Alternative #102
Alternative to agricultural subsidies. Goal: Selfsufficient prosperous farmers.

How: Instead of subsidizing large farmers for not producing, we should
subsidize small farmers who fall below a specified five year production level.

Practical Benefits:
This would protect consumers from price fixing and prevent an oligarchy of large growers. It would also weed out the unproductive farmer, because worked into the five year formula, would be a level of production below which subsidies would stop.

Soft Power Benefits:
Farm families are notoriously independent and self-sufficient. Taking money for not producing is not something most desire. A new program which helps a struggler and bets on a hard worker is more beneficial for everyone than a program which fails to distinguish between workers, shysters, poor managers and gold-brickers.

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Background for Alternative #102
Agricultural subsidies were increased under Republican administrations. Subsidies that amounted to $3 billion under Jimmy Carter rose to $ 19 billion under Ronald Reagan. The trough for farmers was 1983. In the first quarter of 1990 real net farm income was up 188 percent from the deeply depressed average of 1983 and up 125 percent from 1980. The agriculture department has a $61 billion budget. There are 154,553 full time agriculture department employees which comes out to one employee for every 1.9 farmer. The definition of farmer is something else. If you sell a single horse during any given year you could add to the farmer population. Anyway, depending on the definition used there could be 300,000 not 2 million farmers. PIK—the payment in kind program—a subsidy for agricultural interests— pays out billons of dollars every year in exchange for farmers leaving 60 million acres idle. This inadvertently harms other businesses connected with farming whose products are not needed when the land is kept idle. Suppliers of farm equipment and related shops went out of business directly due to PIK and they took 250 million jobs with them. PIK also adds billons of dollars to America's food bill. Farmers have learned how to "play" the federal government and can reap a record crop while receiving subsidies for idling land at the same time. All they have to do is idle the rocky or wet spots they never would have planted in a freemarket economy. Taxpayers foot the bill for billions of dollars for water programs to allow farmers to grow surplus crops where normally only cactus would have grown. The number of rice growers in Yolo County, California increased from 50 to 72 in 1986. This was not due to an increased demand for rice but because people figured out how to take advantage of the rice-subsidy system. In 1986 50 rice producers received government checks for more than $1 million each. The game went something like this: the maximum government subsidy was $50,000 a year so the key was in knowing the exact number of acres to plant in order to qualify for that subsidy. The government presumed by having such a cutoff only smaller growers would benefit. All a large grower had to do, however, was plant the qualifying number of acres and then rent similar parcels to "new growers, each for a handsome sum because each parcel would automatically be worth $50,0000 to each and every new rice grower. There are eleven thousand sugar farmers in the U.S. who receive what amounts to a government subsidy equal to four to six times the world price of sugar. The sugar users far outnumber the growers, but the users' sugar

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expenditures are only a tiny fraction of their overall budgets and therefore the incentive for the average sugar user to campaign for lower sugar prices is very small compared to the high per capital incentive the growers have to campaign to limit foreign sugar imports. Why not make payments to needy farmers without all the hoopla— —let them plant or not, and over time introduce the element of a free-market with a gradual scaling back of "welfare payments" (subsidies). It just might be cheaper than the present charade we are playing with agriculture. At a hearing of the Joint Economic Committee before the London Economic Summit in July 1991 Mr. Armey asked "What would happen if we dared to demonstrate the courage of our convictions? What if we dared to reform agricultural policy—getting rid of practices which distort the market—like import restrictions and price controls?" We could use negative income tax for low income farmers instead of the current subsidies. People who have analyzed the breakdown of the subsidy payments have found large amounts of taxpayer dollars going to foreign investors, executives with part-time farms and to the farmers with net worths exceeding a million dollars who have the financial clout necessary to make it on their own. Not long ago seven percent of the farmers were receiving seventy percent of the government payments—and they weren't the small full-time farmers! Our Food for Peace program helps us get rid of our subsidized agriculture surpluses but it does nothing to promote the agricultural production of the recipient countries. The Swedish Red Cross issued a report in 1984 which claimed that drought aid given to lesser developed countries generally reinforced the political and social systems responsible for creating the condition in the first place. Many of Africa's famines are man-made predictable results of government policy, not unlike the famine that Lenin gave the Russian peasants to bring them into line in the 1920s. Thanks in part to our economic aid, Africa now produces less food per person than it did in 1960. In 1991 fifty percent of the income of Europe's farmers was government subsidized. The Regan administration had little success in getting mutual cut backs in agriculture subsidies and the Bush administration is making little headway. The United States has enough leverage in world markets to compel by example, the G-7 countries to cut back on their own subsidies. If things get nasty there is no doubt we could win, hands down, any trade war that started. We are the world's largest market. Maybe it's time for a showdown!

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Alternative #103

Alternative to bashing Japan.

Goal: A harmonious and mutually beneficial relationship.

How: Relaxing trade barriers. Granting mutual access to each others markets.
According one another reciprocal treatment.

Practical Benefits:
Other things being equal (at last) our legislators would see clearly the importance of reducing the cost of capital, the tax bite and legal liabilities that work to make our businesses less competitive in the global marketplace. Minimal government interference will lead to capital investment and flexibility, ingenuity and technological breakthroughs that will benefit all concerned.

Soft Power Benefits:
We shouldn't think in terms of protecting our markets but rather in terms of advancing them. This will foster a spirit of cooperation and optimism.

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Background for Alternative #103
The Japanese have expanded their manufacturing capacity sharply over the past five years. One of every four yen that the Japanese economy generated in 1990 was reinvested. The Japanese recently committed $3.2 trillion for infrastructure, including four or five airports, and tunnels connecting the islands. Although imports have grown at an annual average of $25 billion over the past five years, they are still minimal. Recent events in the Japanese economy have left many wealthy Japanese real-estate tycoons and stock speculators with less yen to lavish on foreign luxury goods and art. The yen has doubled in value against the dollar since 1985 but it needs to strengthen further to encourage imports and discourage exports. This would also make it easier for Japan to reduce interest rates and stimulate its domestic economy. The Japanese use money as seed corn. Trade surpluses mean cash at home, Japan is the only advanced nation that can provide savings (seed corn) to developing countries at the moment. Inflationary pressures have reduced domestic demand which means Japanese products are sold abroad which increases Japan's trade surplus even more. Their exports to Asian nations climbed twenty-three percent between 1990 and 1991. The United States economy, now in the neighborhood of $6 trillion, is more than forty percent larger than the GNP of Japan. The U. S. economy is still more flexible than any other economy in the world and will remain so only if we refuse to adopt the quasi-industrial policies that are currently being promoted. What the world economy needs now is cooperation from Europe and Japan in allowing the newly emerging Eastern European countries and Latin America access to their markets. James Morgan, 52, sells semiconductor manufacturing equipment to the Japanese and wrote a book titled Cracking the Japanese Market. He started in 1977 selling his product through a Japanese trading firm and then went into partnership with them, later making the company a wholly owned subsidiary of his American firm, Applied Materials. "Morgan got part of his initial capital from the Japanese Development Bank, a government agency that had never before extended a cash loan to a U.S. company." The article claimed the USA's share of the world market for chip-making gear has fallen from sixty-one percent in 1985 to forty-five percent in 1990. I would suppose that Applied Materials is classified as a Japanese firm, although James Morgan, and probably other Americans, are direct beneficiaries. Remember, statistics can be misleading.

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More than 30,000 Japanese students attend American schools. In fact a new hotline where the operators speak Japanese, was installed at Cornell's Johnson Graduate School of Management in 1991 because the year before more Japanese students applied to this Ithaca, New York institution than did residents of New York. A 1986 study found that if the growth rates in Latin America had been the same in 1986 as they were in the late 1970s we would have had a twenty percent lower trade deficit in this country. If Japanese trade barriers had been relaxed, our trade deficit would have been only five percent lower. Despite rhetoric to the contrary Japanese barriers don't cause that much damage. A lot of the barriers are coming down, because of the rational self-interest of all parties. Venture and investment capital, research centers, factories, part suppliers, workers, managers everything that makes up commerce is becoming more and more global. NTT, Japan's Nipon Telegraph & Telephone Corporation, the former state phone monopoly was privatized in 1985, a year after the breakup of AT&T here in the United States. Because it is now in a competitive atmosphere, NTT finds buying foreign equipment is in its self-interest. In 1990 it spent about six percent of its budget ($654 million) on foreign equipment and our own digital switch and telecom equipment manufacturers were the winners. That amounts to a thirty percent increase in the purchase of foreign equipment over the previous year. NTT recently invited AT&T to collaborate with its own researchers in developing a new fiber-optic transmission device. NTT & AT&T had equal numbers and abilities of engineers and worked long intense hours together in both countries. Japan is coming along. Europe may be the bigger problem. Germany is considering excluding from the EC any products that don't have at least fifty percent local content. European wages are high and they know a flood of Asian imports in particular, will cost jobs they can't afford to lose.

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Alter|||ive #104
Alternative to whining over our manufacturing base.
Goal: Become informed. How: Realize 1 - For forty-five years we have been bolstering other countries trying to make them more productive and raise the standard of living of their people. We succeeded 2 - In world manufacturing shares break down: Japan=10%, Europe=20%, USA=32%. 3 - In manufactured exports over forty years Japan's share of the world market went from 2% to 8%, West Germany's from 4% to 13% and USA's from 17.5% to 13%. 4 - On the OECD index production per capita in 1990 was W.Germany = 97 Japan = 98 and USA = 134. 5 - Manufacturing as a fraction of our GNP fell only from 29% in 1950 to 22% in 1987.lt is American efficiency in the remaining 80 percent of its economy that has yielded the higher standard of living in the USA. Practical Benefits: 1 - Facts make us less vulnerable to emotional appeals. 2 - Having some facts means you can inform others. 3 - Having some facts means our situation may not be as gloomy as you've been led to believe. Soft Power Benefits: It is stupid and nonproductive to go around feeling we, as a nation are beaten, or as one early presidential candidate said "we have lost the Cold War to Japan". We can be proud that after the WW II we cared about the peoples of the world and helped them achieve the prosperity that is evident today. It is time to realize that we are a good people and we wish our American neighbors and neighbors in other nations wed. We should recognize that our highest good is not in trying to "top" one another but in going forward together as the family of man in the 21st century on the planet Earth.

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Background for Alternative #104
Doom-sayers contend that the United States has lost its share of manufacturing in the world. Investment in manufacturing declined in 1990 after rising from twelve percent to sixteen percent from 1987 through 1989. The United State's share of only its manufactured exports between 1950 and 1990 dropped from 17.5 percent down to 13 percent, whereas Japan's share climbed from 2 percent to 8 percent and West Germany's share rose from 4 percent to 13 percent. That could be made to sound like a calamity, but there are several things to notice here. One, we're talking not about all exports, but only manufactured exports. Secondly, we're not behind the rest of the industrialized world, but in this instance we're even with West Germany and way ahead of Japan. The fact is our exports in general nearly doubled during those nine years, despite popular rhetoric to the contrary. And in world manufacturing the shares break down just among the three biggest competitors: USA=32%, J=10%, Europe= 20%. Again doom-sayers claim we didn't get investment in manufacturing during the early eighties because of the overvalued dollar and the rough competition from foreign manufacturers. But the truth is, in the eighties the Fed's index of manufacturing production grew by 6.3 percent a year or a cumulative 48.3 percent which makes one question the "deindustrialization of America". By 1989 manufacturing accounted for 23 percent of GNP; up slightly from 1980. Those who insist the United States is falling behind Japan and Germany in production per capita should look at some OECD figures. The Organization for Economic Cooperation and Development tracks most governments world wide. The OECD index, measuring how much above or below the average for developed countries a nation's production per capita is, starts with a perfectly average country and a score of 100. In 1950 the USA registered 175, West Germany was at 72 and Japan at 20. In 1970 the USA had dropped to 142, West Germany was 98 and Japan 80. In 1980 the USA dropped further to 134, West Germany went to 100 and Japan to 89. Between 1980 and 1990 the USA remained at 134, West Germany retreated to 97 and Japan rose to 98. So despite what you hear in the popular media, the USA has a continuing advantage of about thirty-five percent over its leading trade partners in the output of goods and services per capita. The figures usually cited have to do with manufacturing, which is a relatively small fraction of die US economy. Manufacturing accounted for 29 percent of the GNP in 1950,21 percent in 1980 and 22 percent in 1987. The rest of the economy consists of trade, transportation, financial, insurance, real

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estate and service sectors as well as government services. It is American efficiency in the remaining 80 percent of its economy that has yielded the higher standard of living in the USA. It is difficult to counter criticism of the disparity between the salaries of the working American and his CEO. In 1960 the CEOs of the 100 largest nonbanking corporations earned twelve times the wages of the ordinary plant worker, whereas in 1991 they earned seventy-two times as much—an increase of more than ninety percent. While American CEOs in manufacturing were making obscene salaries the Japanese worker's output grew three times faster than the output of the average American worker. Management must, and I believe is, shaping up. Americans need to increase investment, bolster the competitiveness of both small manufacturers and service companies while strengthening technology and the ability of American workers to apply that technology. Trade policy and infrastructure are priorities of lesser importance.

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Alternative #105
Alternative to being fearful of foreign investment.
Goal: To understand why many countries would give anything to attract foreign
investors to their shores.

How: Realize
1 - Five percent of all new jobs created in the 1980s were a product of foreign investment. Foreign companies employ about 3.7 million American workers here in this country which accounts for approximately 4 percent of total U.S. employment. 2 - The USA is the largest magnet for foreign capital and offers the largest market for foreign goods as well as being the largest investor overseas. Americans spent nine times as much as the Japanese did in 1989 buying companies in Europe. ($15 billion) 3 - Actually foreign investment in this country amounted to $400 billion in 1989 which was only 3.4 percent of our entire GNP. 4 - The 41 percent decline in the Japanese stock market accounts for the shortage of investments in this country during 1990. U . S . investors become interested in safety when a recession seems eminent and so they purchased the government securities normally snapped up by the Japanese. This means the Japanese move away from U.S. investment is not being felt as much as some doomsayers predicted.

Practical Benefits:
Citizens should be more willing to accommodate foreign investors knowing that Americans are the ultimate winners in the relationship.

Soft Power Benefits:
Lack of knowledge and understanding leads to break downs in relationships among nations as well as individuals. Understanding breeds empathy and goodwill and brings us closer to the everlasting peace for which all peoples of the world yearn.

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Background for Alternative #105
Most people are wary of foreign investment in this country and dislike the idea of foreigners buying up America. Many people illogically want to stop the Japanese from buying up the U. S. land. A few years ago land and in some parts of Tokyo cost upwards of $20,000 a square foot. The 100 year mortgage has been instituted in Japan, which means the house and the mortgage is passed on from one generation to another. The Japanese were loaded with cash in the late 1980s due to two things. First, the Group of Five monetary accords in 1985, in an effort to combat the U. S. trade deficit, doubled the dollar-to-yen ratio, suddenly giving the yen twice as much purchasing power in the United States. Secondly, real estate markets in Japan skyrocketed because the government interfered in the Japanese economy and in an attempt to encourage spending put a 20% tax on the interest earned on Japanese savings. The interest paid on savings in Japan had been running 4% to 5% behind the interest paid in the U.S. until a couple years ago and that had encouraged the Japanese to invest their savings here. No big conspiracy, only individuals attempting to do what is in their best interest. In the eighties the Japanese added a confiscatory short-term gains tax in an attempt to slow down the speculative real estate market. Then in the nineties the Japanese government considered a national property tax as a way to bring the price of real estate in large cities within the reach of the average Japanese. However special interest groups gutted the proposal by having it apply mainly to corporations, exempting property valued at less than $7.5 million, exempting all residential and farm land and land for hospitals, schools and other public uses and for the remaining, mostly commercial properties, the tax starts at a low .2 percent of the assessed value. It's no wonder the Japanese looked outside of their own country to purchase real estate; to the U.S. and especially to their neighbor, Hawaii. Congresswoman Helen Bentley of Maryland is always concerned about foreigners, especially Japanese, taking over American industry. On October 2, 1989 she stated that Japan's twenty-five percent share of California's banking assets were up from ten percent only seven years ago. Her main concern was that Japanese banks "will know everything about American companies"—as if it could be kept secret at any rate in this day of computers and technology. She referred to a New York Times article by Michael Quinn and a September 20,1989 article in the Washington Post by Jerry Knight regarding the disadvantage we are facing because of the expansion of Japanese banking.

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By 1990 the total stock of foreign investment in U.S. Securities, bonds, factories, and real estate had climbed to $986 billion from $235 billion in 1980. Norman Glickman from the Center for Urban Policy, addressed the 1991 International Platform Association in Washington, DC. He said there had been a twenty percent growth in foreign investment over the last decade but that the growth had actually peaked in 1980. Great Britain, with a 1991 investment of $110 billion is number one followed by Japan at $70 billion. Not that long ago Japan was 67th among countries with foreign investment in America. Japan's purchase of U.S. Securities by huge pension funds, insurance companies and banks amounted to approximately $50 billion a year between 1984-1989 whereas they sold $9 billion more than they purchased during the first half of 1990. Now a larger percentage of their investment savings is going to Europe. Also the 41 percent decline in the Japanese stock market accounts for the shortage of investments in this country during 1990. If $11 billion worth of ten year U.S. bonds are sold at a 8.47 percent yield rather than an 8.51 percent yield it would save the U.S. taxpayers $44 million in interest payments. U.S. investors become interested in safety when a recession seems eminent and so they are purchasing the government securities normally snapped up by the Japanese. This means the Japanese move away from U. S. investment is not being felt as much as some doomsayers predicted. The Japanese like to purchase trophy properties. They paid $900 million for Rockefeller Center, for their own reasons, although no American investor would have offered to pay more than $400 million. As for businesses, the merger and acquisition of U.S. companies is way up. In 1990 the Japanese invested approximately $17 billion and picked up more than two hundred companies worldwide with almost $ 14 billion accounting for 121 properties in the United States. Actually the Japanese prefer to build companies, rather than take them over, as the British usually do. But I agree with Milton Friedman that when American property is sold for high prices it is Americans who gain. This is bom out in the $341 million loss by the Japanese businessman who bought the famous golf resort next door to me. (Pebble Beach). The Japanese lost millions of dollars on their purchase of high priced American resorts which have no hope of breaking even. In 1983 foreigners added $17 billion worth of U.S. Treasuries to their holdings. In 1985 the Japanese increased their holdings of U.S. Treasury bonds by $19 billion, triple the previous year's rise. At year-end 1985, the Japanese held $47 billion of the U.S. government's $2 trillion debt. That was up from $27 billion a year earlier. At U.S. Treasury bond auctions in the eighties, the Japanese have been known to gobble sixty percent of a new

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offering. The Japanese and West Germans bought the Fed's newly created dollars in order to protect their export industries and to ensure the value of their own dollar holdings. What few people realize is that until 1986, Japan's foreign financial investments were limited almost exclusively to the purchase of Eurobonds and U.S. Treasury issues which offered a secure return of eight or nine percent. And that was a full four percent higher than the yield on comparable Japanese bonds. However, in the summer of 1986, the yield on long-term Treasuries, at about 7.1 percent, was low for the Japanese. They had been used to investing in U.S. securities only when the yield was at least 300 basis points (three percentage points) above Japanese government bonds, which were then yielding about 4.5 percent. Nevertheless that year Japanese banks purchased about a quarter of all U.S. Treasury bonds. In effect funding our deficit. However, as our interest rates began to fall and our dollar continued its precipitous slide, die Japanese suddenly began losing their appetites for our Treasury bills and started buying up prime U.S. real estate and other equities. In the first quarter of 1987 the Japanese took advantage of the forty-five percent drop in the dollar relative to the yen (from its 1985 high) and began buying our blue chip stocks at a rapid clip. Our stock market was too good to pass up, with American stocks offering higher yields than die Japanese home markets (seven percent vs. little more than half of one percent) and much lower price-earnings ratios (16 vs. 49). Before die October, 1987 stock market plunge, many Japanese brokers had estimated that by 1991 Japan's total holdings of U.S. equities would reach $100 billion or about four percent of all U.S. equities. That didn't happen.

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Alternative #106

Alternative moaning about our lack of patents. Goal: Gain access

to correct information.

How: Realize The number of patents issued to individuals in the USA rose
thirty-seven percent from 1986 to 1990; from 13,000 to 18,300. Americans are not vegetating—we're not resting on our laurels as some would have you believe. In 1989 the patents granted to U. S. universities jumped fifty percent to 1,216. An Arizona firm even commercializes inventions for universities. There are 150 non-profit inventors clubs in this country.

Practical Benefits:
We will make our greatest gains in productivity in the breakthrough of new technology. Getting good ideas to market could have a significant impact on the nation. Inventors are responsible for the high standard of living Americans enjoy today.

Soft Power Benefits:
Creativity is one of the things that sets mankind apart from the other animals. We all benefit when creativity is encouraged.

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Background for Alternative #106
The number of U. S. patents granted to Americans has dropped from sixtytwo percent of all patents in 1980 to only fifty-three percent in 1990 when seven of the top ten corporate recipients were foreigners. In 1980 the companies applying for the most U.S. patents in order were General Electric, Bayer (European) RCA.U. S. Navy, AT&T, IBM, Hitachi (J), Westinghouse, Siemens (European), GM. In 1990 the first four companies on the list were Japanese; Hitachi, Toshiba, Canon and Mitsubishi with GE fifth, Fuji Foto, another Japanese firm in sixth place and Eastman Kodak seventh, Philips (European) eighth, IBM ninth and Siemens (European) tenth. A federal patent court was created in 1982 and inventors have been winning more patent infringement cases. Government research money has more than doubled in the past five years to $445 million earmarked for small business in 1990. The Commerce Department spends about $5 million a year on individuals and small companies with energy-saving ideas. This role can legitimately be undertaken by the private sector and government should back off. Picking and choosing by offering grants would only encourage favoritism.

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Alternative #107

Alternative to losing markets based on new technologies to our global competitors.
Goal: Discover and commercialize new competitive technologies. How: 1 - Fight do-gooders, our own courts and bureaucrats who would stop innovation in its tracks. 2 - Two thirds of corporate R & D in this country concentrates on new breakthroughs rather than improving the old. Japan uses two thirds of its R & D to upgrade old processes. 3 - If Americans find their cost is too high for the market, they are forced to go back to the design tables and start over. This is one area where we should follow the Japanese lead. The Japanese are using a more efficient method of pricing their product for market than we are. Companies in both countries start with market research, go on to determine the characteristics of the product they have in mind and then when the Americans go into design, engineering and supplier pricing the Japanese pause and determine their target cost—the selling price minus their desired profit. They can then formulate their design, engineering and supplier price in line with that target cost and have these departments negotiate trade-offs. Practical Benefits: The key to a nation's prosperity is its ability to be flexible and creative. We should constantly be replacing old social structures and technologies with new. Soft Power Benefits: Resilience and change have always been American hallmarks

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Background for Alternative #107
There is a race to commercialize new technologies. Already a European company earns the most revenue from its telecom equipment. Alcatel of France in 1990 had revenue of $17 billion followed by our own AT&T with $15 billion and then in succession come competitors: Siemens in Germany, NEC in Japan, Canada's Northern Telecom, Sweden's Ericcson, and Hitachi and Fujitsu which are of course Japanese. Competitors batter U. S. companies selling technologies and products first invented in the USA. Seventy-three percent of the microwaves sold in this country are manufactured in Asia. General Electric sees heavy plastics as a replacement for metal, wood, ceramics, glass and traditional plastics. Valox is made of 50-75 percent mineral compounds. It can be used for floors, roof tiles, kitchen sinks and other plumbing fixtures. It's recyclable. No nation does more research than we do in our universities and 726 government laboratories. Americans have access to the best university research and the deepest pools of venture capital in the world. New companies have pioneered diagnostic instruments, surgical tools and drugs. We spend 2.8 percent of GNP on R & D (same as Japan and Germany) but that includes the one third earmarked for defense research compared to the one tenth so earmarked in other countries. Japan took the lead in technology-intensive exports back in 1986 and in 1990 it was spending a larger share of its GNP on nondefense research and development. Both Japan and Germany, our closest competitors, have spent a larger percentage of their GNP on nondefense R&D for almost twenty years. Not that we haven't been engaged in R&D but most of our R&D has been defense oriented. In fact an interesting set of statistics traces the source of R&D funds for the three countries and shows nothing very surprising in the fact that Germany gets approximately sixty-one percent of its R&D from industry and thirty-eight percent from government, Japan gets about seventy percent from industry and twenty percent from government. The United States government provides close to 49 percent of the funds for our R&D—the same amount as industry. This nation gets a greater portion of its R&D funding from the United States government than is provided by the governments of either Germany or Japan simply because most of our R&D has been oriented towards defense. Unfortunately capital for research in the United States costs about fifty percent more than it does in Germany and one hundred and fifty percent more than capital costs in Japan. There's our real problem.

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Alternative #108

Alternative to the high cost of capital in this country.
Goal: To provide our businesses with access to competitively priced capital.

How: Through increased savings, loosening restrictions on lending institutions and changes in tax law.

Practical Benefits: With access to reasonably priced capital there will be greater investment in research and probable breakthroughs in technology. Capital makes it possible to bring new products to market, expand businesses and create jobs.

Soft Power Benefits: When sophisticated insurance companies are considered incapable of looking after their own interests and must abide by the judgment of bureaucrats when making investments, then we all suffer. We benefit when our elected representatives understand that while the majority of the population is outside the government bureaucracy it is equally qualified to make decisions.

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Background for Alternative #108
A high deficit as a percentage of GNP is fine if savings are equally high, as they were until recently in Japan. Personal savings rate (net savings as a percentage of disposable income) dropped for the three countries with the strongest economies between 1980-1989. Japan's notorious savings rate fell from 19 percent to 15 percent, West Germany went from 17 percent to 16.8 percent and in the USA our savings went from bad to worse—from 7.5 percent to the 3.3 percent low reached in 1987. Americans see less need to save as we move closer and closer to a welfare state. Employees of many companies purchase savings bonds through automatic payroll deductions. This program raised $5 billion in 1985, enough to cover about 2.5 percent of new government debt. But savings bonds have to be held at least five years to avoid ending up with a return as small as four percent. Still twice the best return many young people are expected to get from their Social Security contributions. If held ten years to maturity the savings bond rate is higher (varies) and they may be a viable vehicle for conservative investors. Especially when you consider the tax on the interest is deferred until the bonds are redeemed. U.S. EE savings bonds had a minimum 7.5 percent guaranteed interest rate for quite some time. That was cut near the end of 1986 in order to save the government money and to reduce competition with private offerings. In the first half of 1988 a saver could receive 8 percent on a 5 year Treasury and a 30 year zero coupon Treasury (non-callable) was paying 9 percent. At an interest rate of nine percent, savings double every eight years. I think if we made sure our youngsters understood these things in school we'd have a better chance of increasing our savings rate in this country. Junk bonds (high-risk-high-yield securities) were used as a a source of capital by many viable small and medium sized capital-hungry businesses. To avoid takeovers in the 1980s many companies piled on too much debt and ended up in big trouble. Instead of investing in their businesses, these over-committed companies are now using any available capital to buy back their own bonds. Healthy companies used to be able to roll over their debt when it came due, but now lenders, negotiate tough terms and fees and sometimes refuse the roll over, forcing businesses into bankruptcy. Most companies will survive, although in a shrunken condition, and banks will be fine because of their collateral. It's the bondholders who may get stuck holding the bag. The large sophisticated insurance companies who are exempt from SEC protection—supposedly able to look after their own investment interests— have generally been a good alternate to commercial banks. Unfortunately in 1990 the National Association of Insurance Commission-

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ers (NAIC) came up with stricter guidelines for lending by insurance companies. These overseers tightened the criteria for determining investment grade investments and virtually closed the capital market to these businesses by prohibiting lending to below investment grade companies. , I believe m 1990 Prudential had a $34 billion private loan portfolio with Metropolitan Life, Cigna and others also lending billions of dollars in the same market. Since when are these big boys unable to evaluate and balance risks and profits? This mentality is engulfing all segments of our society— the idea that citizens are unable to look after their own interests without Big Brother and his team of bureaucrats. Only in this instance the bureaucrats are eight overworked regulators each processing a thousand issues a month. Since they get blamed for insolvencies it is easy to understand how they might become overly cautious and rigid. Never mind that their actions restrict capital flow, undermine job formation and slow economic activity. That's regulation! Capital investment (in nonresidential fixed capital as a percent of GDP— gross domestic product) increased for the Japanese and the Americans between 1966 and 1988: USA went from 12.5 percent to 14 percent, Japan from 15 percent to 23 percent but West Germany's investment fell from 19 percent to 17 percent. The cost of debt capital (long-term real interest rates) in the ten years between 1980 and 1990 was up for West Germany and the United States but lower for Japan: USA=1.7 percent to 4.1 percent, WG=3.9percentto5percentandJapan=5.1 percent to 5 percent. The Japanese people save despite the restrictive regulations and the rockbottom interest rates the Japanese pay their own citizens on savings accounts. But until recently the Japanese had few alternatives. For instance a few years ago buying a hundred shares of a $50 stock cost a Japanese investor as much as $63 in fees. Between their commercial bank's low government controlled rates of interest and the high fixed commissions charged by the securities firms, there is little choice. On the other hand, you have probably heard more than you care to about the deplorable savings rate in this country and the disincentives to save built into our tax code and social policies. Many believe that an American that saves is an American sucker. The prudent ones who turned their backs on the popular "enjoy-as-you-go" philosophy, are the ones that end up in an income bracket guaranteed to force them to pay even more taxes on their already taxed Social Security benefits. That's how we reward savers in this country. They end up footing the bill for the non-savers, who may or may not have been profligate spenders in their youth. When will our policy-makers understand that we get what we encourage?

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Alterative #109

Alternative #109

Alternative to strict regulation of the banking system
Goal: To protect taxpayers and promote economic growth at the
sametime.

How: To reinstitute the discipline of a free market. Practical Benefits:
Everyone wants a stronger more stable banking system which will encourage economic growth. In the half-free half-regulated atmosphere of the late seventies, bankers sought high returns through risky lending to third world countries and to commercial real estate developers. Without the self discipline of a free market, speculators had a field day. Discipline imposed from the outside by government never could have and never will work. The people conducting exams and those supervising them never were and never will be a match for elaborate white-collar schemes. In an unregulated market place borrowers and lenders are free to make their own decisions and innocent taxpayers are not made to pay for the mistakes of professionals.

Soft Power Benefits:
When decisions are based on a determination of what is best for the parties involved rather than coerced by an impersonal bureaucracy, accountability enters the picture. Freedom, prudence and responsibility get a boost also as do the creative and optimistic impulses of citizens.

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Background for Alternative #109
Weakness in the banking system may be traced to regulations which distort the market and wreak economic havoc. The real question is whether regulators can protect taxpayers and promote economic growth at the same time. If there has to be regulation, then limiting individual bank's exposure to large speculators and opening up capital sources for a greater variety of more modest endeavors, is one of the better regulations Barney Frank of Massachusetts is one of the most brilliant men in congress. He showed that he knows darn well what is going on when he reminded fellow members of the banking committee that As you measure something you may be affecting it. As you regulate something you may be affecting it. W e ought not to pretend that the regulation is simply a neutral look. Regulation is a calculation of risks. We undercalculated the risks of lending and undercalculated the damages of too little lending—-we need to balance the two. It's only too bad that he has more faith in the ability of inexperienced legislators to calculate risk than he does in experienced bankers and investors. He obviously prefers regulating to market forces. It seems to me that congress, instead of reforming the deposit insurance system, is simply increasing the power of regulators and examiners to determine who gets credit and who doesn't. When the losses from depressed real estate are tallied it is possible that 40 percent of all deposits will be in undercapitalized institutions. Therefore how these deposits will be lent will be controlled by regulators rather than management and shareholders. Naturally each participant will find ways to exploit the particular rules that apply to him or her. Strong banks will search for "loopholes" in Glass-Steagall and for states that will allow them to do things not allowed by federal law. Non-bank financial firms will continue to sell bank-like products (money market mutual funds, credit cards, home equity loans) with a different set of rules. Instead of making market and economic and competitive forces work better, this narrow reform will distort those forces. It won't be the quality of service that gains market share, but exploitation of rules. The average citizen has been pretty much brain-washed by media coverage and almost to a man and woman believes deregulation has been the cause of most of our problems and must at least share the blame for the recent instability in the U.S. financial system. They honestly believe that deregulation encouraged banks to venture into risky activities that they often knew little or nothing about. The present trend is away from removing regulatory oppressions and toward the imposition of new safeguards aimed

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at ensuring the safety and soundness of the banking system. After all, who can be against "ensuring the safety and soundness of the banking system"? Deregulation may be one of those "chicken or the egg questions" ______ which is the cause and which is the effect? Competition has meant more convenience for consumers. Many banks now stay open 45 hours a week instead of 27 as was the norm just a couple years ago. Some are even open Saturday and a few hours on Sunday and others offer 24hour phone information. The costs are passed on to consumers who don't seem to mind as long as volume allows the banks to keep individual charges low. For every dollar a bank pays in premiums to the FDIC, $ 15 is removed from its lending inventory. A free market in banking would give consumers a wider choice of financial services and products at competitive prices more than anything dreamed up by legislators. There's safety in the diversity now prohibited by Glass-Steagall and there's safety in geographical as well as investment diversity. Because they were restricted at home, Japanese investors were induced to make large scale overseas investments. Now it is up to policymakers in this country to loosen the restrictions they have placed on American financial institutions and to allow them to compete on that mythical level playing field. FASB is an acronym for the Financial Accounting Standards Board which is the chief rule-making body for accountants. Fasb has a proposal requiring footnote disclosure in all financial statements of more-current values of assets and wants banks to hold larger reserves for bad loans, beginning sometime in 1992. These two items will be costly for banks. Just to estimate the fair value of loans will be demanding. The proposal is supposed to give analysts a clearer idea of a bank's soundness. Now loans are tracked by book value. There was an earlier call for market-value accounting which has been watered down somewhat to this fair value proposal. Fair value is the current market value and it will be required as a foot note to financial statements for all financial instruments including equity, debt, loans, receivables and even options. Banks with less than $150 million in assets will have until 1995 to adhere to the new accounting disclosures. FASB also has a proposal for troubled loans effective for calendar 1993 requiring banks to include interest components in their calculations of reserves. This would increase the carrying costs for troubled loans on the balance sheet and could sharply reduce reported profits. The idea is to encourage a faster dumping of bad loans. Unfortunately struggling borrowers will be given less of a chance to revive. Besides, such a "prompt disposal" policy could intensify current real estate problems by encourag

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ing more and faster sales of construction loans and mortgages when the market is already saturated. The Bush administration has tried to encourage bankers to work out and resolve problem loans rather than foreclose, if it all possible, but our philosopher kings think this is all for the good as banks will be able to put their mistakes behind them quickly rather than try and help a struggling entrepreneur weather bad times. Perhaps some relaxation of expensive, useless SEC disclosure rules are in order, scandals occur regardless of regulation. Markets are the best regulators and the FDIC should review regulation vis a vis foreign markets and competitors with the idea of allowing foreign stocks on U.S Exchanges. Henry Gonzalez, Chairman of the House Banking Committee, believes illicit narcotics business thrives because of our negligent banking system. It is very easy to cook the books so that regulators have no idea what is really going on. Attorney General Thornbourgh wrote a letter asking Gonzalez to stop an investigation but luckily a Senator from Italy came up with the documents our own government would not take an interest in providing. "Securitization" is the packaging of loans for sale to investors. First mortgages now account for $300 billion-plus with securitized auto loans making up another $10 billion annually. Other consumer loans are being considered for securitization; boat loans, mobile-home loans, home-equity loans, second mortgages, credit-card loans and even non-performing loans are all examples. The trouble is the best loans are the most marketable and banks are often left with the most risky loans in their portfolios. Bank regulators were skeptical in the beginning, but in 1986 ruled that banks can eliminate the loans through a securities sale as long as the buyers are not given recourse to the bank that first made the loans. Issuers get a financing source which allows them to take the assets off their balance sheet and thereby increase the return-on-asset and capital-to-asset ratios. Investors get a higher yield than they could get with comparable securities. Consumers, because securitization provides greater pools of money for lending, should reap the benefits of lower interest rates on consumer loans.

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Alterative #110
Alternative to having a set ceiling on interest rates.
Goal: Optimal rates for everybody involved.

How: It is probably not feasible to have the market determine interest rates.
Alternately why not institute a flexible ceiling tied to the market interest rate on Treasuries? This would at least avoid the drain on banking that occurred under Regulation Q whenever the market rose above the old inflexible mandated rates.

Practical Benefits:
This would avoid the pitfalls in any attempt to circumvent regulations- --------pitfalls which experience has proved can be worse than the dangers the regulations are meant to prevent.

Soft Power Benefits:
More power to the market and individuals and less reliance on the bureaucracy.

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Background for Alternative #110
The 1865 national currency act would have been different if Lincoln had lived. It put no limit on interest and afforded no protection from usury which occurs through our fractional currency or reserve system. Banks can issue money equivalent to ten times what they have on hand just by issuing credit. Regulation Q was a prime example of unhealthy interference by government. If you remember, banks, under Regulation Q, were only permitted by law to pay 5 to 5.25 percent to depositors when the prime (most favorable interest rate) was as high as 21.5 percent! Inflation meant that savers were getting less real dollars back than they put into the banks in the first place. Usury laws kept credit cards at eleven or twelve percent in some cases when borrowing elsewhere cost eighteen to twenty percent. When deregulation overtook Regulation Q it was way overdue. Restrictive monetary policy had driven interest rates up and depositors had left banks for higher-yielding, unregulated money-market accounts. The interest rate ceilings imposed by Regulation Q were removed in 1982. Competitive banks immediately began paying depositors interest rates far in excess of what made sense for the risk assumed. Of course with deposit insurance, there was no risk assumed. Government in effect subsidized those interest payments to depositors and allowed the banks to offer overly generous loans to borrowers. It could do that because technology had allowed them to raise deposits around the world and they were unable to use those deposits for anything beyond the loan business. Some experts favor measures to restrict the range of bank risk, raising the capital requirements of banks and more frequent examinations of bank records and management. Instead of reviving Regulation Q with its inflexible ceiling on interest rates, the maximum interest rate on deposits could be raised to the market interest rate on Treasuries. As long as legislators are determined to dictate to the market this proposal would at least avoid the drain on banking that occurred under Regulation Q whenever the market rose above the old inflexible mandated rates.

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Alternative #111

Alternative to the notion that junk-bonds are evil.
Goal: To educate. How: Realize that highly speculative bonds have been the only source of capital available to small businesses not able to offer stock to the public. The changes in the 1986 tax law, especially in reference to capital gains, dealt the death blow to speculative bonds. They only became "junk bonds" after government action made certain they became "junk". During good times bankers can lower their lending standards, safe in the knowledge that any poor lending decisions will be redeemed by the rise in the price of assets. In bad times, even good decisions are marred by the possibility that a drop in the price of assets could make an otherwise well secured or well considered loan risky. It's a round robin with the credit crunch spawning more hard times, creating a greater contraction of capital producing more hard times and so forth. Called loans, tight credit and deflating asset values all add to the problem. Practical Benefits: The greatest possible number of solutions will surface when emotional rhetoric gives way to rational analysis. Soft Power Benefits: Distortion and ignorance is the enemy which knowledge will defeat.

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Background for Alternative #111
When are we going to learn that government regulation does not work—has not, will not and cannot! The same abuses that destroyed the S & L industry— risky investments, self-dealing and accounting shenanigans—are now showing up at insurance companies. Take Guarantee Security Life Insurance Company in Florida whose recent collapse left many of the 57,000 policyholders in 40 states defrauded. Guarantee paid lavish commissions to get independent agents to sell their policies, offered low minimum premiums to folks of modest means shopping for security and paid ultra-high interest rates to attract investor dollars. Of course they ended up playing the junk-bond market in order to pay the exorbitant interest offered. Because state law limited insurer's exposure to junk bonds to 20 percent of assets, the company temporarily swapped, at least on paper, hundreds of millions of dollars of junk bonds for U.S. Treasuries. Government regulations exempt companies who invest in Treasuries from setting aside reserves to cover potential losses. In 1986 state examiners noticed big swings in Guarantee's portfolio, but they faded to understand their significance. Four years later Guarantee was in such bad shape, with the collapse of the junk bond market, that it curtailed writing new insurance policies. The state postponed a scheduled examination and by the summer of 1991 it was all over. This highlights the inability of stale regulators, who are often not sophisticated enough to spot problems when complex deals are involved. Consumers should not depend on them!

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Alterative #112

Alternative to propping up the S&L Industry. Goal: To either
reform or phase out the industry. How: 1 - During the Reagan administration, whose motto was the freedom to succeed is the freedom to fail", we had the savings and loan debacle. But the truth is, if congress had allowed that philosophy to prevail, we wouldn't have had the savings and loan problem. Thrifts were used to borrowing short and inexpensively from consumers and lending at higher rates for a longer term to home buyers. At the end of the 1970s, when high interest rates made this impossible, the thrifts should have been allowed to fade out instead of being propped up by higher government guarantees and lowering investor's risk of capital loss. By 1983 thrifts had a one percent capital reserve so taxpayers were underwriting ninety-nine percent of the risk. 2 - Reform is still possible by risk-rating the deposit insurance, or adding a deductible to cushion the liability of the taxpayer as well as raising the capital reserve standards. Practical Benefits: We will avoid such a huge taxpayer liability in the future. Soft Power Benefits: There is a strong sense that the "little people" have been had. That those that have— gets! This is demoralizing and we need to make certain that everyone realizes that self-dealing and accounting shenanigans will not go unpunished. Prosecutions will give the people hope and renew their belief in justice.

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Background for Alternative #112
In early 1987, Vernon Savings and Loan in Texas reported $1.35 billion in assets but about $1.7 billion in liabilities. The trouble, according to a report of the Federal Home Loan Bank Board, was "Imprudent and Risky.. .Lending Practices". Since losses are usually double the amount of a failed institution's negative net worth, in Vernon's case the loss was estimated at about $700 million. In the summer of 1986 federal bank regulators decided to spend $130 million to salvage the failing Bank of Oklahoma; only the eighth bank to be saved since 1933. First Republic Bank of Dallas, which was formed in 1987 by a merger of Republic Bank and Inter first, in 1988 turned to the federal government for relief. Reportedly 16 percent of its loan portfolio was "bad", leaving bond holders and shareholders at risk. In 1988, First Republic was the same size as Continental Illinois was at die time of it's rescue by the federal government in 1984. Professor George Kaufman of Loyola University in Chicago come up with a plan calling for quick closure of troubled banks while there are still resources to pay depositors and creditors — when the bank's net worth is zero rather than sub-zero. "Timely closure" would allow more equal treatment of banks regardless of their size, location or nature of their business. First National Bank & Trust Co., Oklahoma City; M Corp of Dallas and First Republic (TX) and Bank of New England were all considered "too big to fail". Their size made it highly unlikely that they would be purchased and absorbed by other banks. Besides, economists fear that a large bank failure could result in adverse macroeconomic consequences and instability in the financial system. However, facts show about ninety percent of small-bank failures are resolved through P&A, purchase and assumption transactions. In a P&A, all the deposits are assumed by a healthy take-over bank. Of the 169 banks that failed in 1990, only 20 were resolved through a payout of insured deposits. Naturally a P&A is less costly to the FDIC than is a liquidation. The 99th Congress was unable to pass legislation which would have pumped $15 billion into the ailing FSLIC and would also have permitted regulators to sell failing institutions. Opponents argued that additional legislation wasn't necessary since many state laws already allow such sales. On top of that, the U.S. League of Savings Institutions incorrectly estimated the FSLIC would have $17.42 billion to cover pay outs over a five year period.

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Alternative #113

Alternative to the rules by which the RTC offers confiscated property for sale.
Goal: To obtain the best deal for the taxpayers. How: 1 - Cut back on the procedures required before soliciting buyers in the regular marketplace. 2 - Recognize the drafting error in the original 1989 legislation that had a perverse incentive which meant the more assets under its control the more money for the RTC. The RTC was permitted to borrow working capital totaling more than one and a half times its assets. 3 - Pass legislation similar to the Rinaldo amendment to H.R. 6 (Deposit Insurance Regulatory Reform Act of 1991) which would permit the highest bidder to purchase failed banks even if the bidder were a non-banking entity. 4 - Consider more efficiencies in hiring outside help in the sale of RTC property beyond the 1991 $2.5 million cap put on awards to any one legal firm in any one year. 5 - Get rid of perversities like the law which forces S&Ls to deduct from their capital any direct investment in real estate. Practical Benefits: William Seidman, former head of FDIC and RTC, argued that because the Rinaldo amendment would allow an additional source of capital it would reduce the eventual cost of the bailout for taxpayers. The other suggestions should have the same affect. Soft Power Benefits: Everyone will benefit from a swift end to the lending institution bailout because it carries with it the feeling that the ordinary people are being played as chumps by the "big guys".

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Background for Alternative #113
The RTC doesn't pay back depositors, it uses the money to purchase the bad assets of insolvent savings and loans. Lamar Kelly, deputy in charge of asset disposition, said the RTC has sold more than half of the assets seized in 1991 and in the first eleven months had raked in close to $81 billion. There was a drafting error in the original 1989 legislation authorizing the RTC which allowed it to borrow "working capital" totaling more than one and a half times its assets; a perverse incentive to hold on to assets rather than sell them. Every time the RTC sell something, that sale reduces the amount of working capital the agency can borrow. The more assets the RTC manages the more fees it is allowed to allocate, thanks to the 1989 drafting error. It's amazing how legislators consistently overlook human nature when drafting laws. It is not shameful and it should be no secret that people act in their own self interest. In East Germany even before reunification was underway, government property was turned over to an agency called Treuhandanstalt (Trustee Institute) known as THA. In April, 1991, under the dynamic leadership of Birgit Breuel, once the finance minister in Lower Saxony, THA began to sell the property. In less than six months it had sold 3,788 businesses. Only $8 billion was realized, but you can imagine the run-down condition of the communist managed properties and it is a wonder that there were any bidders. On the bright side, the purchasers promised to invest $50 billion to restore the properties, which is estimated to create 7,200 new jobs. Many German citizens claimed the government failed to get high enough prices and that buyers might not fulfil their investment commitments and so forth. But Birgit Breuel was determined to go ahead and do what had to be done despite suspicions and criticism. It is sad to compare Germany's THA with our own RTC. East Germany, of all places, is actually privatizing while our own congressmen and women ho and hum in an attempt to curry favor with their constituents. The THA is selling off miserable assets at a business-like clip, partly because it has its management staff on a strict budget of $22 billion a year. In this country we fund everything according to need or desires. If the job takes more than the money authorized, the RTC, or any and every other agency, simply asks for more money. No discipline, no budget, no limits. And the worst thing about the way we have been doing business in the United States over the past couple decades is that our leaders don't bother to ask their constituents for the extra funds, they just put it on the tab to be paid by future generations.

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By the summer of 1991,96 failed S&Ls had already been purchased by nonbanking entities with no problems. However the Rinaldo amendment to H.R. 6, the Deposit Insurance Regulatory Reform Act of 1991 failed to pass. It would have allowed commercial non-banking entities to purchase failed banks as long as they put in the best bid. But banking committee members John Dingell, Henry Gonzalez and Jim Leach all were adamantly against the Rinaldo amendment. Mr. Dingell complained that it would set up two categories of banks. Paul Volcker, former Federal Reserve chairman, testified before the committee. He expressed fear that such a concentration of power in the American economy would be bad for banks, bad for business and bad for consumers. He felt finance-commerce combinations could be costly to stockholders and not in their best interests. On the other hand, William Seidman, former head of FDIC and RTC, argued that allowing this additional source of capital would reduce the eventual cost of the bailout for taxpayers, and Representatives Norman Lent and Barney Frank thought that anything that would save the taxpayers money was great. The RTC and FDIC spent close to $900million on legal services in 1991 with about $700 million going to private law firms. That's a hefty price even for competent service, but Richard Schmitt, reporter for the Wall Street Journal told of hiring a private firm that "not only appealed the wrong case, it filed its appeal the day after the filing deadline expired." It was a $1.2 million mistake, but was easily absorbed in the budgetary item labeled "waste" and passed on to patient, long suffering tax payers. The FDIC beefed up the auditing section which kept an eye on the 1,600 or so law firms that were expected to receive fees from the FDIC and RTC in 1991. Auditors found overstaffing, unauthorized research and inflated clerical expenses and are getting law firms to make refunds of an average 3 percent of fees previously paid. In November, 1991, the ABA Journal listed twenty law firms whose 1990 receipts from the FDIC topped $2.5 million. Fees up to $600 an hour have been authorized. Henry Gonzalez, chairman of the House Banking Committee finds the fees of outside law firms often "excessive". Hokpins & Sutter of Chicago headed the list with receipts totaling $22.3 million. In February 1991 a cap of $2.5 million was put on the fees that the FDIC or RTC can award any single law firm in any one year. In 1990, regulators, on the advice of outside counsel given by a private San Francisco law firm and paid for by taxpayers, turned down a $78 million settlement and won a $68 million suit. The federal judge had warned that for the FDIC to go to trial would be "playing Russian roulette with taxpayer dollars." Despite these incidents the FDIC maintains that it gets back an average of $29 in recoveries for every dollar spent.

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In formulating the rules by which the RTC, as landlord of confiscated property, was to offer it for sale, an effort was made to cater to special interest groups. Before soliciting buyers in the regular marketplace, first right of refusal sometimes has to be tendered to representatives for low income-earners in need of affordable housing, minority groups, homeless advocates and even government agencies who might make use of habitable buildings. Senator Robert Smith of New Hampshire attributed the depth of the recession to the lack of confidence in banks and the Savings & Loan fiasco. He also felt that not enough effort was being made to get rid of the RTC inventory. The administration's chief economist, Michael Boskin claimed an attempt was being made to urge the examiners to be more reasonable. He claimed the behavior of most regulators was too restrictive and that there was a real need to base policy on reality not unfounded fears that what occurred with the savings and loans would necessarily be repeated with other lending institutions.

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Alternative #114
$-"

Alternative to restricting the ability of banks to diversify the products and service it offers.

Goal: To reduce risk.

How: Overhaul the Glass-Steagall Act and allow banks to compete with foreign institutions and Wall Street firms in the underwriting of securities (CMOs).

Practical Benefits: Diversity always reduces risk. Getting rid of restrictive regulations will allow American banks to compete on a morenearly level playing field with foreign institutions an investment bankers operating in this country.

Soft Power Benefits: Freedom, flexibility and a sense of fairness.

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Background for Alternative #114
It wasn't until 1933 with the passage of the Glass-Steagall Act that banks and savings and loans were forbidden to underwrite securities. It was an attempt to insulate the various types of banks from competition by commercial enterprises and also to protect consumers from having their deposits used by banks speculating in the stock market. Alan Greenspan, Fed chairman, said in April, 1990 There is reason to believe that the opportunity/or a bank to diversify the products or services it offers or to diversify geographically may in some cases raise its rate of return and lower its risk. Congress has been urged to pass legislation that would overhaul the GlassSteagall Act and permit banks to engage in underwriting of commercial paper, mortgage-backed securities, revenue bonds and mutual funds. I remember when now retired Senator William Proxmire, was chairman of the Senate Banking Committee, he wanted to dismantle all or part of the GlassSteagall Act. He saw it as a legacy he wanted to leave the country. Although commercial banks have been allowed to underwrite government guaranteed mortgage-backed securities, such as Ginnie Maes, they haven't been able to touch CMOs, collateralized mortgage obligations. CMOs are bond-like securities backed by a pool of mortgages whose cash flows are repackaged to obtain securities of mixed maturities. CMOs allow investors and underwriters some protection against prepayments by mortgage holders. If Congress won't let them compete more freely, some banks may simply give up their banking charters so they will be free to diversify into other businesses. Many of the nation's largest banks have applied for an expanded role in the underwriting of securities. Underwriting involves purchasing securities in a block from the issuing corporations and selling them in smaller denominations to a variety of investors. Federal Reserve Chairman Alan Greenspan believes commercial banks need more latitude in order to compete against freewheeling foreign institutions and Wall Street firms and therefore hopes Congress will overhaul Glass-Steagall. The Glass-Steagall Act still keeps the big commercial banks from underwriting corporate securities in this country and competing with the investment bankers. If a transaction is successful the bank is often able to make money from the management fees and also from the profit on the deal itself. The difference between the additional-fee-income and interest-income alone explains why investment banks enjoyed an average return on equity of 26 percent 19831985, while commercial banks had to

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settle for an average return of 14 percent. But these off-balance-sheet deals stretch the bank's capital in ways the traditional ratios fail to measure. They sought high returns through high-risk lending to Third World countries and to commercial real estate developers. The discipline of a free market was removed and speculators had a field day. Although most politicians tell it the other way: regulation was removed and speculators had a field day. They still haven't realized that government regulations cannot control market forces. Congress had defined a bank as an institution that accepts demand deposits and makes commercial loans. In a 1980 case, Gulf & Western Corporation substituted personal loans for commercial loans and viola, the first consumer bank was recognized. Treasury had a plan to allow banks to affiliate with nonbanks under a common holding company. The affiliate would not be protected by deposit insurance and fire walls would be erected. Prudential Securities has an insured income account which includes checking privileges covered by the FDIC $100,000 guarantee. The business community can raise short term cash by selling commercial paper or for longterm money they can issue bonds. Small and medium sized companies can turn to General Electric, General Motors and Ford who all offer business loans to consumers. In his 1991 book, The Future of Banking, University of California (Berkeley) professor of economics, James Pierce agrees that there is nothing especially unique about banking anymore. At the end of 1990 banks held only 16 percent of the $3 trillion in residential mortgages and less than 50 percent of all auto loans. Why do we need banks? We can get cash through automated teller machines set up by companies like Sears, AT&T and American Express. To put our money into savings and checking accounts for safety and convenience we can use mutual funds. We don't even need banks for loans. Auto companies finance car loans, mortgage bankers finance homes and entities like GE Capital and insurance companies lend to businesses. Big borrowers can often borrow more cheaply in the public debt markets than the bankers can. There are alternatives to business as usual.

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Alternative #115

Alternative to geographical restrictions on banks.

Goal: A safe and sound banking system.

How: Allow branch-banking so that risk is spread over several communities.
When the economy goes sour in one location the bank is saved by good times in another area which balances out instead of pulling under.

Practical Benefits:
Getting rid of restrictive regulations will allow more business start ups and other creative endeavors to proceed.

Soft Power Benefits:
Freedom , flexibility, creativity, optimism, responsibility, self-control will flourish.

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Background for Alternative #115
Geographic and product diversity should be encouraged. It's stupid to deny power to the banking system and then fault it for being too weak to adequately serve the public. Diversity and numerous branches prevent failure—only when banks were small and localized and dependent on a small local economy did they fail. We had choices in this country up until 1964 with few problems. The McFadden Act denied nationally chartered banks the right to operate branches within a state unless the already existing state chartered banks were given equal rights. The McFadden Act originally permitted national banks to exercise securities powers. The Bank Holding Company Act of 1956 forbade holding companies owning more than one bank from operating in various states without express approval from the states themselves. In 1970 even one-bank holding companies were brought under the jurisdiction of the Federal Reserve Board. These regulations were a response to the rapid expansion of financial conglomerates, mostly based in New York. Legislation was pushed by members of congress from states such as Texas and Illinois where state banks weren't even allowed to open branch offices intrastate. Bert Ely, who has written a book for the Cato Institute which details the banking collapse in America in the early 1930s, attributes the relatively smooth sailing that took place over the same time period in Canada to the fact that ten banks operated 4,000 branches throughout that country. This gave Canada's banks a broad geographical dispersion for their banking risks. The independent bank, far from being the strength of small town America was its greatest weakness according to Mr. Ely. He believes the banking collapse in America in the early 1930s was caused, at least in part, by the restrictions on branch-banking which kept U.S. banks unnaturally small. In 1930 there were 23,700 banks and only three percent of them had any branches at all. In the early thirties the typical bank failure could be traced to fraud or a local economic disaster. Of the 4,800 bank failures during the Great Depression era, most banks were too small to carry on investment-banking activities and therefore there was really no justification, Mr. Ely points out, for enactment of the 1933 Glass-Steagall Act.

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Alternative #116

Alternative to government underfunded FDIC.

insured

deposits

and

an

Goal: To avoid runs on lending institutions and ensure stability of the banking
system. Substitute government insurance with private insurance purchased by individual depositors or the institutions, or make sure the existing FDIC is adequately capitalized.

How:
1 - Consider having government-provided insurance replaced with private insurance or having depositors pay a co-payment for the insurance provided by government. 2 - Banks could purchase "preferred stock" in the FDIC equal to one percent of their domestic deposits, and could carry this stock at par on their balance sheets. This way the FDIC would get an infusion of approximately $25 billion and banks would receive dividends on their investments. Since they could carry the preferred stock on their balance sheets as an asset, the banks net worth for accounting purposes—assets minu liabities—would not go down. 3 - The Fed can pay interest on capital reserves the bank places with it. But since the Fed pays any excess funds into the Treasury, any interest paid by it would ultimately reduce the Treasury's income and just be one more hit on the taxpayer. 4 - Another suggestion is to lower the legal lending limit of federally insured institutions. If there has to be regulation, then limiting individual bank's exposure to large speculators and opening up capital sources for a greater variety of more modest endeavors, is one of the better regulations

Practical Benefits:
Reinstitute the discipline of the market which would close down poorly managed institutions.

Soft Power Benefits:
Encourage depositors to take responsibility for the selection and monitoring of the institutions where they deposit their funds. Expect managers to exercise prudence.

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Background for Alternative #116
The U.S. banking system was fundamentally sound prior to federal deposit insurance and was not prone to destabilizing banking panics. In the early 1930s, frightened depositors irrationally converted their bank accounts into currency. U.S. currency is still the most widely used medium of exchange. Today there is more than $250 billion worth of currency in circulation and those who hold it don't have to worry about risk of default. They do have to worry about theft or losing it. Credit cards and checking accounts are much more convenient and favored, I'm sure, by most people. In their 1963 study of monetary history, economists Milton Friedman and Anna Schwartz claimed that the monetary contraction of the thirties intensified the economic depression. They blamed the Fed for failing to pour reserves into the banking system. According to one theory the lack of funds, led to the bank runs which in turn produced a credit crunch which acted as an additional drag on the economy. Between 1865 and 1933, before the government insured deposits, depositorlosses averaged only 0.78% of the total deposits in all commercial banks. In a study published by MIT Press in 1986, tided Perspectives on Safe and Sound Banking: Past, Present and Future, it was argued that costs imposed by bank failures and associated runs, were no greater than costs imposed by the failure of non-banking firms. Runs were examples of depositor discipline that shut down poorly managed and insolvent institutions—the market at work. But even though these losses were small, they nevertheless exceeded the losses of the FDIC between 1988 and 1989. According to the report FDIC losses were approximately 0.25 percent of total bank deposits at insured banks or roughly one-third of the depositor losses experienced during the crisis years prior to deposit insurance. Deposit insurance, introduced in the 1933 Glass-Steagall Act, has encouraged risk and poor management. It has distorted the system. Originally the Federal Depository Insurance Corporation (FDIC) was supposed to stop runs on banks, but instead it has effectively stopped depositors from keeping an eye on their savings, and bankers from being prudent. The "pass-through" theory says that entities like pension funds, should be considered as so many individual deposits, each below the $100,000 ceiling deposits. The fact that they are lumped together should be overlooked for insurance purposes. In 1984 the FDIC and the Federal

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Home Loan Bank Board banned new "brokered accounts" which is what they call the really large deposits which are split into $100,000 accounts split to take advantage of FDIC insurance limited to that amount. In 1987 the FDIC insured 14,822 institutions with over $2 trillion in deposits, and for the first time since its founding, FDIC reserves of slightly more than $ 18 billion were in danger of running out. The FSLIC (Federal Savings & Loan Insurance Corporation) which then insured 3,200 savings and loans, was technically bankrupt as 1987 began. There could be "safe banks" where deposits are invested in government and agency securities, and home mortgages. These banks could be covered by the FDIC—backed ultimately by taxpayers. "Risky banks" would have more investment latitude but depositors would not be provided with insurance. Of course they could obtain their own. Problem most consumers would prefer the risky banks because of the higher possible returns. Americans are optimists! According to Lowell Bryan, author of Bankrupt: Restoring the Health and Profitability Of Our Banking System, most institutional investment, a total of $1 billion in deposits and other borrowed funds, would leave the insured "safe banks" Secondly, the investments that make "safe banks" safe, like Treasury bills and so forth, are already backed by taxpayer guaranties, making FDIC protection redundant. Banks pay premiums into the Bankers' Insurance Fund (BIF). These premiums exceeded disbursements leaving as much as $18.3 billion in the fund as recently as 1987. But by the end of 1991 the insurance fund had dropped pretty near to zero because of the increased number of pay outs. We can give the FDIC an infusion of capital by borrowing, either from the banking industry, the Federal Reserve Board (Fed) or taxpayers. Professor Lawrence White suggests a plan that would have all Some people did suggest that merging the FSLIC with the FDIC would, back in 1987, have provided nearly $29 billion to handle bank and savings and loan failures over the next five years without dipping into the corpus of the FDIC fund. Former head of the FDIC, William Issac, was not one of them, nor was his successor, William Seidman. Both men were against a merger. Of course there were a variety of individual opinions but in general the commercial banks were afraid a merger might mean an increase in their deposit insurance premiums and would amount to the bankers' bailing out the thrifts. The savings and loans were not exactly overjoyed, fearing a merger might mean their ultimate extinction, or at least stricter controls. we can't afford to be complacent when in FY1991 the FDIC paid out $66.6 billion and is expected to disburse $100 billion or more in 1992. Add

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on the $70 billion loan to the BIF (Bankers Insurance Fund) and there is a liability of $250 billion in future outlays just to pay off depositors. There are no constituents for this item in the budget. Everyone would like to see it fall to zero. Islam forbids the payment of interest. They have a profit-or-loss system where the borrower and lender make an agreement the delineates the way in which profits or losses are to be shared between the two parties. Risk is transferred to the lender, which makes the lender more careful about the endeavors it finances. This emphasizes productive investments. Lenders become involved in a venture where they have placed money and to do their best to make it work. They essentially become team players. In such a system the banks' balance sheets would show equity positions on the balance side and the liability side would look like a listing of shares in a mutual fund. Instead of depositors, there would be shareholders and their returns would vary with the banks' returns. There would be no need for deposit insurance and no fear of runs on the bank. It is doubtful that the banks would have so easily lent money to LDCs if the return on the investment depended on the success or failure of the project for which the money was requested. Also if depositors viewed themselves as investors with money at risk, they would shop in order to put their dollars in the bank with the highest profit and least risk. Sound management would be rewarded and encouraged. And banks would be forced to find the most promising investments in order to attract depositor-investors. Depositors could make standard deposits that are federally insured up to a reasonable limit or could open an uninsured mutual fund account. Allowing financial institutions to play a dual role would give a much larger sector of the U.S. population access to mutual funds. The exposure of the (FDIC) would diminish as more depositors become more savvy and open accounts in the mutual-funds side of the bank. I think we should be looking for new and better ways to do things. I'm not advocating wholesale adoption, but we can pick and choose from a variety of ideas to upgrade our present system. Bank regulators from around the world met in Amsterdam at the end of 1986 and expressed their concern about the dangerous banking practices which they feared might have the potential to touch off a global banking crisis.

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Alterative #117

Alternative to American banking regulations that benefit foreign competition.
Goal: Fairness. How:
1 - Change current practices that make foreign funds a preferred source of capital for American banks. Foreign deposits are insured if a bank fails but they are not counted when determining the size of a bank's premium. 2 - Change current practices that allow foreign competitors to engage in the most profitable lines of business without carrying the same cost burdens of American banks. 3 - Change current practices that result in our own commercial banks paying premiums that insure the brokered deposits of investment banks. 4 - Change laws like the International Banking Act of 1978 which exempted approximately fifteen large foreign banks from the provision in the 1933 Glass-Steagall Act which prevents American commercial banks from underwriting corporate debt or equity offerings in the United States. 5 - Change current practices that allow foreigners to own banks in more than one state while making it illegal for a domestic bank to do so.

Practical Benefits:
American banks will be stronger and more competitive. A nation must have a strong stable banking system for its economy to prosper.

Soft Power Benefits:
The notion of fairness permeates the society and makes all citizens feel more confident.

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Background for Alternative #117
Bank managers will have greater incentive to act prudently once they have more capital on the line and this, by itself, should reduce the probability of bank failures. Foreign deposits are insured if the bank fails but they are not counted when determining the size of a bank's premium. They get a free ride. This makes foreign funds a preferred source of capital for banks! Until the late 1980s foreign banks were able to open branches anywhere in the country even though domestic banks were prohibited from doing the same thing in Japan. Japan doesn't allow foreign banks to develop money market instruments or manage mutual or pension funds in its country. The Japanese Ministry of Finance keeps interest rates low and gives Japanese banks their lower cost of capital. American laws allow foreign competitors to engage in the most profitable lines of banking business without carrying the same cost burdens of American banks. On top of this, our own commercial banks end up paying premiums that insure the brokered deposits of investment banks who cater to generally the most sophisticated financial consumers. In addition to the expenses and costly regulations imposed on domestic lenders, foreign lenders have access to cheaper overseas funds. These foreign entities can therefor offer better interest. Is it any wonder they cornered 30 percent of the loans made to American business in 1991? American banking regulations benefit foreign competition. Thanks to the International Banking Act of 1978, approximately fifteen large foreign banks were exempted from the provision in the 1933 Glass-Steagall Act which prevents American commercial banks from underwriting corporate debt or equity offerings in the United States. Last year a subsidiary of the Union Bank of Switzerland managed debt issues for Borg-Warner Acceptance Corporation, Transamerica Financial Corporation and Allied Signal— ad in New York. Many foreign banks have been on a spree, buying shares in American investment banking establishments. Not long ago Sumitomo Bank of Japan purchased a $500 million share in Goldman Sachs, one of Wall Street's more prestigious firms in order to break into investment banking in this country. To counter the ridiculous situation that allows foreigners to own banks in more than one state while making it illegal for a domestic bank to do so, in 1987 twenty states adopted reciprocal privileges. They allowed citizens of other states to own banks within its borders as long as the privilege was reciprocated. History repeats itself. There were 700 Japanese banks in 1931 and ten years later that number had dropped to 190. After the Second World War

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Japan had a very tightly regulated financial system. In an attempt to prevent the concentration of capital in the hands of a few institutions, the Japanese put into their banking law a word for word translation of the American Glass-Steagall Act, our law which prohibits banks from underwriting corporate securities. But the deposit insurance system in Japan is not funded according to our American standards. In fact premiums paid by participating lenders could barely cover a handful of very small institutions. The banks keep small reserves because they have to pay taxes on reserves that exceed .3 percent of total loans. They also pay taxes on bad loans which the government makes them keep on the books for a full year after borrowers have stopped paying interest. Not that long ago, (1989) the largest Japanese manufacturers had accumulated cash amounting to four times their annual expenditure on plant and equipment. Loans were not needed because the Bank of Japan adopted a loose monetary policy and cheap capital meant businesses could raise money through the stock and capital markets and by-pass the banks altogether. Banks began speculating in stocks, securities, art and the already inflated real estate market. Between 1985 and 1990 real estate lending tripled. At the very end of 1989, Uahushi Mieno, Japan's counterpart to our Alan Greenspan, raised the central bank's discount rate. It fluctuated but two years later it was still double the old 1989 rate of 2.5 percent which had provided such a joy ride for investors. Depositors were paid more but it took awhile before lenders could be charged more for the use of those funds. The spread between the cost to the banks and the yield widened with the risk masked by the hot speculative market. This depressed stock prices, making it harder for the banks to raise capital. In addition, many of the banks' customers and their own investments were hurt, just as banks' costs rose. Then to top it off, the Bank for International Settlements imposed stricter capital ratios. Japanese manufacturers depended on bank loans for their rapid expansion. When their profits began to decline in the nineties, as the result of the recession in that country, Japanese banks took the hit. Even the big Japanese banks are in trouble because their capital consisted of appreciated stock and real estate equity. The Japanese stock market never recovered from the 1987 crash and in 1992 was still down 40 percent from its peak and Japanese real estate values were down 30 percent. Japan still has eight of the ten largest banks in the world but they are being restricted by nonperforming loans and rising costs. According to the New York Federal Reserve Bank, a few years ago large U.S. corporate customers were borrowing $4 from foreign banks for every $10 they got from major U.S. banks. Such borrowing has increased since then.

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In the United States, when low interest rates are more important than innovation, Japanese banks have picked up a large market share. Some Japanese banks offer loans to U.S. businesses at between 1/8 percent and 1/ 4 percent below the savings rate at American Banks. Sometimes they earn less than onetenth of a percentage point for supplying credit, less than half what an American bank might consider to be profitable. Even the most westernized Japanese bankers disdain U.S. and European notions of what constitutes an acceptable profit. Some Japanese companies are able and willing to forebear profits for up to ten years in order to build up business. Actually the Japanese economy as a whole is a low-profit operation. Sumitomo Bank returns a mere thirty cents on each hundred dollars of assets whereas Citicorp returns 75 percent. It's not so surprising then that by the end of 1986 Japanese banks held 8.4 percent of all commercial loans in this country. This is especially true in the state and local government market where Japanese banks sell letters of credit which enhance the credit rating of the municipality or agency wishing to float bonds or notes. The more a bank is able to increase the issuer's credit, the less the issuer has to pay to borrow money. And Japanese banks can offer high credit ratings because the Japanese government can be counted on to bail them out. Nevertheless Japan may be the place to borrow but not to invest. American banks are more profitable, measured by return on assets, than are Japanese banks. We hear so much about American loans to Latin American countries but the Japanese got burnt in the same market ($40 billion to our $100 billion) and are therefore leery of risky or relatively unknown borrowers. Lending their credit ratings to American state and local governments is a low-risk business where the default rate is far lower than for commercial loans. The state of Michigan was saved from a budget crisis in 1982 when the Mitsubishi Bank agreed to guarantee $500 million worth of the state's bonds. In 1986 the Bank of Tokyo lent $5 million to a group of New York developers who were building an office complex in a run-down section of the Bronx. The city of Boston, also in 1986, solicited competitive bids on a $100 million note. The three lowest bids were Japanese with the best U.S. bid twice as expensive as Sanwa, the winning Japanese bidder. City officials estimate Sanwa's bid saved the Boston taxpayers somewhere between $130,000 to $400,000 in fees. And Boston's experience was not unique. In December 1986 the Arkansas Development Finance Authority found its three best bids were Japanese and that the winning bid from Sumitomo Bank saved it just under $2 million in reduced interest costs and other fees over a three year period.

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Not long ago Japan's seven trust banks and twenty-one life insurance companies were the only entities authorized to manage tax-exempt pension funds in Japan. Japan's pool of retirement savings amounts to over $50 billion and is expected to skyrocket in the next decade as the aging workforce sets aside more and more for their retirement years. The average Japanese retires at 55, earlier than in the United States and can expect to live longer. Today (1991) one in eight Japanese is 65 or older and by the year 2005 Japan will be the nation with the largest percentage of its population over age 65. With a greater need for retirement income and the poor returns that have thus far been produced by their own Japanese trust banks, there is a blossoming interest on both sides for American access to those pension funds. In the eighties the coffers of Japanese banks became so overladen, thanks to Japan's huge trade surplus, that the Japanese had no way to invest all that money domestically. At the end of 1986 the Japanese Finance Ministry liberalized capital flows from Japan so in 1987 Japanese banks, insurance companies and brokerage houses were flush with more than $500 billion for investment in foreign countries. The Japanese Postal Insurance Fund, which is managed by the Post and Telecommunications Ministry, used to be allowed to invest a maximum of 10 percent in foreign bonds. The ministry doubled the amount allowable and also made it possible to invest in foreign corporate bonds. Formerly investments were allowed only in bonds issued by foreign governments and public organizations. Japanese commercial banks are very closely regulated. As far as the interest rate on bank deposits goes, 60 percent is set by regulation and the other 40 percent is determined by the marketplace. Certificates of deposit and foreign deposits escape rate regulation but the number and size of those deposits is strictly limited. The Japanese used to have lower capital requirements than American banks. When the Federal Reserve Board required U.S. banks to set aside cash, bonds and other low-yielding capital, equivalent to 5.5 percent of their assets, Japanese banks kept about half as much in capital. That one change meant they could lend more cheaply. Most of the world adheres to a principle called "national treatment" which means that foreign firms must have the same rights given domestic firms. Japan doesn't abide by it. On the "level playing field" principle, the Fair Trade in Financial Services Act of 1990, backed by Senator Don Riegle and at least ten other senators, would allow U. S. regulators to limit Japanese bank expansion in this country. If the idea is to get fair treatment for American firms from the countries whose firms we treat fairly here, it's an idea whose time has come. American businessmen can forget about being successful abroad without the presence and help of American banks in foreign countries.

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Alternative #118
Alternative to the lack of reciprocal treatment for American banks in foreign markets.
Goal: A level playing field for U.S. banks How: Reform the terms of the 1978 International Banking Act which required
foreign banks to submit to our federal bank examiners, carry insurance, maintain reserves, adhere to limits on interstate banking and nonbanking activities and to be licensed. It also grandfathered in a couple competitive advantages like letting foreign banks continue underwriting securities, even though Glass-Steagall prevents American banks from doing the same. It also granted "national treatment" to foreign banks even though no other country gave us national treatment in return. In 1987 the Senate passed a bill denying the application of any foreign bank whose country does not grant American banks national treatment, but the legislation failed in the House. No wonder Japan's banks overtook their American counterparts as the world's largest international lenders.

Practical Benefits:
American businessmen can forget about being successful abroad without the presence and help of American banks in foreign countries.

Soft Power Benefits:
The notion of fairness permeates the society and makes all citizens feel more confident.

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Background for Alternative #118
The United States dominated worldwide banking in the 1950s and 1960s but the European and Japanese banks got a real foothold in this country during the 1970s. The International Banking Act of 1978 was passed in response to complaints that the operations of American banks were restricted when compared to the unchecked operations of foreign banks here. The proverbial "level playing field" was the goal. The legislation required foreign banks to submit to our federal bank examiners, carry insurance, maintain reserves, adhere to limits on interstate banking and non-banking activities and be licensed. It grandfathered in a couple competitive advantages like letting foreign banks continue underwriting securities, even though Glass-Steagall prevents American banks from doing the same. It also granted "national treatment" to foreign banks even though no other country gave us national treatment in return. In 1987 the Senate passed a bill denying the application of any foreign bank whose country does not grant American banks national treatment, but the legislation failed in the House. So Japan's banks overtook their American counterparts as the world's largest international lenders. The Japanese have established banks in Australia and London where some 35 Japanese banks account for 20 percent of all British banking assets. The United States is now host to more than 38 Japanese banks, including the five largest banks in California. In February 1988, J. P. Morgan Co., the last of the American companies to enjoy a triple A rating, lost it. About the same time Federal Reserve Board Governor Martha Seger appeared on C-SPAN. Martha Seger disavowed any protectionist sentiments but expressed anger because of the "unlevel playing field" on which American banks were forced to compete. She declared that the Bank Holding Company Act, which controls how foreign banks operate in the United States, should be scrutinized. She was not shy in pointing out that in Japan U.S. banks are not treated on a par with Japanese banks whereas Japanese banks are treated even better than U.S. banks when they come to this country.

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Alternative #119
Alternative to the way the Treasury Departments sells U. S. government debt.
Goal: Dollar savings for taxpayers.

How: Reform the auction system controlled by the forty licensed primary
dealers.

Practical Benefits:
Since in this day of global communication there is little fear that here would be no purchasers for U.S. government debt and since paying dealers to steer the sale of our debt is merely a custom, it would save taxpayer dollars to phase out the outdated system. Discontinuing the routing of bids through the primary dealers would reduce the temptation to abuse.

Soft Power Benefits:
Any reduction in the appearance that favors are accorded some segment of society at the expense of others would promote fairness.

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Background for Alternative #119
The Treasury Department was at one time afraid the U. S. government might offer securities for sale and there would be no takers. But in this age of instant global communication there is no possibility that the U.S. government would be unable to sell its debt. Therefore many people today question the need to pay for the expensive services of the 40 primary dealers—an outdated luxury that should be phased out, He suggests we examine ways to improve the efficiency of the market, reduce the cost of financing the government's huge deficit so the taxpayer can have some relief. The Salomon Brothers scandal might have been the catalyst for a rethinking of the auction system controlled by the 40 licensed primary dealers, Actually anyone can place competitive bids, but the bidding process is so cumbersome that few outsiders do it. The common bidders, large mutual and pension funds, route their bids through the primary dealers. This gives these 40 dealers valuable information about how the large institutions are going to bid and is in itself a temptation to abuse, according to Mr. Murray. We take time to fume about underwriting by banks and ignore the manner in which over $2 trillion (figure for 1990 alone!) worth of government securities is auctioned every year. Let's get real!

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Alternative #120

Alternative to the lack of uniform capital standards for the world's banks.
Goal: Prevent banks in one country from having an advantage over banks in
another country.

How: Enforcement of the terms of the 1988 Basle Accords agreed to by the
central banks of the leading industrial countries especially the requirement that by the end of 1992 banks have capital reserves equal to eight percent of their assets.

Practical Benefits:
Puts American banks on a more equal footing with foreign banks. But this reform is a mixed blessing since it changes the way banks value assets and may impede lending.

Soft Power Benefits:
The fairness aspect is good but to the extent that new capital requirements lessen access to capital to a small business person or fails to let a banker exercise his own judgment as to the credit worthiness of the borrower and the quality of the proffered assets, it is harmful. It takes power away from people and strengthens an impersonal bureaucracy.

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Background for Alternative#120
Capital is the difference between the market price of a bank's assets and market price of its liabilities. In 1988 under the Basle Accords, the central banks of the leading industrial countries promised to compel the banks they supervise to keep capital at a prescribed percentage of assets. The Basle requirements meant stricter capital ratios and signaled the need for banks to raise new capital to grow, or even to keep from shrinking in some cases. There is a rather complicated formula involved but the bottom tine is that by the end of 1992 banks will have to have capital equal to 8 percent of their assets. The requirement also changes the way banks value assets. In the past, regulators have permitted banks to value equity (assets) at the original cost rather than the current price so they don't have to write down real estate loans during depressed times. They reason that they intend to hold on to the property until the market turns and so no actual loss has been suffered until it is sold or transferred. The new rules spell trouble not only for American banks. Midland Bank, once Britain's largest, replaced its CEO and cut its dividend in the spring of 1991 and Moody' s dropped the ratings on the huge Japanese banks, leaving only one with a AAA rating. In this country, bankers figure that in order to cover reserves, deposit insurance, and other requirements, they now have to build about 1.25 percentage points into the rates they charge customers on their loans. Foreign and nonbank competitors have in the past been spared these costs. Actually these capital requirements may be less arduous for American banks than for banks in other countries. Most U.S. banks are already overcapitalized relative to the risks to which they are exposed. A bank has an incentive to either guarantee all of a loan or to retain the loan and the related exposure. Therefore, while there may be far too much capital in the banking system as a whole, there may be far too little to protect the FDIC from experiencing catastrophic losses in a severe nationwide recession. Having everyone raise more capital is not the answer — specific institutions, not the entire industry, is where the problem lies. Legislation was actually passed in November 1991 which included strict capitalization requirements and higher fees to finance the $70 billion replenishment of the FDIC. (The FDIC Improvement Act of 1991.) According to financial analyst William Ferguson, already 9,500 of this country's 12,000 banks ($2 trillion in deposits) have assets of $100 million or less with capital of 8 percent to 9 percent. Anything above 4 percent used to be considered respectable. Besides, equity accounts for about five percent of all funding sources for American banks and savings and loans; fifteen percent for consumer finance companies and seventy percent for

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non-financial companies. Bankers have argued for the inclusion of subordinated debt as well as equity in the regulatory definition of "capital". Regulators tend to look at capital as a buffer to absorb credit losses, whereas banks view capital as an expensive source of funds. But we didn't always have such stringent capital reserve requirements in this country. Between 1933-1947 debt to equity ratios soared in the United States but dropped under the pressure of capital regulation in the 1950s. The ratios climbed again as deposit protection expanded. The Basle Accords have made this ratio of capital to assets uniform worldwide. Even earlier, in December, 1987 the Cook Committee for Bank International Settlements announced standardized capital guidelines for banks operating in 11 or 12 countries. The fear has always been that higher capital requirements may cause banks to invest in riskier assets in an attempt to maintain a given rate of return on equity. But according to bank analysts Michael Keely and Frederick Furlong The value of the deposit insurance guarantee to the bank rises as asset risk increases ...increasing leverage by increasing deposits relative to initial assets also increases the value of the deposit insurance guarantee. I take that to mean that a bank, if allowed, can increase the wealth of stockholders by either increasing leverage or asset-risk. According to Keely and Furlong, as the capital of an insured bank increases, the bank's incentive to increase asset-risk falls. Therefore banks with the lowest capital ratios have the greatest incentive to assume risky asset portfolios. More stringent capital requirements would not give banks more of a reason to invest in riskier assets, it would give them less of an incentive to do so.

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Alternative #121

Alternative to forcing banks to write down assets to present values.
Goal: Stop the decline of real estate values and restore confidence and health to the capital markets in this country. How: There should be no need to value assets at bargain basement prices as long as they are showing adequate return. Stocks, bonds, property and other fluctuating assets do not lose value unless they are sold. Lower interest rates, institute regulatory policies that allow sound real estate financing, and a federal tax program aimed at stabilizing and restoring commercial and residential real estate values. The Fed and regulators should assure lenders they will not be penalized by financing sound real estate investments. Congress should restore some form of passive loss treatment and cut the capital gains tax. If there is going to be tax code manipulation existing commercial properties should be favored over new construction and incentives should be given for new residential construction and low-income housing. Practical Benefits: Whatever such a program would cost in foregone taxes would be made up in fewer bail outs. Stopping the decline of real e s t a t e would restore confidence and health to the capital markets. Every economic recovery in the post war period has begun with real estate.

Soft Power Benefits: Allowing people to make as many choices free from government mandates reinforces the inner resources and self-reliance of citizens.

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Background for Alternative #121
Falling real estate values will trigger more failures by thrifts, banks and insurance companies. Depressed real estate values lower the value of loans and securities collateralized by real estate which represent about 30 percent of bank, insurance and other financial institution portfolios. Real estate values have an enormous impact on every community and makes up one third of household net worth and contributes in varying degrees to the net worth of businesses. Commercial real estate is responsible for about 23 percent of all the taxes paid in this country, more than 70 percent of all local taxes collected. An asset looses 20 percent of its value the minute the government takes possession. This fact serves as justification for providing subsides to those who purchase failed institutions and their undesirable assets. The lesser subsidy saves the 20 percent that would be immediately lost if the RTC were forced to possess the bad assets instead of selling them with the institution. Shortly after the passage of the 1991 FDIC reform act, Timothy Ryan, head of the RTC (Resolution Trust Corp.) told examiners not to write assets down to liquidation value. Since real estate is a substantial portion of the nation's net worth and it has already declined by about 40 percent between 1989 and 1991, it would no doubt be helpful if bank regulators stopped forcing banks to write down assets to their artificially low present values when they have real longterm much higher value. There should be no need to value assets at bargain basement prices as long as the property is showing adequate return. Stocks, bonds, property and other fluctuating assets do not lose value unless they are sold. Stopping the decline of real estate would restore confidence and health to the capital markets. Every economic recovery in the post war period has begun with real estate. The 1981 tax cut created excessive incentives which contributed to the overbuilding of commercial real estate and the 1986 act overshot and knocked the props out of real estate prices by taking risk capital out of the industry. Then some people claim inadequate regulation was the cause of the over-aggressive lending which led to inflated prices and overcapacity. Homeowners were the real unrecognized LBOs of the 1980s. According to the Fed's own figures residential assets totaled $2.57 trillion in 1980 and mortgage debt amounted to about $942 billion; a leverage ratio of 36.7%, fairly steady since 1950., In 1992 the asset value of residential real estate was up to $4.7 trillion and mortgage debt was $2.7 trillion (3 times higher than in 1980)with a 59% leverage ratio which was off the historical charts. By 1992 the homeowners equity withdrawal amounted to

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$1 trillion. This equated to a $300 billion equity drop since the middle of 1989, or a drop of 15 % in the principle asset of most households. No wonder consumers felt threatened during the 1991-92 recession. They may only feel secure enough to start spending when the leverage ratio is back in line. In 1980 the 1,300 largest companies in the USA had aa+ ratings and a 25% debt to capital ratio and the oe rating coverage of interest was 5.2 times, the debt to capital ratio was 42% and the operating income coverage of interest was only two times. Late 1989 and early 1990 the expansion stopped. For the five years ending August 1990 GNP was up $1 trillion to $3.8 trillion. Since then there has been, not an inventory reduction but a destruction of capital, a deleveraging of the balance sheets as shown in the assets of savings and loans and banks—down $ 130 billion in absolute terms or a 3% contraction. Since September, 1990, commercial business paper totaling $40 billion has dropped by six percent. David Stockman told an American Enterprise Institute audience in January 1992, that the danger is the depletion of bank capital. In 1980 combined private and public debt was $4 trillion which was not far from the 1.5 x GNP ratio which has held pretty steady since 1954. In 1988 the combined debt had shot up to $11 trillion and the ratio was 2.0 x GNP, the highest ratio ever. Mr. Stockman said to expect a ten year visible supply of empty office space. Before 1980 there was 7 sq ft of retail space in the country for every man, woman and child and now there is 16 sq ft. There is an excess of fixed assets which means more depreciation of real estate and liquidation of debt which he read as a sign that the recession may well continue into the mid 1990s. In 1989 the RTC had $500 billion worth of assets under its control. Those assets had dwindled to a mere $140 billion by 1992 with $16 billion of it consisting of foreclosed real estate. That breaks down to $7.5 billion worth of commercial properties, $7 billion worth of raw land and $1.5 billion in residential real estate. The 24,000 acre Banning-Lewis Ranch on the east side of Colorado Springs is the RTC's largest and most expensive real estate holding. The agency holds as much as 40 percent of the land in some cities—Austin, Texas for example. And in California a sub-regional office was recently established. Savings and Loans are having a hard time in California with the 1992 economic slump and their inventory of high priced real estate that nobody except the RTC wants or can afford to own. Having the RTC as landlord has caused local governments problems. The RTC has faded to pay property taxes on time and refused to pay late fees and interest on overdue debt as wed as special assessments in some instances. This is in addition to the undermining of local property values

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which occurs when RTC slashes its prices to get a sale. If properties don't sale at the asking price within 30 days, prices are cut 20 percent; after six months they are slashed again, only this time by 40 percent. The investors that know this naturally wait until these cuts have been made before submitting their bids. This depresses the surrounding property values and the revenues of local governments that depend on those property values. There was an amendment to grant temporary exceptions to legislation which requires savings and loans to deduct from their capital any direct investment in real estate. Other amendments to decrease the amount of capital a S & L must hold for certain home-construction loans and for high-quality seasoned apartment loans, were deleted by the Senate, after passage by the House and before the final vote on the bailout bill in November 1991. In bulk sales, where the RTC sells several properties to one purchaser, the government typically provides the financing and receives a portion of the cash flow and the proceeds from any subsequent resale. At least 25 percent of the real estate included in such deals is supposed to be unprofitable. Sometimes this practice of combing unprofitable with profitable assets is referred to as "bundling". These "bundles" are sold at a discount and saves the RTC, and ultimately the taxpayers, money. A quick sale is better than incurring the holding costs for managing the bad assets for a long period. In 1992 the RTC hopes to sell $ 100 billion worth of assets with almost one-third bundled. But when "bundles" are offered for sale, all cash, at bargain basement prices, only the wealthy have the means to take advantage of die bargains. We need to stabilize real estate values to prevent the failure of more institutions and get the industry moving again. We need a combination of lower interest rates, regulatory policies that allow sound real estate financing, and a federal tax program aimed at stabilizing and restoring commercial and residential real estate values. The Fed has been attempting the first step by lowering interest rates but long term rates need to come down further. Secondly some of the lavish criticism that has been directed at both lenders and regulators needs to be curtailed. The constant blame has led to paralyzing fear. The Fed and regulators should assure lenders they will not be penalized by financing sound real estate investments. And hardest of all, because this is an election year and partisan politics will be in full swing, congress should restore some form of passive loss treatment, cut the capital gains tax and expand incentives for lowincome housing. Most experts believe existing commercial properties should be favored over new construction but incentives should be given for new residential construction. Whatever such a program would cost in foregone taxes would be made up in fewer bail outs.

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Alternative #122

Alternative to the Community Reinvestment Act.
Goal: Access to capital for as many credit worthy borrowers as possible. How:
1 - Not by forcing private or tax supported entities to go against their established guidelines to favor one group of Americans over another for fear of government reprisal. 2 - Not by using taxpayer dollars to pay Legal Service Corp. attorneys to institute protests and obtain extortion from profitable lending institutions. 3 - But by publicizing and encouraging entities like Chicago's Southshore Development Bank, and James Rouse's Enterprise Foundation and countless other voluntary philanthropic entities. 4 - But by the voluntary pooling of community and family assets to provide capital for advancement for those who do not meet the credit requirements of privately operated for profit financial institutions.

Practical Benefits:
Economic development in communities where financing would not be possible through established for-profit channels.

Soft Power Benefits:
Empowerment of people through their own efforts and not via the hardpower alternative of extortion.

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Background for Alternative #122
The Community Reinvestment Act (CRA) was enacted in 1977, supposedly to encourage the banking industry to actively participate in economic development activities at the community level. In practice the CRA provides the umbrella under which groups protest the merger and expansion of financial institutions. The protests are generally designed, not so much to deny, but to delay the "revenue-generating endeavors" of institutions. According to William Harvey, professor at Indiana's University School of Law and former chairman of the Legal Service Corp's board: Demands usually include an assorted menu of below-market interest-rate loans, specific geographical and dollar-amount lending targets, minority business loan emphasis, and outright cash grants to the protesting coalition. Such demands benefit specific interest groups, to the detriment of the community as a whole. Unfortunately the banking community has found it cheaper to give in to the protestors' demands than to fight them. Naturally extortion attempts increased with that kind of encouragement. Federal Reserve Board statistics show the number of CRA protests filed in 1987 was more than 10 times the number of all protests lodged in 1984. Professor Harvey claimes that although the Legal Services Corp. is private it received more than $2.5 billion in direct Congressional appropriations during Ronald Reagan's presidency. The Professor says the worst part is the fact that taxpayer-funded attorneys (funded by the Legal Services Corp. so ultimately by the taxpayers) not only represent protestors in many CRA cases, but often initiate the protests themselves and get paid. These protests often amount to nothing more than straight transfers of wealth from a productive sector to a nonproductive set of individuals.

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Alternative Alternative #123

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#123

Alternative to the expansion of tort law to include recognition of lender liability law as a new speciality.
Goal: A banking environment where lenders are not afraid to lend. How: Redress due to duress, bad faith breaches, fraud, fiduciary relationship
and other banking abuses are available to borrowers under existent theories of contract law.

Practical Benefits:
Every expansion of liability makes more business for attorneys and more expense to consumers. Expansion of liability is as chilling to the banking industry as the expansion of product liability is to manufacturing. Anything that puts the brake on commerce and industry hurts our competitiveness in the world market. It's not a matter of sacrificing the interests of individual borrowers for the good of the banking industry; the interests are tied together. If banks are afraid to lend, borrowers suffer.

Soft Power Benefits:
Government officials denigrate borrowers by attempting to relieve them of responsibility for their own welfare. Just as there are a majority of good eager-to-help people in any community, there are also the sharks and scavengers with no qualms about taking advantage of the weakness in others. No favor is done by keeping the weak dependent. Only if they are allowed to protect themselves by developing awareness of the pitfalls around them will they acquire the self-respect necessary to enable them to fulfill their potential. Any other attitude towards healthy people is elitist.

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Background for Alternative #123
A fiduciary relationship is a special relationship where the advising party must place the advisee's interests above his own and is not normally found in a lending situation. However it was found to be at least a "quasi-fiduciary" relationship in 1985 in California. The lender must do nothing which could hurt the borrower's interests. It has also been established in California where excessive control by the lending institution over the borrower can be shown. Also a joint venture can be found if an institution becomes too involved in a borrower's business and liability has been established for breach of an implied joint venture agreement. I have no trouble with holding banks and other lending institutions liable when it comes to old fashioned fraud; suppressing facts which should have been disclosed, making misrepresentations to the borrower or third parties, making promises with no intention of keeping them and so forth.

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Alterative #124

Alternative to the expansion of laws beyond the ability of ordinary citizens and even the courts to manage.
Goal: To have an efficient responsive court system. How: 1 - Reduce the number of laws that are oppressing every segment of this nation. 2 - Streamline the procedural process. 3 - Overhaul tort law.

Practical Benefits: 1 - Business might dare to be innovative once again. 2 - Workers will find employment more readily. 3 - Investors will be more willing to invest. 4 - Consumers will have cheaper, innovative, abundant choices. 5 - The nation will be more competitive in the global market.

Soft Power Benefits: 1 - Citizens will gain respect for laws when there are fewer and they are readily understood. 2 - The feeling of fear, oppression and desperation will dominish. 3 - It will be easier to be honest.

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Background for Alternative #124
Class-action securities-fraud suits have almost tripled in the past three years. They often allege concealment or failure to disclose information and seek large monetary damages. Virtually all such cases (96% compared to 60%-70% of other civil cases) are resolved through settlement. Of 330 cases studied by Vincent O'Brien, of the Law and Economics Consulting Group, only three were decided by a jury. The average attorneys award was about $ 1 million in fees and $250,000 in expenses or approximately twenty percent of the settlement. Barbara Franklin was sworn in as Secretary of Commerce on March 23,1992 and two days later on the 25th she appeared before a House Appropriations Sub-Committee (an increase in the agency's budget—what else?) and surprisingly was unable to respond when questioned about the hesitation of private sector companies to invest in new technology on their own (without government funds and urging). Even though she was well versed in the "old" short-term emphasis of most CEOs and assured the House panel that in her opinion short-term outlook had been so denigrated that "time horizons and strategic thinking is stretching towards the long-term now", she failed to make an important connection ---------------failure to invest and act with the long-term in mind and class-action lawsuits. It seems like all a company has to do is see its stock slip in value and it becomes a target for a class-action law suit. Surprisingly, companies with less than $10 million in revenue were sued as frequently as those with over $30 billion in revenue. It was determined that the suits didn't change the companies' way of doing business nor offer much benefit to stockholders. The beneficiaries were law firms—and generally one of the seven firms nationwide, who handle most of these cases. In early August 1991, Texas Federal Judge Edith Jones addressed the American Bar Association. She described a situation where the nation is getting "litigation without law". As in so many areas of our modern life, our courts are getting buried under a mound of paper work. Lawyers proliferate and specialize in order to keep up on the latest developments. Now days lawyers, like doctors, find they must become specialists because it is impossible to be knowledgeable in all the quickly expanding areas of their respective professions. Twenty or thirty years ago there was absolutely no federal law in the following areas, according to the Judge: most civil rights, OSHA, ERISA pension, health, habeas corpus, securities, voting rights, reapportionment, title 7 employment discrimination, federal compensation (black lung),

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financial institution and environmental regulation. There are all sorts of new rights granted to the disabled by the 1990 legislation which need to be protected by the courts. Toxic tort law is expanding at an alarming rate. Federal responsibility has expanded recently to cover sentencing guidelines, currency transaction regulation and forfeitures. Bankruptcy codes expanded and filing for bankruptcy and reorganization have proliferated so that it is four times greater the number of cases than just twenty years ago. Judge Jones claimed the case load in federal district courts climbed from 87,000 in 1960 to 263,000 in June of 1990. The federal appeals courts cases went from 35,000 to 40,000 over the same thirty years. Each federal judge in Jones' jurisdiction works on a average of 600 matters per year. There were approximately 100 million cases filed in state courts across the nation in 1989. Cases alleging injury from negligence or product defects (tort cases) increased 7.6 percent—the largest increase in four years. One of my sons has been a practicing attorney for only a short time but has expressed surprise at how little courts do to help keep legal fees down. There are many nonsensical and tedious (and costly for the client) procedural rules involved with filing which many judges agree are ridiculous but nevertheless do nothing to change. Unfortunately judges are part of the problem and most do little to make the process flow smoothly and efficiently.

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Alternative #125
Alternative to the restriction of capital.
Goal: To make capital available to business and industry.

How:
1 - Do not scare away potential sources of capital. 2 - Get rid of ambiguities in the law. 3 - Restrict potential defendants in order to cut back the reach to ever more and deeper pockets. 4 - Restrict awards.

Practical Benefits:
Anything that removes the brake on commerce and industry helps our competitiveness in the world marketplace.

Soft Power Benefits:
1 - Optimism. 2 - The feeling of fear, oppression and desperation will lessen. 3 - Opportunity to reach potential.

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Background for Alternative #125
The Superfund legislation mandated the clean up of the environment but failed to provide the funds for the job. It intends to get the job done by relying on the retroactive assignment of liability for waste disposal that was legal at the time. Although that may sound like it violates the provision against the federal government passing ex post facto laws—laws which change the situation, after the fact to the disadvantage of the actor—you'd have just about as good a time arguing that as you would arguing the constitutionality of the 16th amendment. No one has been able to convince a court that the income tax is illegal even though they've tried. Nevertheless, the injustice, as seen through the eyes of the average non-lawyer citizen, of retroactively assigning liability, needs to be highlighted. The government goes to unconscionable lengths to obtain money for the clean ups. When the old user of a contaminated site cannot be determined, or has no funds, the government looks to banks and insurance companies that may have had some connection with the user. In May 1989 a federal court found that banks that loaned money to subsequent polluters may themselves be held liable for the entire cost of an environmental cleanup. Not only does this chill a banks desire to loan money in the future but it endangers many institutions on the basis of previous loans. Because of the rapid advance of lender liability law, activities which are perfectly legal and common practice one day are illegal and a cause of action the next. The first lender liability case might be traced to 1982 when a California jury awarded $7.5 million to a borrower who suffered foreclosure by a bank on his delinquent loan. Then a couple years later a Texas jury awarded $ 18 million in damages to a clothing manufacturer who was able to show his firm was essentially destroyed by the takeover by incompetent bank managers. In State Nat. Bank v Farash Mfg. Co., the court ruled the lenders conduct was legal and had a legitimate business interest, but it failed to meet "standards of fair play". Ambiguous? Nevertheless the Texas Federal Appeals Court Justice decided "social benefits derived from permitting the lenders' interference are clearly outweighed by the harm to be expected there-from". Consequently the lender was liable for damage and lost profits. This judge decided the collective good takes precedence over individual rights. Both judges and legislators are depriving citizens of the right to contract guaranteed in our Constitution. Lender liability is being

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found due to duress, bad faith breaches, fraud, fiduciary relationship and other theories. Liability that was non-existent in many instances, less than ten years ago. Although duress has always been an affirmative defense, now courts are ruling that when a borrower is faced with either financial ruin or taking the loan tendered, the bank may be guilty of duress. Forget all that went before in getting the borrower into such a condition. Forget that a person should bear responsibility for the consequences of his own actions. A borrower's mere fear of economic loss can make the lender liable if the borrower accepts a bank loan and later regrets his own decision. How can we live together and have business dealings when such absolute nonsense is given credence-------- more than that—sanctioned in our courts?! In 1985 a grocery business in Tennessee was awarded $7.5 million by a jury who found the lender breached his "obligation of good-faith performance" and that same year $37 million was awarded apple growers in California who were able to show that the calling of their loans forced them out of business. Although an appeals court threw it out for insufficient evidence, the case shows the expansion of this area of law and the mood, of juries. Have you ever met anyone who could not tell his own personal story of arrogance, insensitively , incompetence or just plain negligence by a lending institution? It's little wonder juries are so willing to award large damages to borrowers. But this expansion of liability is as chilling to the banking industry as the expansion of product liability is to manufacturing. It's not a matter of sacrificing the interests of individual borrowers for the good of the banking industry; the interests are tied together. If banks are afraid to lend, borrowers suffer. Besides, I believe adequate avenues of redress are available to borrowers under existent theories of contract law without this expansion into a new field called "lender liability". Every expansion of liability makes more business for attorneys. Before they take any action business people are being advised to consult with specialists in environmental law, product liability law, civil rights law, employment law, and now lender liability law. The Uniform Commercial Code, as you may know, is law adopted by states to give some uniformity to commercial transactions throughout the nation. Under its code there is a covenant of good faith and fair dealing in commercial transactions and a recognized tort—"bad faith breach". In California the tort is independent of the UCC. Anyway banks must treat their customers "fair and reasonably" no matter if the signed written documents (contract) between the parties says otherwise. This determination of fairness is, by law, to be left to third party judges or juries and can not be settled by the contracting parties. This leaves the parties with

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a potential liability over their heads and is definitely an unhealthy climate for business. What is fair at one moment in history may not be in another. Those best able to determine what is "fair" in any given situation are the parties to the contract. Would you be as likely to enter a contract if you knew someone could not only wriggle out of it later, but also obtain punitive damages against you? I'd find another business, or charge every customer enough not only to make a profit, but also to cover the chance of being sued. (Insurance premiums!) Banks have been found guilty of breaching the covenant of good faith and fair dealing when they stop advancing funds or switch formulas for advances under an established line of credit. Even if they are given the right to do those things in the written agreement signed by the customers. Of course I'm not against holding a lender liable where, for instance, a loan office cuts a customer off out of a personal vendetta or fails to stick by the reasonable notice provisions in agreements. The unequal bargaining power of parties has long been considered in courts of law. Nevertheless I am unhappy with the rewriting of a legal document. This nonsense is just one more of those well intentioned attempts to protect the public which end up hurting more than they help. The only reason one would sign a subjectively speaking "unreasonable" document, is to better his or her situation. Only the signer can determine the reasonableness of any action in the light of the choices he or she is facing at the time. Elitist officials choose to think of "the public" as children and attempt to remove them from all responsibility for their own welfare. If you go on the premise that the majority of people are basically good and want to help one another than you will not scoff at the idea that even an illegal immigrant who doesn't speak the language in which the contract is written, can go to a priest or friend of a friend for help. The world is not a perfect place. Just as there are a majority of good eagerto-help people in any community, there are also the sharks and scavengers with no qualms about taking advantage of the weakness in others. Sure, we want to help, we want to protect. But government officials, just like good parents, should learn to trust, respect and have faith in the abilities and good judgment of others. To do otherwise is to encourage weakness and dependency.

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Alternative #126
Alternative to the chill put on business due to lawsuits. Goal:
To have a vibrant productive, innovative business sector. How: Interject some common sense into tort law.

Practical Benefits:
1 - Start up and expansion capital will be more available. 2 - Old business will expand & invest in research and development. 3 - New business will decide to take a chance. 4 - Long range thinking and planning will come to the fore. 5 - Employers will hire. 6 7 8 9 - Employees will find more good jobs available. - Consumers will have a greater variety of products. - Trade will increase. - Relations between disgruntled groups will improve.

Soft Power Benefits:
When stupidity is isolated and truth and common sense are given a chance, citizens will suddenly remember what it means to be an American. Our buoyant nature and faith in our ability to make the future better will be restored. Our children will gain a renewed appreciation of the contributions Americans have made to improve life for countless people around the globe.

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Background for Alternative #126
The latest trend in law suits is called domestic protectionism . It is an effort to protect the public, to protect jobs and worst of all to protect uncompetitive industries. We are our own worst enemy. Factory workers oppose robots, agricultural workers oppose mechanical harvesters, airline pilots oppose the shift from three to two person cockpits and plumbers oppose labor efficient plastic pipes. What would the unions have done to Eli Whitney's cotton gin? The tort system, together with increased bureaucracy, is beginning to strangle development and the marketing of new technology. Progress means change. Stone gave way to copper, nomadic hunter-gatherers, became farmers, the long bow was exchanged for the crossbow and the crossbow gave way to gun powder, the horse and buggy was exchanged for the automobile and the telephone replaced the telegraph. Today business gets ready to expand or innovate and is stopped cold by threat of litigation. There are 15 million law suits costing the nation $300 billion every year. In business especially, time is money. Why wouldn't a business be smart to locate outside the USA in the nineties? An aura of uncertainty will kill any economy. Today borrowers and lenders are uncertain as to the dangers inherent in pending legislation such as the clean air bill with its endless permit process and the civil rights bill that could turn firing and hiring into lawsuits. Before strict liability became a standard in the sixties, liability depended on negligence. Assigning liability without fault has led to an unpredictable legal system. Strict liability assesses the technology because jurors don't possess the proper skills and knowledge to pass judgment. Good faith, prudence and training which were once used to evaluate human beings, become irrelevant. Today's business decisions are influenced more by open-ended liabilities. Decisions as to whether or not to introduce a product, build a new facility, hire, promote or fire personnel, lend money, transport potentially hazardous materials-all can end up destroying everything an executive has built during a life time of conscientious work. Together with our regulatory agencies, the courts have been sending a clear message to American business—"play it safe, don't be venturesome, don't take chances!" There are little more than rumors that electromagnetic fields from hightension wires, as well as PCBs (the polychlorinated biphenyls) can cause cancer. But the fact that these claims have not yet been scientifically documented does not deter the lawyers.

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I read that beets, celery, lettuce, radishes, rhubarb, mustard kale, turnips, cabbage and in fact most vegetables, if subject to tests similar to those used to screen synthetic chemicals would be banned as carcinogens. In 1985 a $5.1 million award was won against Ortho Pharmaceutical Corporation on the strength of a single study that tentatively suggested— not proved—spermacides might have something to do with birth defects. A couple years after the verdict the authors of the study maligned their own work saying the study should never have been published since the reservations and qualifications written into published papers are routinely ignored. Another example: whooping cough was responsible for 7,500 deaths in 1934 and the vaccine which was licensed in 1949 was considered unanimously to be a blessing to the entire world. In 1981 a British study suggested the vaccine's use might account for one instance of brain damage for every 310,000 immunizations. That was all American lawyers needed to launch an avalanche of cases blaming the vaccine for epilepsy and any disease they could possibly relate to the brain. The litigation threat literally eliminated one major supplier of the vaccine. Further and more exhaustive studies showed no evidence of serious neurological complications or deaths from the vaccine. For a more recent illustration let's take Prozac. Prozac, an antidepressant, came under a shadow on the observation of six patients who supposedly exhibited increased suicidal tendencies. A study involving hundreds of Prozac users showed no such connection, but again that did not stop trial lawyers. Scientific uncertainty about risk used to be resolved in favor of the regulatee, now it is the regulator who gets the ruling. It is understandable that government would act cautiously approving small steps by an established company over gigantic break throughs by a newcomer. After all, the more innovative the technology the more uncertain the risks. Insurance is less expensive, the more experienced the company, so new innovative companies are faced with prohibitive insurance rates. Rather than market new technology here, innovators sell it abroad and buy it back after a record has been established. Who wins and who loses? No wonder ad sorts of new pharmaceuticals are available in Europe and other parts of the world ten to fifteen years before they are available in America. For instance Depo-Provera developed by an American company at home is available in ninety other countries but not here. And it looks like things might get worse before they get better. Secretary Louis Sullivan of the department of Health and Human Services, is asking for 500 new FDA (Federal Drug Administration) staff members (food cops) to regulate new standards of food advertising.

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There is little if any scientific consensus in the field of nutrition or just about any field, but consumers will pay as lawyers contest claims in court. Older second-hand small airplanes are today more marketable than the new safer small airplanes. The new planes are too expensive and don't sell well because of product liability costs which average over $100,000 per plane. On the other hand, the older second-hand planes which are much more dangerous, are exempted from the stricter liability standards which are now imposed on new designs. Does this make sense? Defense procurement costs are inflated because suppliers have to add on the cost of liability insurance which increases as settlements become more prevalent. Settlements such as the $180 million spent on awards to those who claimed Agent Orange was responsible for their medical problems. In the Agent Orange instance epidemiologists now are certain there is no connection. But that doesn't undo the damage. Nor can the tens of millions of dollars spent by the Merrell Dow Pharmaceutical company in defending itself from spurious claims that its morning sickness drug caused birth defects, be reimbursed. The National Center for State Courts compiled statistics showing civil damage suits growing from 320,000 in 1984 to almost 450,000 in 1989, the most recent figures available. This prompted a Washington D.C. lawyer to comment that although "there have been some helpful fingers in the dike" tort reform has been spotty and the litigation explosion seems to still be in full swing. During much of the nineteenth and twentieth centuries America was the world's premier technological innovator but today's marketplace presents an ominous warning. When a product finally makes it to the market it is assaulted by a liability system relentlessly hostile to all that is technologically unfamiliar.

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Alternative #127
Alternative to using our courts as scapegoating institutions.
Goal: To return our courts to grown-up business.

How: Expect citizens to be accountable for their own actions.

Practical Benefits:
More services, activities and products will be available. We will share a more sane world with less whiners and more responsible, intelligent, interesting individuals with whom to interact.

Soft Power Benefits:
The notion of responsibility, self-control, discipline and accountability will come alive. Self-esteem will increase along with the real possibility of fulfilling potential and enlarging one's opportunities.

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Background for Alternative #127
A woman was cited for contempt of court in Fresno for failing to stop popping her gum when told to do so by a Judge. She was in the jury pool at the time. She was given a court-appointed attorny who spent over a 100 hours on the case. She appealed a 30-day suspended sentence and the $150 fine. The offender has since been a guest on A Current Affair and Inside Edition and vows to continue to appeal her case. So far the cost to California taxpayers has exceeded $15,000. The attorney gets $150 an hour. There is overwhelming evidence that complications during labor and delivery are not responsible for the huge majority of cases of cerebral palsy but lawyers find such litigation very lucrative. Some commentators refer to clinical ecologists as pseudo-scientists who spend most of their time testifying in courtrooms across the country. Apparently clinical ecologists believe trace chemicals in the environment cause all kinds of maladies. In Sedalia, Missouri in 1985 two clinical ecologists claimed to discover "pervasive abnormalities" in the immune systems of every resident tested and convinced a jury that Alcolac, a manufacturer of soap and cosmetics was responsible for the abnormalities. The jury awarded $6.2 million in compensatory damages and another $43 million to punish Alcolac. Never mind that the tests relied on by the ecologists were developed by Schossman's research team at Harvard and he discredited the ecologists' use of his material. A man in Iowa was awarded $506,000 even though he suffered no clear ill effects from asbestos and was in fact too busy working as a plumber to attend all but two days of the three-week trial. The award was compensation for "mental anguish and fear concerning his increased risk of cancer." In Los Angeles in December 1990, a 75 year old retired tire worker was awarded $155,000 on his claim that exposure to asbestos caused shortness of breath. This despite the fact that the 75 year old gentleman who walked five miles a day, had been a heavy smoker all his life. Asbestos has been the goose that lays the golden eggs for lawyers and some lucky clients at the expense of American consumers ----------the ultimate payers. Just remember this whenever anyone suggests the burden be laid on business. Al 6 year old crashed through a glass window and sued the laundromat for not having installed posts in front to prevent such an occurrence. Someone choked on peanut butter and sued because warning of such a possibility was not on the label. Nor, I might facetiously add, do labels warn of the damage that might occur if peanut butter were mixed with toner and used in your laser printer.

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How about the lady who sued the tobacco company because she fell asleep with a lit cigarette and set the couch on fire? Some parents are suing McDonalds because their child was injured on one of their playgrounds even though signs were posted telling parents to supervise their children. The plaintiff claims McDonalds had the duty to supervise. A medical student flunked out of school and claimed the school discriminated against him because he suffered from dyslexia, which is a handicap within the meaning of Section 504 of the Rehabilitation Act of 1973. In Wynne v. Tufts Univ. School of Medicine (1991) a three-judge panel from the first Circuit found that the medical school had failed to show it owed the student no obligation to modify its testing procedures in light of his handicap. The burden is on the defendant—guilty until proven innocent. In this light a feeseeking attorney might find a good candidate for blackmail in a one-legged obese woman who could sue for special treatment from a prosperous ballet school, if there is such a thing. They may find deeper pockets by going after the school's financiers. There's an endless number of things that could be added to President Bush's contention that it's hard to get a coach for Little League games or a doctor brave enough to deliver babies. Everyone is afraid of being sued. Common sense seems to be legislated right out of so much of our modern existence. Don't you agree that individuals have the obligation to to evaluate their own situations, abilities and handicaps and make choices accordingly? How long are we going to sit by and condone the passing to third parties of what should be personal obligations?

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Alternative #128

Alternative to our current tax policy with its 4,000 pages and outrageous complexity, constant changes, wasted manhours, lack of fairness, gestapo feeling and wrong incentives.
Goal: To lessen the tax burden and stop using the tax code for social policy. How: The key is long-term planning. Without constant promotion, watchdogging and citizen commitment, congress will make changes along the way. All segments of society must be ableto know for certain that what is mandated will actually happen on schedule. The commitment would be to phase out all taxes in their present form except certain excise taxes and substitute a flat tax, user fees and privatization. Practical Benefits: 1 - Allow those engaged in production and investment to proceed with more certainty. 2 - Permit more productive use of the nation's wealth according to the wishes and judgment of earners rather than bureaucrats. 3 - Speed up the dismantling of an overgrown bureaucracy. 4 - Provides an incentive to work and invest, as can keep more earnings. Soft Power Benefits: 1 - Less dependence on government as provider. 2 - More willingness to attend to the unfortunate since one is not duplicating already paid for and available government services. 3 - Self-determination encouraged as more private funds are freed to help in a more targeted, efficient yet more loving and personalized way.

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Background for Alternative #128
Too often now days we speak of what it costs the government to allow an individual to keep some of what he has earned via a tax deduction or credit. The idea has been twisted so that it appears the government has a fundamental overriding right to all dollars; the heavy handed Internal Revenue code sees to that. For some reason, governments are unable to understand the underpinings of economic opportunity. Progressive tax rates destroy incentives and a tax on capital gains prevents successful productive players from benefiting from the knowledge they gained through their original investment. Instead of being taxed out of the market, successful players should be encouraged to play again. No matter the claims of the reformers, tax codes distort markets, are responsible for the misallocation of resources, the decline of capitalist energy, the mix-match of producers and consumers, the suppression of creativity and generally frustrate the creation of wealth. Everyone has a different idea about what needs to be done. Some say tax policy should shift to reward investment more than consumption. They would like to see private investment encouraged by measures like tax credits for research and development and a revival of taxdeductible individual retirement accounts which would be offset by consumption taxes and higher gasoline levies. On a higher level of micro-managing you find ideas like the following: 1) Deduct sales tax and the cost of acquiring capital to purchase any big ticket items like appliances, autos etc. as long as components are principally manufactured in the USA. (hard to determine!) 2) Set up Investment Savings Accounts (ISA) with minimum holding periods where the holder could make loans but only on a fixed asset in the USA or to benefit a company engaged in the USA. For each dollar invested in an ISA, the investor could deduct $1 from his gross reportable income. 3) Allow capital gains tax cuts according to what is done with the proceeds of the gain. Allow a 50% deduction if the gain is invested in—and here's the catch—"something productive for this country" and a 100% deduction if the gain is invested in a depressed area (enterprise zone idea). It is estimated that our deficit could be reduced by up to $100 billion a year if these measures were instituted.

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Secretary of HUD, Jack Kemp favors the continuation of the investment tax credit and likes the idea of using the tax code as a tool for social manipulation. Kemp would rather use the tax code than direct subsidies to provide housing for low income citizens. He would like to see the capital gains tax reduced as a means of increasing new wealth as opposed to maintaining old. He would eliminate capital gains in all enterprise zones and doesn't favor the two year limit on capital gains. I am always in favor of any legislation that would allow citizens to keep more of their own income, which generally means I favor tax breaks. However, I am against robbing Peter to pay Paul—that is against redistribution via a more progressive tax code. Within that general framework I would choose the best of available alternatives. The idea behind the earned-income tax credit is to reward working families with meager incomes. The earned income tax credit was available to working families with at least one child living at home and a 1989 income of less than $19,340. (Using 1989 data because there hasn't teen enough time to gather sufficient data about the use of the credit in more recent years.) A maximum credit of $910 was allowed until income exceeded $ 10,240 it then decreased until income reached $ 19,340. It was suppose to pay $6 billion to ten million low-income families. In 1990 the maximum benefit to a family was just under $1,000 or $953 . That was supposed to reach $1,583 in 1991 and go to $2,000 by 1994. The five-year cost was estimated at $13.1 billion with a huge increase anticipated after 1994. Low-income working families with children would also get a tax credit of six percent of their eligible earnings or a maximum of $426 in 1991 in order to purchase health insurance for their children. The anticipated five year cost of this proposal was an additional $5.2 billion. At least it would be putting that money into the hands of the people rather than bureaucratic programs. Unfortunately a 1990 Internal Revenue Service study of 1,347 returns found that nearly 40 percent of those who did take advantage of the credit in 1989, were not legally eligible. In 1990 there was a study to find out how many are eligible but not taking the credit. Many eligible low-income taxpayers with a child are filing as "single taxpayers" (class ineligible) instead of "head of household".

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Alternative #129

'.)*+,^ve #129
Alternative to a tax code which influences the economy so strongly.
Goal: A means of raising revenue with minimal influence on ecnomic
decisions.

How: A simple flat tax with no deductions, user fees and some excise taxes.

Practical Benefits:
1 - Simple to understand and easy to file. 2 - Would not distort economic decisions and interfere with the free workings of the marketplace. 3 - Would be fair and keeping with the original ideals of this nation. 4 - Manpower hours freed to do something productive.

Soft Power Benefits:
1 - One large inducement to dishonesty would have disappeared. 2 - With understanding comes a feeling of empowerment. 3 - Lifting of the feeling of oppression and fear as envelopes bearing the dreaded initial IRS will no longer arrive.

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Background for Alternative #129
A meeting took place at the Cato Institute on July 29,1991, relevant to our tax structure and the economy, both of which underlie our ability to compete on a global basis. On the panel: Lawrence Kudlow of Bear Stearns; Richard Rahn of the U.S. Chamber of Commerce; Art Laffer, UCLA economist; Rudolph Penner, Head of the Congressional Budget Office during the Reagan administration; Robert Shapiro of the Progressive Policy Institute and Robert Mclntyre, Director of the Citizens for Tax Justice. Art Laffer denied that the 1981 tax cuts hadn't had the intended affect because they didn't take effect in 1981; they were phased in gradually—5% cut in '81, 10% in '82, and 10% in '83—full cuts didn't take effect until January 1983. He also pointed out that the inflation that was predicted from the cuts, failed to materialize. His advice was to forget our low savings rate and look at productive capital— tax reform got rid of windmills and other shelters in order to make capital more efficient. He reminded the audience that 21% interest rates and a 70% tax rate on unearned income was the climate of 1981. He opinionated that a trade balance surplus is a capital account deficit—"Think which you would rather have; investors at the border trying to get in or out of your country." He insisted there's nothing wrong with the rich getting richer—the dream is not to make the rich poor, but to make the poor rich. Pro-poor is different from anti-rich. What happened to the poor? They did become better off, and if the chairman of the House Ways and Means Committee and the head honcho when it comes to taxes—Dan Rostenkowski— hadn't blocked enterprise zones, the poor probably would be even better off. He went on to ask if it ready made any difference whether the government took your money in the form of taxes or just borrowed it without repaying it. He asked if anyone actually thought if the government were able to raise an additional $300 billion in new revenue that the money would be used to pay off debt. He said it matters how government raises its money. He told everyone that Milton Friedman says congress spends everything it takes in and more—that running deficits makes government look less expensive than it ready is and encourages spending. If the real cost were apparent to the general public there would be consensus to curb spending. Art Laffer thought we should have controlled spending and should have reduced corporate tax rates. He reminded us that everything good out of the government does not come from more spending. To him the real trouble is a lot of personal income goes through and is counted as capital gains. The capital gains tax is a discretionary tax and when we reduce it, revenues increase. It is unfair to

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tax inflation and that's what most capital gains taxes do. Rudolph Penner said tax cuts are and were good news. High taxes are a disincentive to work and savings. Besides that we couldn't afford them— witness the debt! The mistake was immediately recognized and tax increases of some kind or another occurred in every year in the eighties so that by the end of the decade the nation was almost back where it had started with regards to taxes: FY (fiscal year) 1980 taxes = 19.4% of GNP(gross national product) compared to FY1989 taxes =19.3% of GNP. He would have liked to see the 1986 reform take effect early in 1981 when inflation was then bolstering tax revenues. Mr. Penner didn't think the capital gains issue was very important either way. In his mind, all the debate just shows how hard it is to tax capital correctly. Instead he would like to use a consumption tax and lay off taxing capital at all. We need more savings at public and private level, according to Mr. Penner, and we definitely need to do more about the deficit. He would give the president recision power but claimed that because so much government spending is in the entitlement area that recision power wouldn't really make that much difference anyway. As to "efficient use of capital" the generous depreciation schedules in the tax code led to a proliferation of empty office buddings; not too efficient by anyone's standards! Ronald Reagan kept signing tax increases and kept declaring victory—some think tax cuts were an attempt to starve big spenders but the congress spent almost what the president requested. The debate, according to Mr. Penner, was not over levels of spending but over priorities. He felt that the Republicans would still control the Senate if Ronald Reagan hadn't backed down in 1985, leaving New Mexico's Senator Pete Domenici, chairman of the Budget Committee holding the bag containing the first, and possibly only genuine social-security-cut. Mr. Penner acknowledged that the elderly made a fuss, but he felt certain that if the cola cuts ( reduction in the cost of living adjustments) had gone through, they wouldn't even have noticed. He sees backing away from the social security issue as the worst mistake Ronald Reagan made. Lawrence Kudlow thought the Reagan tax cuts were a success and compared to the seventies, the economy of the eighties was great! Cutting taxes and excessive regulation along with holding the tine on government spending and tighter monetary policy were good moves in his opinion. He pointed out that the reduction of marginal tax rates reduces the cost of labor and capital and makes the nation more efficient and productive. Mr. Kudlow didn't give former Federal Reserve chairman, Paul Volcker, credit for cutting inflation. Instead, he said, the money supply actually grew faster in the 1980s than in the 1970s. The lower marginal tax rates were

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responsible, in his opinion, for curbing inflation and ending stagflation. He reminded everyone that during the Reagan administration unemployment fell from 11 % to 5.5% and females, blacks and other minorities made great economic strides. Nineteen million jobs were created and assets totaling $6 trillion in real new net worth were produced in the 1980s. The so-called misery index, which had been 13% under Gerald Ford and 20.5% under Jimmy Carter, dropped to 9.5% under Ronald Reagan. In 1983, 1984,and 1985 real growth rates outperformed their forecasts and inflation was lower than anticipated. Gross business investment grew 5.2% and manufacturing grew 3.8% during the 1980s and only 4.8% and 2.8% respectively during the 1970s. Nevertheless, Mr. Kudlow stipulated that growth was not ad that different between the 1970s and 1980s, but inflation and unemployment rates were much lower in the 1980s. Inflation was 4% when Ford left office, 19% when Carter left office and 3% when Ronald Reagan left office. Government spending amounted to 22.1% of GNP in 1980 and 22.2% in 1988. He claimed the huge deficits and run up of debt was not because we were taxed less—it's because we spent more. The annual deficit was 2.8% of GNP in 1980 and amounted to3.2%ofGNP in 1988,less than half of one percent higher but by that time our GNP had risen to almost five trillion dollars. Revenue was not decimated by the Reagan tax cuts. Mr. Kudlow concluded that Reaganomics couldn't be so bad since currently the rest of the globe was anxious to adopt it. Robert Shapiro expressed extreme dissatisfaction with "supply-side economics". He reminded everyone that the payroll tax went up seven times in the 1980s and that is a regressive tax on labor and average people. He agreed with Mr Penner that tax reform was really a wash out, but objected to the fact that high-income earners were paying more at the end of the decade in terms of dollars, but a lower percentage share. He claimed that tax cuts didn't cure inflation and that financial deregulation caused shifts between Ml, M2 and M3. He reminded the panel that the money supply had a negative growth rate in 1982 and the contractionary effect dampened inflation. The resultant high dollar translated to cheap imports. He would have spent more on infrastructure and education. He was concerned about the deficit, claiming 20% of ad tax receipts go to pay the interest on the debt. He was distressed by the heavy tax burden on average people and suggested raising taxes on high income people and restraining spending. Mr. Shapiro argued that Ronald Reagan's programs were at best trivial. He also insisted that growth throughout the eighties was not as strong as in the 1970s, although he was called to task later by Mr. Rahn for starting his calculations from January, 1983. Richard Rahn claimed that Ronald Reagan's policies were more

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effective than anyone expected. He declared the Washington Post had been wrong in claiming that it was impossible to cut unemployment without increasing inflation. He delighted in pointing out that MIT economist, Lester Thurow had cried "wolf one month before the longest peace time expansion in our nation's history. He took exception with Mr. Shapiro's statistics, claiming he had included only the years necessary to make his case but had failed to take a look at a continuous eight-year period, adjusted for inflation. As proof of further improvement he recalled the 20% interest rates that prevailed ten years ago. Richard Rahn claimed we should have controlled spending with a national goal to bring government spending down to 19% of GNP. Increases in regulation and taxes are responsible for our slow down according to Mr. Rahn. He cast dispersion on the 1990 budget agreement which had promised to reduce the deficit by $500 billion over five years in exchange for a $ 165 billion tax increase. That new revenue disappeared, and Mr. Rahn and many others predicted those dollars would never be seen again. Robert Mclntyre began by declaring the 1981 tax legislation the "biggest financial heist of all times" and then spent several minutes defending his position. He recalled the promises made by Reaganites that massive tax cuts for wealthy people would make money for the federal treasury—Ronald Reagan had intended to pay for the defense buildup with revenue generated from those tax cuts; cuts that were supposed to be fair to all income groups, suppose to foster international competitiveness, sharpen trade and lead to a business boom. Forgetting social security, we are spending more on defense, interest on the debt and the savings and loan bailout, but less by $140 billion on the rest of government. The facts, he said, show that annual deficits skyrocketed, the national debt tripled and savings and capital failed to increase. The rich got their taxes slashed at the expense of middle and low-income taxpayers, which Mr. Mclntyre, together with other "wisemen", had predicted. Productive business ventures were crowded out of the financial market. Mr. Mclntyre praised the 1986 tax act for eliminating tax shelters which had deterred investment in new business but insisted that the changes wrought in 1981 were disastrous until the reforms of 1986 took effect. He said there should never have been a tax cut in 1981. He viewed our large budget deficits as preventing everything we need to do. According to Mr. Mclntyre, our debt is not letting government do its job and there's a lot of things government does wed. (Tell us about it!)

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Alternative #130

Alternative to the mistaken idea that the end justifies the means.
Goal: To put ideals above pragmatism.

How: Ask the right questions. Not does program A work better than program B, but rather is it government's role in the first place.

Practical Benefits:
When government sticks to its constitutional role then the private sector will provide for the general welfare via market forces far better than a bureaucracy ever could.

Soft Power Benefits:
Our children will have a chance to know first hand what it means to be free and responsible Americans.

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Background for Alternative #130
George Gunman, a tax attorney with the Research Institute of America, supposes that a role of government is not the confiscation of wealth but seeing that wealth is spread more evenly over society. (In a capitalist society, already?!) To accomplish this goal he suggests a tax on recipients of wealth—an inheritance tax set at income tax rates. (Since when is any tax not a confiscation?) There would be less need for expensive estate-tax lawyers to devise elaborate schemes to avoid death taxes. The nation as a whole would benefit, according to Mr. Guttman, because wealth would be less concentrated and probably put to more productive use. But should the ends justify the means? There are pros and cons enough for a good debate on both contentions but such a debate would be missing the real issue (as usual)—what right does the state have to "spread" anyone's wealth? A capitalist society functioning under the old-fashioned commonly understood meaning of the words used in the U.S. Constitution cannot justify such action by saying it might be "good for the country" (debatable), might be "put to more productive use" (Once government gets its hands on it? Oh yeah, and how many bridges have you bought today?) or that "spreading wealth" might put some "expensive estate-tax lawyers" out of work.

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Alternative #131

Alternative to further increases in the gasoline tax. Goal: To

make taxation as fair as possible.

How: Stop increasing the most regressive taxes like payroll taxes, excises on alcohol and tobacco and the tax on gasoline.

Practical Benefits: 1 - The congress will be forced to look elsewhere for an energy policy and may even be tempted to turn to a free market. 2 - Either less revenue will be raised which might pressure congress to finally get serious about cutting government spending or other, less regressive taxes, will be substituted.

Soft Power Benefits: It prevents the injustice of having large western states or rural areas of the country and lower-income people in general pick up a larger percentage of the total tax burden.

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Background for Alternative #131
It has been estimated that seventy-six percent of a gasoline tax would be born by families with modest incomes and that those with incomes in the $10,000 range would face a two and a half percent increase in the amount of money that goes from their pockets into the coffers of the federal govt. Dan Rostenkowski, chairman of the powerful Ways & Means committee, wanted a cut off the top off any nickle increase in the gasoline tax. This caused Bob McEwen of Ohio to claim (Rosty wants) "a deduction on a tax that hasn't been raised yet!" When "Rosty" took two and a half cents from the gas tax to offset the deficit in the fall of 1990, everyone was asked to take into consideration the unique situation of the budget accord and to act in a spirit of compromise. If they did, the leaders claimed, it would never happen again. According to Dan Rostenkowski, only the net revenues can be spent. He wanted to take a nickle and reduce it by one and a half cents because business deductions cost the general revenue that amount. His critics said he wasn't taking into account the increased revenue from increased productivity and new jobs which improved infrastructure would bring. They countered claiming 243,000 new jobs at $25,000 a job, brings in new income which would result in income tax bills of $2 or $3 thousand per job or a half billion dollars in new tax revenue. If you're going to calculate the losses you must also calculate the gains. Congressman Fred Grandy's option would have increased the funding for infrastructure without raising the gas tax. Remember last year the five cents gas tax was split—half to the general revenue to mask the deficit and half into the highway trust fund where motorists think it all belongs. Grandy wanted to move the fractious 2.5 cents back into the trust fund—interest would accrue and would amount to about $12 billion. The advantages he saw were (1) no gas tax (2) at end of 1997 when the budget agreement ends there would be $20 billion more than under the administration's proposal (3) why raise taxes when we can draw down the trust fund? Mr. Rostenkowski was concerned that only net revenues be spent, stressing the necessity to keep a certain amount in the trust fund. He saw no problem in Grandy' s plan with gross revenue vs net revenues because the principal wouldn't be touched until later. Without a gasoline tax the budget agreement allows a disbursementof$16bildon in 1992, $18 billion in 1993, $20 billion in 1994. In the end he backed Grandy's proposal as a good compromise since it was certain that Bush would veto any highway bill containing a gasoline tax.

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Alternative #132
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Alternative to the high total bite from a combination of taxes.
Goal: To lower the tax burden on all Americans. How:
1 - First become aware of what is happening by paying, at least the income taxes, in a lump sum just before November elections. 2 - Keep marginal rates low on income tax,( or better still substitute a flat tax) lower regressive taxes on gasoline, alcohol, tobacco and work (payroll taxes), lower deductions of interest, including interest on real estate mortgages( you can't have your cake and eat it too!), lower the capital gains tax and add incentives for investment and savings. 3 - End double taxation by eliminating the corporate tax, eliminate all taxes on capital gains, substitute a tax refund (guarantee minimum income for welfare payments) for low-income earners.

Practical Benefits:
The economy would pick up as the private sector would have more dollars to invest and spend.

Soft Power Benefits:
Citizens would gain more control over their lives as they are "permitted" to keep more of what they earn. This could result in an increase in opportunity, optimism, creativity, discipline and charity.

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Background for Alternative #132
Pay! Pay ------- all we do is pay! Someone figured that the median income earner— half of the population made more income and half of the population made less—was paying two percent in taxes in 1950. Today, when you add state and local income, property, sales and all other taxes on top of federal taxes, the average American has tittle more than half his income to budget for his own personal priorities. Just look at the following figures and tell me if you think those who promised to look after the taxpayer have kept their promise over the last eleven years. Corporate taxes = $61 billion in 1980 and $98 billion in 1991. Social security taxes = $133 billion in 1980 and $371 billion in 1991. Excise taxes = $41 billion in 1980 and $43 billion in 1991. And don't parrot the line that corporations are now paying their fair share. How do you think corporations go about paying that share? Taxpayer organizations claim we work for government until May 8th every year. Some say serfs in the middle ages worked more for themselves. According to Professor Paul Craig Roberts, Tax hikes in the eighties added $366 billion more to the Treasury' s coffers than tax cuts took out. On a staticrevenue basis (forget the incentives and disincentives of the laws) ERTA prevented revenue of $1,490 billion 1981-1990 but the 1981 cut was followed by a tax increase every single year—TEFRA in 1982, Highway Revenue Act of 1982, Social Security fix of 1983 plus the increases to bases and rates previously scheduled for social security which took effect in 1983, the Deficit Reduction Act of 1984, small hikes in a variety of taxes from 1985-88 not to mention bracket creep which pushed incomes into higher brackets and totaled revenue gain to the Treasury of $1,856. State and local revenue coffers tided during the Reagan years thanks to die start up of new businesses, record employment and the general boom-time atmosphere only to empty as if flood gates had been opened during the early 1990s. As of October 1, 1991 California had the highest sales tax, varying between 7% and 8%, depending on the county, and Colorado and Wyoming had the lowest, at 3%, not counting Alaska, Delaware, Montana, New Hampshire and Oregon which have no sales tax. Rhode Island charges the highest state gasoline tax at 26 cents per gallon, Connecticut charges 25 cents, Nebraska, 23.7 cents, Washington 23 cents and North Carolina 22.6 cents. Florida has the lowest gasoline tax at 4 cents per gallon. Virginia has the lowest cigarette tax in the country, only 2.5 cents a pack while

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Connecticut has the highest at 45 cents per pack. It has been suggested that income taxes be paid on November 1st, because on even years that would make them due just before national elections. I've also heard people, other than George Bush, suggest that taxpayers make a lump sum payment in order to feel the full impact of taxes. It was done that way until 1943 when taxes were first taken out of paychecks as a war time measure. The idea, as presented in the President's 1992 State of the Union address, was not well received because citizens had come to look forward to income tax refunds as gifts from the government and didn't want to have to discipline themselves to put dollars aside when government was willing to do it for them. Additionally, not being able to use all that "extra refundable money" would cause an estimated shortfall to the treasury of $5.2 billion. Mr. Bloch of H & R Block, the large tax preparer firm, testified to essentially the same sentiment before a congressional committee in February, 1992. He said the average tax refund is $900 and that 70% of taxpayers get a refund and prefer it as a way of saving. To do as Bush recommends, and not let workers overpay except by special appeal, would likely cause a compliance problem. People file now in order to get their refunds. This failure to care, to aspire to self-control is a visible sign of the crumbling of the American dream the great experiment where men and women aspire to "be the best that they can be" --------here is concrete evidence that it is either not recognized or recognized and not desired.

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Alternative #133
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Alternative #133

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Alternative to the immobilizing bickering by the two major parties over tax policy.
Goal: To turn off the spigot of harmful and nonsensical tax legislation which
continues to pour out of Congress—some of it not read and pleasing few legislators or constituents.

How: A more rapid and thorough turnover of members of Congress.

Practical Benefits:
New people will not be so entrenched and enamoured with themselves and the cocoon they all seem to settle into in Washington, D.C.

Soft Power Benefits:
Constituents will not feel as powerless as they do now and so distrustful of and angry with government leaders.

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Background for Alternative #133
OnNovember7,1991 Democratic House leaders Congressmen Gephardt and Rostenkowski held a press conference to display their own version of tax fairness. It included a 10% sur-tax on millionaires and a new 35% rate in exchange for a reduction for 90 million middle-income tax payers. They had a simplistic basic color chart appropriate for any Headstart classroom in the country. It had a large wide swatch of brilliant blue, a smaller slanted band of yellow and a very narrow L shaped strip of red—the L lying on its back with the bottom going part way up the side of the chart to represent the very narrow group of people who would benefit from the tax legislation that this color represented—the rich. The yellow stood for those that would be affected by a tax plan put forth by their counterpart in the Senate, Lloyd Bentsen. It also contained mainly tax rebates for those with children. The blue strip represented the $200 or $300 the congressmen wanted to put in the hands of 90 million Americans. One of those lower to middle income people from Ohio called the C-Span journalist round table discussion the next morning and said "Forget the $200 or $300 rebate—what I want is a cut in the taxes enacted last year— the excise taxes on my beer, cigarettes and gasoline." It's true that excise taxes are the easiest to pass and the easiest to keep— it is more of the deception practiced by artful politicians. Their elitist attitude is "Throw them a bone" a few hundred dollars from Gephardt & Rosty and they'd never know that they are paying a lot more in other ways. As Mr. Gephardt said, "People need their confidence rebuilt." He and Mr. Rostenkowski were proud that they were fashioning a tittle something for those cherished and deserving middle income Americans. What do you think? In 1981 the wealthiest people in the country paid 18% of all taxes and seven years later, in 1988 they paid 27% of ad taxes. In 1991 the wealthiest half paid 95% of all income taxes and 83% of all the social security taxes collected. If a $ 10,000-year income earner would be paying 134% more in taxes if the Carter policies had been continued, and those making $ 1,000,000 a year would be paying only 62% more in taxes than they are now but they would also have their loopholes in tact. Of course interest rates would have continued at over 21% and inflation would have remained in double digits with much, much larger deficits as a result of Carter's unchanged policies. In the November, 1991 Atlantic Monthly, Republican Senator Phil Gramm seemed to concur: "The top 1 percent, the top 5 percent and the top 20 percent pay a larger share of the total tax bill today than they did when Ronald Reagan became president."

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Alterative #134
Alternative to public lands
Goal: To adhere to the ideals that this country was founded upon. In a capitalist nation the government should own as little property as possible. How: Arouse people's indignation over the neglect of fundamental ideals and heed Thomas Jefferson's warning that the federal government should avoid ownership and should sell tracts of land so they would "never again . . . revert to the United States. Recognize that land disposal was federal policy until 1934. Rearrange economic incentives so that people don't find polluting or depleting resources easier and cheaper than not doing so. Practical Benefits: 1 - Privatizing public assets would make them more productive. 2 - Private owners would have an incentive to eliminate waste and nurture their own property. 3 - Taxpayers could eliminate the $100 million annual negative cash flow they absorb because of the cost to government to manage the land it leases at a loss. 4 - Taxpayers could trim the deficit and cut back on the exorbitant useless interest cost they are forced to pay on the national debt (approximately $300 billion a year) if instead of paying to manage land they received money from the sale and annually thereafter from taxes paid by the new private owners. 5 - Studies have shown that private lands are better cared for than are pubic lands. 6 - Private and even state owned recreation areas serve many more visitors on a fraction of the land used by the federal government for this purpose, and at far less cost. Soft Power Benefits: 1 - Character is strengthened by adhering to principle. 2 - A recommitment to the original American ideals. 3 - A sense of unity and purpose as a people would be rekindled

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Background for Alternative #134
Environmental issues are legitimate concerns. Yet these problems arise, not from a failure of the free market system, but from the very failure to apply free market principles to resource management in the first place. The failure to define property rights in all natural resources has led to what some observers have referred to as the "tragedy of the commons".The phrase was coined to describe the tendency to treat publicly owned resources as free goods, to which everyone has a claim, but for which no one bears responsibility. That's why we have disputes over the management of vast tracts of government-owned land. The main danger to our forests today comes from federal lands (national parks, national forests, and wilderness areas), where no management is allowed, because "nature knows best." The national forests contain 142 million acres located in 40 states with up to 90 million of these acres holding enough timber to qualify as commercial forest lands. In the beginning the timber business was more of a mining operation rather than a farming enterprise. Policy makers felt deforestation would continue to be the norm and somehow discounted the notion that people act in their own self interest and that they might figure out for themselves that re-planting and careful tending of an asset would produce benefits in the future for new generations. Under the centrally controlled environment of the Bureau of Forestry, timber production was kept constant and supply did not keep up with demand as it would have in a market system. Many policy makers are afraid to let markets and the price system determine who will use what resources, where and in what quantities. They step in to equalize the unfairness of a system where price has a say. They prefer to spread subsidies as breaks for the poor and levy penalties on the rich. It always seems to come down to the debate between large or small government, between free marketers and those who favor industrial policy. That's what all the fuss is about when our philosopher-kings decide whether or not to allow nuclear plants to be built and determine who should be allowed a drilling permit and where drilling can take place or how large a tree can be cut down or what kind of coal can be burned and what kind of equipment must be used and what safety measures, clean up procedures— —the micromanagement is endless. Environmentalist, John Baden, co-founder of the Political Economy Research Center, a group that believes free markets solve environmental problems better than governments, has suggested that when resources are owned in common, ecologically damaging behavior might be considered

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the norm rather than the exception. It could well be that the single largest cause of pollution is lack of accountability. The Wilderness Society is trying to influence Congress to declare more than a million acres of New Mexico land federally protected wilderness, including about a quarter-million acres of state-owned land that is surrounded by federal holdings. Protecting the environment may mean getting it away from bureaucrats and into private hands. It's been shown by example that there needn't be a conflict between maintaining die quality of the environment and developing commercial resources. More and more people are beginning to understand that in fact private ownership may be the best way of protecting wilderness areas. The Nature Conservancy of Arlington, Virginia has more than 200,000 members and has saved close to 3 million ecologically significant acres over its more than forty years existence by purchasing the properties. They believe if the land is in private ownership it will stay protected and not be left to the whims of congress. Do you realize the federal government owns 170 million semiarid acres of range-land in eleven states? Range-lands which are larger than all of New England. Taxpayers should be incensed about the $100 million annual negative cash flow which translates into a $5 management fee for every $1 collected in grazing fees from the 31,000 ranchers who own grazing permits on these rangelands. Thomas Jefferson warned the federal government to avoid ownership of the means of production by selling these vast tracts to insure they would "never again.. .revert to the United States." Land disposal was federal policy until 1934, when the Taylor Grazing Act became law. Since then bureaucratic administration and continued federal ownership has become the unquestionably accepted standard . Because grazing fees are minimal, anywhere from one-third to one-seventh of the cost of fees charged by private landowners, it is only natural that most ranchers would prefer to lease, rather than own grazing land. And since they aren't landowners, they avoid paying property taxes, which are pretty high in some places. Even the Wilderness Society concluded in one of its studies that users of the range-lands have no economic incentives to conserve the resources, therefore overgrazing is commonplace and has damaged a large portion of these lands. Congressman Mike Synar of Oklahoma sponsored a bid to quadruple, by 1995, the 1991 federal grazing fee for livestock from $1.97 to $8.70 per cow or five sheep, for one month's use of federal land. He argued successfully the point about die government losing more than $ 100 million

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a year due to its below market grazing fees. The vote was close; 232 to 192 with only 47 Republicans voting in favor of getting a fair market value for grazing fees. In 1925 the Department of Agriculture studied 111 ranches in the Southwest. In Texas where 28 ranches were observed, 73 percent of the acreage was in private hands and 27 percent was leased from the government. In New Mexico and Arizona 83 ranches were studied with 92 percent of them on government owned open range and 8 percent were situated on privately owned lands. The size of die ranches, the amount of cattle and the climate were all comparable. It was found that 47 percent more calves were born on ranches with secure property rights, deaths were cut in half, the average cow weighed 15 percent more and the marketable price per cow was 43 percent higher. Whatever was saved on lower rent was lost in the long run by those who chose to lease government owned range-land because those ranchers didn't want to invest dollars in improving leased land, even on long leases. Why should they? After all the land wasn't going to pass on to their heirs. This behavior can be clearly seen if we look at the study. Texas ranchers with secure land rights invested $7.3 per head of cattle in water weds, whereas New Mexico ranchers invested only $2.85 per head for the cattle that grazed on public lands. It seems obvious that secure property rights are necessary for the efficient use of range land. Privatization would help end overgrazing and the depletion of land quality. The key is to get people angry over the neglect of the ideals that this country was founded upon—to publicize Jefferson's warning and to remind ordinary citizens—the non-ranchers and non-bureaucrats—that this is not a socialist country. In a capitalist nation the government should not own property. This idea coupled with the desire of most people to see our national debt trimmed, would make die sale of government land and other assets not only palatable, but necessary. I'd want to see the first right of refusal given to those with grazing permits when range-land was offered for sale. As Professor M. Bruce Johnson, past president of the Western Economic Association once said, Whether the government-held land is auctioned off, or simply given away, is of far less consequence in the long run than the improved efficiencies that will surely result. Another alternative might be to obey the law which requires the government to charge fair market value for those permits. The Reagan administration attempted to comply with the law when the fees came up for

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renewal in 1986. If I remember correctly, the going rate for grazing rights on private land at that time was about $7 per animal per month. The federal government was charging only$1.35per animal per month. Under pressure from Western Senators the administration backed down and in another show of hypocrisy turned its back on the hollow ideology expressed in its presentation of the 1987 budget which clearly stated "those who benefit directly from a specific federal service should pay the cost of providing that service." The Kesterson Wildlife Refuge, near Fresno, California is one of the best examples of government bungling. I was especially interested in the story when I came across it in Mr. Fitzgerald's book, because, at the time, two of my sons were working in that area. One with the Fresno Fire Department and the other as a paramedic. The Friant Dam diverted the San Joaquin River around Fresno to what is known as the Westlands at a cost to taxpayers in 1968 of about $100 an acrefoot. The main beneficiaries of this largesse were corporations like Standard Oil, Southern Pacific Railroad and J. G. Boswell, California's largest grower. The Bureau of Reclamation charged these corporations low rentals on 40 year leases. The taxpayer water subsidy amounted to about $217 per acre and since most of the land was planted with cotton, Boswell was able to reap another $10 million in cotton subsidies in 1986, this time from the Department of Agriculture. Those subsidies pushed land values sky high. Randall Fitzgerald equated it with an Alice In Wonderland scenario with "Corporate farmers reaping subsidized water to grow subsidized crops that are in surplus". All that would be bad enough but Fitzgerald goes on to talk about the dangerous levels of selenium in the Westlands soils which had been known to the U. S. Geological Survey agency since 1939 and had been documented in over 325 separate medical and scientific studies. These were apparently ignored by the Bureau of Reclamation when it erected its huge irrigation project. The Bureau built a concrete master drain 82 miles long to carry wastewater, known to contain selenium and other toxins, away from the fields after irrigation. But the Bureau also constructed 12 huge evaporation ponds to receive the agricultural wastewater on what had formerly been the Kesterson ranch. During construction the clay layer under the top soil was scooped out, even though a 1966 feasibility study of the area warned about seepage if this were done. Apparently the Bureau figured seepage would allow greater capacity for wastewater. To ensure congressional funding, the project was billed as a joint wildlife refuge for migratory birds as wed as a wastewater-disposal site. It made sense because dual purpose projects

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have been successful in other areas of the country. By 1981 the damage had been done. Tests showed arsenic, boron and selenium in concentrations known to be harmful to life throughout the 82 mile drain and in the evaporation ponds. Tests in 1982 showed that 60 percent of the wastewater flowing in to Kesterson was seeping out and invading the adjoining property. Apparently to make the Westlands happy, the Bureau waited until 1984 to warn of any of these environmental dangers. By then Fish and Wildlife Service environmentalassessment specialist, Felix Smith had gone to the state capital with evidence. The eventual cost to taxpayers for cleaning up the Kesterson and Westland has been estimated at $13 billion. I just want to show taxpayers what they are getting for their money by leaving land in the hands of bureaucrats. First, water and power was sold for a fraction of its development cost (subsidy #1), secondly there is the surplus crops subsidy accompanied by the nationwide loss from depressed cotton prices (subsidy #2) and the cost of draining the wastewater which the payments by farmers didn't begin to cover (subsidy #3) and then there is the loss of fish and wildlife and the necessary expense involved in cleaning up the fouled environment. Now who is going to claim our nation's resources are in better hands when government is in charge than when tended by the private sector? Senator Steve Symms of Idaho proposed the Private Property Act of 1990 in September. It faded by two votes. It was part of an executive order issued by President Reagan and reissued by President Bush and would require agencies attempting to put environmental restrictions on private property to first research potential losses to property owners. Environmental activists claim the bill "would chill agency action to protect public health, safety and the environment." A similar amendment to the Wild and Scenic Rivers Act was defeated in the House on June 26, 1990 by a 93 to 323 vote. It would have required the prior consent of the owner for the taking of any land along or near a river designated as scenic before it could be acquired by the Department of the Interior. Congressman Kostmayer claimed the amendment would have denied the federal government "the right it has always had to condemn property" as long as it paid a fair price. During the fight on the floor of the House; Alaska' s Representative Don Young admonished his colleagues saying "If you do not vote for this amendment then you have kissed America good-bye,.. .because you do not believe in individual rights any more."

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Alternative #135
Alternative to the way the government currently manages national resources.
Goal: Careful husbandry of the nation's resources. How: By applying free market principles to resource management. Something
that belongs to everyone is only a step away from something that belongs to no one. It is only natural to treat publicly owned resources as free goods to which everyone has a claim but for which no one bears responsibility.

Practical Benefits:
1 - Removal of the largest cause of pollution—lack of accountability. 2 - The environment would be protected best by wresting it from bureaucratic control. 3 - Conservation is enhanced through competition.

Soft Power Benefits:
1 - A sense of wonder that comes from appreciating and expressing concern for the environment and the natural resources which surround us. 2 - The development of a sense of responsibility for fragile things. 3 - Learning the evils of waste and the goodness that comes from conserving, protecting and enhancing our resources.

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Background for Alternative #135
Most of the remaining valuable resources in the United States are found on federal lands. It has been estimated that public lands contain 85 percent of our estimated oil reserves, 72 percent of the oil shale, 37 percent of the natural gas, and over half the country's remaining mineral deposits. Less than a quarter of federally owned land has been explored for oil and gas and more than half is exempted from oil and gas leasing by law. In the 18th century Adam Smith pointed out that the publicly held lands in Europe produced less than a quarter of what comparable private properties produced. It was only natural to conclude then, as now, that privatizing public assets would make them more productive. Private owners would have an incentive to eliminate waste and nurture their own property. The contrast between the publicly owned and depleted oyster beds on the Maryland side of Chesapeake Bay and the privately owned carefully tended beds on the Virginia side is an example of the incentives property rights provide. By careful husbandry privately owned resources can be made to flourish so that even though the owner has used the resource he still has something to sell or to bequeath. Extra effort is rewarded as value is preserved or even enhanced. Not only is private property an American ideal, it is a practical answer to a good number of our problems. In 1924 big game hunter Paul Rainey bequeathed 27,000 acres situated on Vermilion Bay, not far from New Orleans, to the Audubon Society to be used for a wildlife preserve. In 1940 oil and natural gas were discovered on the property. Certain fields were leased and put into limited production with all sorts of restrictions imposed on the commercial operations. Consequently Audubon has received millions of dollars of income over the years enabling it to help purchase other environmentally sensitive properties. Hypocritically it opposes any commercial exploitation of these other properties even though Audubon literature praises its own experience with the oil companies, citing the fact that over decades oil has been extracted from the Rainey Preserves without ecological damage and that precautions taken to prevent pollution have proven to be effective. In fact at one point Audubon's vice president gave the oil companies credit for improving the capacity of certain areas of the marshes to sustain wildlife. The key is to rearrange economic incentives so that people don't find polluting or depleting resources easier and cheaper than not doing so. The Audubon Society allows oil drilling in its Rainey Wildlife Sanctuary and Zimbabwe sells permits to hunt elephants and trade in ivory. Revenue from Rainey funds other conservation efforts and elephant herds have grown by onethird in Zimbabwe since 1986.

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The Welder Wildlife Foundation Refuge in Texas is another example where an oil and gas field has operated for almost 60 years without disturbing wildlife. These examples, where a private use has been the instrument to attain a public good, may make us reconsider whether it is necessary to exclude human beings from nature in order to save the wilderness. Most people would probably favor extracting oil and minerals from public lands if the environment would not be harmed. Lumbermen, ranchers, miners anyone using public lands have a short-term bias with decisions being based on the necessity for high immediate gains. Since they will not have access to any benefits that might be derived in the long term, there is little incentive to conserve these leased assets. As long as the U.S. Geological Survey will pay for exploration all the mining companies have to do is pay a few dollars to file a mining claim. A few years ago a Gallup poll showed 95 percent of those asked which federal agency they most trusted, named the National Park Service. However a 1987 article in the Atlantic Monthly presented evidence that animals that were disappearing in the parks were thriving outside the boundaries. No wonder. We've eliminated natural cleansers like wild fires and predators inadvertently throwing national parks into an ecological disequilibrium that has destroyed the ecosystem's capacity to restore itself. Even officials in the Department of Interior have suggested that the private sector might do a better job of operating and managing the park system. I don't know why the private sector can't meet the demand for campgrounds and outdoor recreation? There are a lot of privately owned recreation facilities in the Big Sur area and they are for the most part wonderfully maintained. And you'll find privately managed facilities on the East Coast too. In his highly recommended book, When Government Goes Private, journalist Randall Fitzgerald writes on page 198 about this very thing : In Maine an association of private landowners has pooled 2.8 million acres of forest for camping, hunting, fishing and other recreation. North Maine Woods, Inc. a nonprofit group, charges its visitors lower fees than a nearby state park. . . State parks nationwide occupy nearly 11 million acres, just one-seventh of the acreage of federal parks, yet host nearly twice the number of visitors. Yet, if you dare to suggest that the government sell public lands, whether forests, range-lands, parks, wildlife refuges—it doesn't matter—

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it is considered sacrilege. On July 26,19891 made notes from the radio presentation by Congresswomen Barbara Boxer and Nancy Pelosi in their attempt to save the San Francisco Presidio from the proposed military base closing. They argued that because of the expense involved in the clean up and restoration that would have to occur before the site was transferred to National Park jurisdiction it would be cheaper for the American taxpayers to keep the base open. This was based on the premise that of course the property could not be sold for private development but must forever be maintained at taxpayer expense for, need I say it, "the collective good." The historic and most scenic areas could come under the jurisdiction of the National Park Service, but there is so much land that it seems perfectly sensible to me to let the private sector develop a portion of it. Besides there are regulations already in place that will ensure if the private sector ever does get a chance at the land, it will only be a portion. The military has the right of first refusal on any surplus military base, then it is offered to federal agencies, followed by state agencies, local public agencies come next and only as a last resort is the property offered to the private sector where its use might generate some revenue. In the continental United States there are about 3,800 military installations with only 300 of that number being designated as essential to our national defense. Most are obsolete, or as I have said, unessential. When Barry Goldwater chaired the Senate Armed Services Committee he claimed that closing just ten of these bases could save taxpayers at least $1 billion a year. I remember the Office of Management and Budget in 1982 and the Grace Commission in 1983, both figured a savings of more than $2 billion annually from base closings. Prior to 1977 military bases were pretty much the prerogative of the executive branch and the Pentagon. That year legislation passed forcing the Department of Defense to notify congress whenever it was considering a base closure. Environmental, economic and strategic impact studies, each taking up to a year to complete and costing a million dollars apiece, were to be submitted to congress by the Pentagon. But still the Secretary of Defense could close any base with fewer than 300 civilian employees without the approval of congress which meant 90 percent of our military bases. This goes to show that the blame lies not only with congress. To alleviate any fear of economic dislocations that might occur in a community where a base was closed the Pentagon commissioned a study that found that in most cases the closure of a base led to an economic boom in communities because lost jobs were offset by even more newly created jobs. When the old arsenal at Benicia, California was closed 2,100 government jobs gave way to an industrial park which soon employed almost 5,000 private sector

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workers. There are many reasons to have government property developed by the private sector: (1) In a capitalist country the government should not be in the business of unnecessarily owning assets. As those living in socialist countries will quickly tell you, private ownership results in better stewardship of land, or anything else, than does government ownership. Something that belongs to everyone is only a step away from something that belongs to no one. It is only natural to treat publicly owned resources as free goods to which everyone has a claim but for which no one bears any responsibility. (2) Already the interest on our national debt is one of the largest items in the budget and takes approximately 50% of every federal income tax dollar. The interest alone on our accumulated debt will soon reach two hundred fifty billion dollars—a quarter of a trillion dollars on interest expense every year—dollars which are not purchasing any tangible assets —not being invested in education, research, infrastructure, defense—doing nothing but paying interest income to those who can afford to purchase government securities. It is stupid to continue to pay mounting interest expense when we can cut it back by paying down a portion of the debt. I would like to see the proceeds of asset sales by the government go directly to pay down the debt. (3) Except for those already established and who unabashedly delight in keeping others out after they themselves are settled in, most people would like to see more available housing in both San Francisco and Monterey. The marketplace, not officials, should determine the best use of the land. I would like to have representatives that have faith in the good judgment and ability of the people and the marketplace. And this does not mean I would like to see the National Park system abolished and park lands and reserves sold to reduce our debt. But military bases are not yet parks, and won't be unless our public officials fail to restrain their greed. Like kids in a candy store, m any of them would not stop until everything belongs to the government and is at the disposal of pubic need. It's also convenient that the larger the government or pubic sector becomes the more power its representatives wield. In our capitalist system, acquisitions for public needs depend on tax collections. But we have conveniently gotten around that restriction by running an annual deficit on the federal level—spending more than we take in—and feeding the national debt.

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Alternative #136

Alternative to the prevailing attitude of cynicism.
Goal: To celebrate our humanity and develop a sense of optimism in the nation.

How: Publicize the accomplishments of mankind and especially Americans
from diverse backgrounds and with a variety of contributions. The world needs more long-range thinkers, more philosophers, more people with a historical perspective who are able to understand and appreciate the contributions mankind has made to life on this planet and the ability to convey this appreciation to others.

Practical Benefits:
A renewal of energy and ideas throughout the country and even the world.

Soft Power Benefits:
Our greatest attribute as Americans has always been our buoyant nature and unbounded faith in our ability to make the future better.

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Background for Alternative #136
By every important measure of human welfare things have improved over time and will continue to do so. It took thousands of years to increase man's life expectancy from the low twenties to the high twenties. Then in two hundred years life expectancy went from under thirty years to almost seventy-five years! The Statistical Abstract of the United States will show improvement in our water, air and pollution over the years rather than deterioration. It was predicted that larger populations would lead to starvation, yet the price of food world wide is on a downward trend because of increased productivity and that's in spite of rising populations. Time and again the doomsayers have turned out to be wrong. Metals, food and other natural resources have become more available rather than more scarce throughout history. Famine was predicted for 1975 and instead there were gluts in the agricultural market. Lines at the gas pumps were followed by the cheapest gasoline prices since the 1930s. The Great Lakes are not dead; they offer better sport fishing than ever. Pollutants, especially those that kill, are used less frequently in our cities. There are presently more people alive than ever before. And better material conditions exist than ever before. The Malthusian theory of increasing scarcity based on fixed resources has been discredited and needs to be replaced. As Professor William Simon of the University of Maryland said, More people and increased income, cause problems in the short run. This presents opportunity and prompts the search for solutions. In a free society, solutions are eventually found. And in the long run new developments leave us better off than if the problems had not arisen. When faced with a shortage of resources, people create more and different resources. There's plenty of evidence to support that statement. In the 1600s the English feared deforestation because people were consuming too much firewood and so coal was substituted. In the 1800s they worried about a coal shortage and the British economist, William Stanley Jevons, discounted oil as unlikely to have much of an impact on energy. But profit-minded people developed oil into a more desirable fuel than wood or coal ever was. Individual entrepreneurs, not governments developed new technology. Entrepreneurs seized the opportunity, made mis

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takes and many risked and lost their capital on unprofitable attempts. But since enough of them were investigating and risking some of them came upon sound and workable methods and produced what was needed by the public in all kinds of areas. In 1989 England was exporting both coal and oil. There was a whale oil crisis during the Civil War which provided the incentive for enterprising people to develop alternatives. Innovators in Japan and South Africa are working with a new steel-making technique which promises to use less energy and emit fewer pollutants than conventional methods. Apparently the polluting gases will be consumed when all the ingredients are heated in a sealed furnace at 3,000 degrees Fahrenheit. There are endless kinds and supplies of oil if you realize that oil is anything that burns oris greasy. Rocks can be turned into shale oil, sand into tar sands, we can get oil out of coal and we can grow oil with soybeans and grape seeds. Besides, we have 13 years worth of known oil reserves for the world and we've had that amount for the last 100 years. We should celebrate our humanity and not apologize for it as so many environmentalists suggest. We alone of all the species on this earth have the ability and have used that ability to develop technology to cure disease, build and create wondrous things. But there will always be those who prefer to scoff at and denigrate man's achievements. The Royal Society of London, the world's most prestigious body of scientists at the time, scoffed at electricity when the idea was first introduced. They claimed it wouldn't work and then feared if it did it was too much power for mankind to handle. The greatest good for the greatest number is the issue here. You can't have school children choking from dirty air and old folks unable to walk outside because they aren't strong enough to withstand the air pollution. And what about the planet itself? Can we afford to wait until all the available data is in? Aren't the greenhouse effect, global warming, acid rain and ozone depletion large enough threats so that any sane person must realize that the risk of making a wrong choice cannot be tolerated. Better safe than sorry, even if it means reducing the standard of living around the world. High-minded altruism make the participants feel good. I know, in the seventies I went door to door in Berkeley with my kids trying to convince people that we couldn't afford to take a risk on nuclear power, we couldn't afford to wait for all the data to come in. Radioactive nuclear waste might leak over centuries. That possibility, no matter how remote, was enough for me. I bought the scare commercials, pamphlets, slogans and signs and said since no one knows for sure "better safe than sorry"—"for our kids"—"for

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the future"—"for the planet". G-d, I remember the feeling of camaraderie and how emotionally satisfying it felt to be on the "politically correct" end of things. But I grew wiser and became more disciplined. I began taking time to study the issues and do the hard work of evaluating and weighing evidence and determining cost-effectiveness—all with the hope of weighing in on the side that will result in the greatest good for my children, the economy, the world's standard of living, and optimistically the very progress of mankind. But there are few of us who can afford to or have the will to take this kind of time. And besides, there is little emotional satisfaction in having common sense. In the preface to Trashing The Planet, Dixy Lee Ray's very first words are This book was written because I believe too many people are losing touch with common sense. I like to think that over the years I have developed common sense. Today too many of my fellow citizens are fearful and constantly looking for a risk-free, secure environment. The following admonition is probably meant to warn you against technology and drive you back to nature. I see it differently. I love it because it reminds me that we will have to answer to future generations if we now turn our backs on the achievements of man and discourage the fullest use of technology. Ask as the American Indian does, "What will be the outcome of this decision on the seventh generation?"

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Alternative #137
Alternative to blaming mankind.
Goal: To ascertain the true cause of damage to the environment. To decide,
independent of pressure from foreign governments and organizations, to act or refrain from taking unwarranted action. To appreciate the abilities and accomplishments of humans and to allow them to continue to pursue activities which preserve and enhance their own species and other species as well as their environment.

How: Evaluate the best scientific evidence available and perform a cost benefit
analysis based on what is best for the United States and the rest of the world—with an emphasis on future generations. To concentrate on the good humans have done and to recognize that by using their abilities they have managed to cure disease and develop technology and build and create wondrous things.

Practical Benefits:
We can find solutions once we know the cause of the problems. If the accusers and scare mongers are ignored we can get on with the accomplishments that will make life even better for future generations. People have made mistakes but overall, by using their brains and innate impulses for good, they have made the world a better place. If they can reach the goal stated above they will continue to do so.

Soft Power Benefits:
1 - As we develop an appreciation for those who have allowed us to escape the disease, filth and drudgery endured by our ancestors the most able among us will be inspired to develop their abilities to create an even better world for those that come after us. 2 - Citizens will regain faith in the power of the intellect and scientific analysis. 3 - The feeling of helplessness and uncertainty will diminish as citizens realize their lives are not ruled by the whims of rulers and in response to scare mongers because it "looks and feels good." 4 - Guilt is counterproductive. Optimistic resolve is a far more healthy response to problems.

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Background for Alternative #137
Defenders of Wildlife raised more than a $100,000 from donations in order to compensate ranchers in Montana who may find some livestock killed by the reintroduction of wolves into Yellowstone Park. They even purchased a guard dog for one rancher. Another organization to assume financial responsibility for the action of wild animals is the Great Bear Foundation who compensates ranchers for stock destroyed by grizzlies. Ducks Unlimited, the Nature Conservancy and Trout Unlimited have all used private funds to purchase wildlife habitats. In today's environment railroads and aviation would have to be postponed or developed by some other country. The early railroads could never have passed an environmental impact or safety test and you can bet the Wright Brothers would have been grounded. And Henry Ford ---------- he never could have brought the Model T to market in our present environment— -the darn thing was too dangerous. Some environmental extremists have a death wish for mankind. I've heard phrases such as "An ice age is coming and I welcome it as a much needed cleansing." Or, "I see no solution to our ruination of Earth except for a drastic reduction of the human population." People who make these kinds of statements rejoice in famines, as Mother Earth's natural defense against overpopulation. I've even heard radicals proclaim the AIDS epidemic "the end of industrialism" which they see as the main cause of the environmental crisis. They consider AIDS a necessary solution. Volcanic eruptions have recently been occurring at a rate of about 100 per year. Krakatoa in Indonesia (1883), Mount Katmai in Alaska (1912) and Hekla in Iceland (1947) emitted more pollutants than man has done since the beginning of the industrial revolution. There is visible data regarding solar flares and sunspots have been seen to whirl in one direction for eleven years and then whirl in the other direction for another average of eleven years; no one seems to know why. Sun flickers (brightness and dimness) occur over a seventy year span. Then there are cycles on the moon which trigger changes in ocean currents and temperatures. Remember oceans account for 73 percent of the earth's surface and can hardly be ignored when looking at climatic changes on our planet. Cause and effect haven't been established, I'm just suggesting that the idea that man is responsible for the deterioration of our planet is preposterous when so much activity is taking place that we know so little about and is of such a large magnitude. Many scientists have tried to reason with the emotional enthusiasm of

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those who would put the burden of environmental changes solely on man. Again, as Dixy Lee Ray has written, When we consider all of the complex geophysical phenomena that might affect the weather and climate on earth, from changes in ocean temperatures and currents, volcanic eruptions, solar storms, and cyclic movements of heavenly bodies, it is clear that none of these is under human control or could be influenced by human activity... Until the supporters of the man-produced-CO2-caused-global-warming-theory can explain warm and cold episodes in the past, we should remain skeptical. I'm not suggesting that the amount of man-made pollutants that is spewed into the air is insignificant. But I am impressed by scientists who allude to forces in the universe beyond man's control and suggest that they bear some of the responsibility. What man has the power to affect, he should, but on a costbenefit basis. Ozone is supposed to bear responsibility for the destruction of acres of white pine forest in the East and Jeffrey pine and ponderosa in California. However, the evidence in those cases is shaky at best. There are so many forces at work that as Professor Paul Mannion of the State University of New York said in a 1982 address, it is difficult to accept the hypothesis that air pollutants are the basis of our tree decline problems. And he went on to say such pollutants cannot be discounted either. Ten years later the reason for the decline is still unknown. Drought, insects, disease, countless things have led to the decline of certain species of trees in our forests. Between 1870 and 1890 the red spruce was almost wiped out in the Eastern region of the country and it wasn't from CFCs as by-products of refrigeration and aerosol sprays. Professor Simon demystifies the loss of species saying that the facts show that from 1600 to 1900 the observed rate of species extinction, mostly birds, was about one every four years; and that the observed rate from about 1900 to the present is about one per year, with no observed increase in the rate over the 20th century. The Interior Department said at the end of 1991 that 41 percent of the 5 81 plants and animals on its list of endangered species are stable or increasing in number; 38 percent are in decline, the status of 19 percent is unknown and 2 percent are thought to be extinct. Sulfur and nitrogen compounds make up the "acid" in acid rain. Dr. Ray says nature contributes more than 90 percent of global nitrogen. Considering the additional sulfur that emanates from volcanoes, fuma-roles, hot springs, ocean spray, and the nitrogen fixed by lightning,

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the generally accepted contribution from the natural sources may be underestimated. In her book Dr. Ray asks in regard to acid rain, "Is enough understood about acid precipitation to warrant spending billions in public funds on supposed corrective measures?" She answers, "Certainly not." Of course the problem is not confined to the United States or to this time period. Early references to acid rain were found in Sweden in 1848, Germany in 1868 and England in 1872. More recently acid rain has been blamed for the decline of forests in Germany. G.E. Likens brought the subject to the forefront by publishing a series of articles of questionable scholarship during the 1970s. But sulfur dioxide emissions declined beginning in the mid-1970s when nuclear energy was largely substituted for coal burning in the production of electricity in Germany. In the 1990s not many people blame the continuing destruction of German forests to acid rain. Ozone seems to be a more likely culprit. Ozone concentration in Germany's forests has increased by more than 30 percent over the last two decades. Results from samples from ice frozen in the geological past and from remote regions of the earth, suggest there may be little relationship between acidity and the industrial production of sulfur dioxide emissions. As we discussed, there is reason to believe that volcanic eruptions have a greater effect on acid rain than does industrial podution. Also there is evidence that the natural acidity of rain may be neutralized by suspended alkaline particles from the dust characteristic of unpaved roads, parched fields, wildfires left to burn themselves out (alkaline ash) and other occurrences that are more readily found in many non-industrial areas on the planet. For instance, the soil in the Northeastern United States has always been extremely acidic as are all soils in areas that have been glaciated. On our East Coast there are numerous naturally acidic lakes, byproducts of glacier activity. Of the 219 lakes declared too acidic for fish, 206 are in the Adirondacks. People who claim that fishing is not possible in many of the Adriondack lakes where once "big ones" were regularly caught were probably oblivious to the annual stocking by the Fish and Game Commission which was discontinued around 1940. Amazingly these acidic lakes account for only four percent of the lake surface in the entire state of New York. It is quite possible that these lakes have always been acid or that if man has had a hand here it is interesting to note that many lakes in Scandinavia showed evidence of being far more acid 800 years ago, long before the onslaught of the industrial revolution. 85 percent of Bulgaria's river water and seventy percent of its farmland had been damaged by industrial wastes and pollutants before the people

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were able to topple the dictator that ruled with an iron hand for thirty-five years. A Rumanian chemical factory sent clouds of sodium and chlorine gas to a neighboring Bulgarian city (Ruse) finally the residents rioted. The pollution of Eastern Europe is the result not of too much technology and development, but of far too little. As technology advances the invariable result is greater and greater value with less and less consumption of raw material. The rest of the industrialized world supports the idea of stabilizing carbon dioxide emissions at 1990 levels by the year 2000. The USA claims that scientific data on the issue is uncertain and the costs of implementing an emission-reduction policy are unpredictable. Spokesmen for the internationally acclaimed environmental group Greenpeace, accuse the USA of being selfish and irresponsible in not conceding that global warming is a problem. Scientists on the United Nations Climate Change panel predict that if the carbon dioxide emissions continue unchecked, the gradual warming could cause environmental havoc worldwide. However Science does not back up their dire predictions. Of the half a degree warming excelsis over the last 100 years, four-fifths took place before 1940. After that ten 1970 temperatures actually declined, with a tiny increase in the 1980s. Hardly an ominous sign. Of the incoming solar radiation, about half is used to warm the earth, 30 percent is reflected back into space and about 20 percent is absorbed in the atmosphere. C02 and other gases, such as methane and hydrocarbon along with water vapor, absorb the infrared radiation that is a natural by-product of the sun warming the earth. These, known as "greenhouse gases", come from volcanoes, wild fires, decaying vegetation and the respiration of ad living organisms on earth as wed as being emitted as by-products of man's heating and transportation needs. Believe it or not, Dixy Lee Ray claims the largest source of greenhouse gas may well be termites, whose digestive activities are responsible for about 50 billion tons ofC02 and methane annually. This is ten times more than the present world production ofC)2from burning fossil fuel. Methane may be oxidized in the atmosphere, leading to an estimated one billion tons of carbon monoxide per year. p. 33 Co2 is produced pretty evenly; half by nature and half by man. However its presence in the ever present mixture of gases in our atmosphere is increasing, which alarms environmental activists. But we can tell from an analysis of air bubbles trapped in glacial ice and of tree rings and ocean sediment, that the earth has survived much larger concentrations of C02 in its past.

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Alternative #138
Alternative to established forms of energy
Goal: To discover a non-polluting, renewal inexpensive source of energy.

How: By lowering taxes and reducing regulations so that investors will be
willing to risk capital in the pursuit of a breakthrough in energy.

Practical Benefits:
Such a discovery will change the world and eventually everyone and everything will benefit.

Soft Power Benefits:
Cheap, renewable clean power will lead to a bigger pie for the world's population and there will be less arguing about who gets what share and more cooperation and opportunity for growth and harmony among all people.

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Background for Alternative #138
One way to obtain cleaner air is to switch from fossil fuel to nuclear to produce electricity and then use electricity for all forms of heating and transportation. Electricity could be used to desalinate sea water and purify polluted fresh water, it could be used to split water to produce hydrogen as a clean fuel for transportation along with the direct use of electric buses, trains and automobiles. Japan is already progressing along that line. They have about one thousand cars now utilizing electric power in Japan and they cost three times what a gasoline vehicle cost. Electric cars are coming along in this country but the batteries still need more work. GM introduced a two passenger electric car to Los Angeles which had a range of only 120 miles. But improvements are on the way. Alan Reynolds, director of economic research for the Hudson Institute makes an interesting point about electric cars that the philosopher-kings should be made to face: electric cars require electric power plants, which already account for onethird of all hydrocarbon emissions, while cars account for only one-fourth. And these costly car batteries end up as tons of toxic waste. James MacKenzie of the Union of Concerned Scientists claims that the USA is almost self-sufficient in natural gas. We import only five percent from Canada. In its favor is the fact that there are more small parcels of natural gas around the world than there are parcels of oil. Possible drawbacks: Natural gas can't be carted around the world because it is too volatile. Relying on natural gas would mean pipelines from the Southwest to the North and Northeast, which would have its own set of environmental hazards besides being extremely expensive. The Soviet Republics have 45 percent of the world's supply and Iran has the second largest supply. Proponents of natural gas claim that since fleet vehicles rack up two and a half times the mileage of a passenger vehicle, 180,000 fleet vehicles on natural gas would save the same amount of pollution as one million passenger cars converted to natural gas. Without any federal program to encourage natural-gaspowered vehicles there are 30,000 vehicles operating in the USA. The fuel cost savings and maintenance reduction was the only incentive needed! In April 1991 the National Academy of Sciences called for the swift development of a new generation of nuclear plants to help fight the greenhouse effect. But the nation's utilities have pretty well given up on nuclear. Long Island Lighting Co. wasted $5.5 billion on its Shoreham

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facility after local authorities refused to approve an evacuation route in case of accident. New York plans to buy the plant for $ 1 and dismantle it for $ 186 million. PSI Energy in Indiana went only half way with its nuclear plant and swallowed $2.7 billion in construction costs before throwing in the towel. Seabrook in New Hampshire cost $6 billion and was kept idle for three years, costing an extra billion dollars, while a second round of public hearings was completed. At least it was finally opened in 1990. One hundred and twenty plants have been abandoned since 1974. Our existing nuclear plants were only designed to last 40 years and will have to be dismantled and buried. However no utility that wants to please its stock holders would dare consider nuclear power. To change this there has to be a credible and agreeable waste disposal system. The public perceives a danger from plutonium in the spent fuel rods which will endure for tens and even hundreds of millenniums. The attendees at the October 1991 Conference on Global Warming which was held in Geneva, Switzerland, decided the Bush administration was not cutting back on carbon dioxide emissions fast enough and in amounts large enough to satisfy them. In 1990 France was getting 75 percent of its electricity from non-polluting nuclear plants, Germany 33 percent, Japan 27 percent, USA 21 percent, England 20 percent and USSR 12 percent. France has standard reactors enabling any nuclear engineer or plant operator to work on 52 of the nation's 55 plants at a moments notice. In this country each of our 112 nuclear plants was custom built so a specialist has to fix it. The Bush administration would like to have four designs ready for utilities to choose from by 1995 in an effort at cost efficient standardization. The French store nuclear waste by converting it into a stable, glassy substance and placing it in concrete bunkers at plant sites while experts study where to dispose of it permanently sometime early next century. Since 1973 our use of electricity has risen 17 percent and records clearly show that economic growth parallels the use of electricity. But putting new construction out of the picture entirely for a moment, we have a real need to replace older generating equipment. We should already be constructing 20,000 miles of new high-voltage transmission lines. Forecasts of only 1.5 to 2 percent increases in electricity consumption in the future are unconscionable. The NERC (North American Electric Reliability Council) founded in September 1988, agrees the 2 percent projected increases are too small. The problem is the NERC's forecast of the nation's ability to increase electricity sales by 2 percent was postulated on a good many things that are not happening. They anticipated 90,000 megawatts of new generating capacity by 1996 even though 45 percent of construction to meet the demand had not commenced by 1990. It takes

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about ten years to get coal-fired power stations licensed and on line but gas turbines can be installed quickly. The only problem is the high price of the oil or natural gas that it takes to fuel the later. Oil-fired plants generate 6 percent of our electricity and accounts for 3 percent of the uses of oil. Everyone agrees we will definitely need more power by 2010. According to DOE (Department of Defense) that could be accomplished by an additional 250 coal or nuclear plants. We have coal reserves to last many decades. The question is, do we want to bear the cost and effects of burning coal or the risks of nuclear power? In order to wean civilizations away from fossil fuels and to establish nuclear energy as the major power source in the world, we would have to complete two nuclear power plants a day between 1995-2020. Currently one plant is completed worldwide every two weeks. Right now fossil fuel accounts for 87 percent of the world's source of energy and nuclear power accounts for only 6 percent. Non-industrial countries will still bum fossil fuels so whatever we do will be only a drop in the global bucket. Northern California's Pacific Gas & Electricity already gets 14 percent of its power from the sun and wind. In April 1991 Southern California Edison joined with Texas Instruments in a six year $ 10 million project using low grade silicon to make photovoltaic cells to convert sunlight into electricity. I'm not arguing against these sources. I don't have the knowledge or the credentials to do so effectively. But let me turn Dixy Lee Ray loose on this subject. On page 129 of Trashing The Planet, she gives an unforgettable explanation of the trouble with trying to harness a diffuse energy source like sunlight when concentrated energy is so much more efficient: There is the same biomass in the body of one elephant as there is in 100 million fleas. Now, if you need to pull a very heavy load, would you rather harness one elephant or 100 million fleas? Provided, of course, that someone builds flea harnesses at a price you can afford to pay, and provided, of course, that you can make all those fleas hop at the same time and in the same direction! And that explains the trouble with solar power. It is diffuse and, like the fleas, it is difficult and expensive to organize and concentrate. As for wind power she cites a study done by Lockheed that if everything went perfectly 63,000 windmills having towers over 300 feet high, blades 100 feet across and a steady wind could supply about 19 percent of the nation's power.

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Apparently the noise from the 7,000 windmills located at the Alta-mount Pass, between Oakland and Stockton California, drove the nearest residents crazy. The operators of the project were forced to buy out suit-happy homeowners. Other drawbacks were the birds that were killed by the revolving blades, the problems with maintenance, the unreliability of the wind and the high cost. In this last regard a failed project in California cost $30 million of taxpayer dollars to build and brought only $51,000 when it was auctioned off for salvage.

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Alternative #139

Alternative to forcing heavy burdens on certain industries.
Goal: To allow private companies to prosper without undue interference by
government.

How: Reduce regulations and outdated and unnecessary laws where ever
possible. Monitor new legislation carefully and let no mandates take effect until an objective cost benefit analysis has been performed and private property rights have been honored.

Practical Benefits:
People will be more likely to invest and make long range plans when they no longer have to fear sudden, arbitrary and often unwarranted regulations.

Soft Power Benefits:
People will stop looking over their shoulder in fear and trying to second guess what their government is planning to do to them next. Instead they may begin to see government as a friend and helper—the servant not the ruler of men, as our founding fathers intended.

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Background for Alternative #139
The Clean Air Act of 1990 was rushed through at the very end of the 101st Congress. It is estimated to cost industry $25 billion a year. It purports to clear the skies of smog, acid rain and toxic fumes. The House wanted $250 million over 56 years for extra unemployment benefits and job retraining for displaced workers, like coal miners who would be forced out of their jobs if the legislation passed. The legislation amounts to 1,100 pages. It called for tighter controls on tailpipe exhaust which could add approx $100 to the cost of a new automobile. Cars would have to emit 60 percent less nitrogen oxide and 40 percent fewer hydrocarbons and emission-control equipment would have to last twice as long as previously mandated or 10 years or 100,000 miles. More studies and incentives for cleaner-burning fuels were part of the legislation. Utility rates should increase as restrictions on coal-fired plants are implemented in an attempt to reduce acid rain. There is a pollution-credit trading system. Utilities that make extra-deep cuts in their emissions earn pollution credits valued at up to $500 for each ton of reduction. They can stockpile these credits or sell them to other companies who find it extremely difficult to reduce their emissions to the mandated level. Subsidies were rejected for the dirtiest plants in the Midwest and so those rate payers are going to suffer the most. Joseph Jacobs, 75 year old founder and CEO of a large and successful engineering firm, claims twenty-five percent of his contracts are with government agencies and corporations struggling to comply with the Clean Air Act and other new environmental standards. He maintains that the American public has little idea of the cost to the economy. Pollution reduction is seldom a win-win proposition. Many programs are foolish and if a cost-benefit-analysis were done, would probably not be attempted. For example removing benzene, as a possible carcinogen, from gasoline will cost consumers sixteen cents more per gallon. Mr. Jacobs, as a chemical engineer, has some expertise in this area and believes there is no significant hazard. He seconds a good many articles that I have read when he calls asbestos remediation "a joke". Alar and radon too. Apparently more than a billion dollars is being spent on uranium-mill-tailings in an effort to isolate leftovers from the uranium boom in the 1960s to prevent them from giving off a meager amount of radiation. On the other hand, Mr. Jacobs would be the first to warn of the potential dangers of federal weapons-production facilities and to advocate the cleanup of these sites.

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Santa Barbara thwarts production from the largest domestic oil field since discovery of Alaska oil 20 years ago. Chevron spent $2.5 billion on a processing plant which sits idle because environmentalists are concerned about the movement of the oil to refineries in Los Angeles. Chevron wants to ship by double-hulled tankers, at least temporarily, but environmentalists want shipment by pipelines. Industry and environmentalists are at loggerheads. Chevron has worked with the community for ten years and spent millions of dollars to allay concerns. It has relocated a school deemed too close to its main processing facility, donated 36 acres for parkland, replanted eucalyptus tress that are a habitat for Monarch butterflies and built a desalination plant. Chevron's plan to spend hundreds of millions of dollars building a pipeline along the Southern Pacific railroad track may be thwarted by the same cities that blocked a proposed pipeline along a different route in 1987. Bureaucrats have figured ways to transport the oil along pipelines now owned by other private companies but Chevron says the high cost and other problems make their plan not feasible. In May, 1990 the 11th Circuit Court of Appeals held a lender liable because the bank could have influenced a company's waste disposal decisions if it had chosen to do so. Could have but didn't! The potential cost of cleaning up hazardous waste in the U.S. could run up to $500 billion over the next 50 years and as things stand, banks could be liable for at least 20 percent of the cost. Under the terms of the Clean Air Act, company officials could be subject to prison sentences of up to 450 years and unlimited fines at $25,000 per day. for failing to meet permit standards and detailed compliance timetables. Company informants and competitors are offered up to $ 10,000 in bounties for fingering suspects. Any activist group can sue to countermand permits even after they are granted. This sort of 'pollution prevention' could signal the death knell for competitive economic growth according to Ernie Rosenberg of Occidental Petroleum, a former EPA regulator and one of industry's most respected lobbyists. If you break down its bill you will find that it cost $82,000 to clean each otter after the Valdez oil spill. (Many didn't survive so the total expenditure was divided among those that did.) Government prosecutors got Exxon to plead guilty to violations of the Migratory Bird Treaty Act of 1916. Attorney General Dick Thornburgh even made a criminal indictment, claiming that the spill was willful or knowing. I understood that Exxon

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admitted liability from the beginning and on its own initiative paid approximately $2 billion to clean up the mess. Even though a jury found the captain not guilty of all his charges Exxon was willing to reimburse anyone who lost money because of the spill. That should have been the end of it! By the summer of 1991 Valdez was almost back to the normal but judges and prosecutors were still grandstanding to the environmentalists. Unconscionable and foolish! In October 1991 the Anchorage Daily News and the Anchorage Times,, newspapers that have not been friendly to Exxon in the past, claimed that federally funded researchers were killing hundreds of birds and animals in order to beef up the government's case against Exxon. Apparently the Justice Department needed to prove that the Valdez accident killed up to 300,000 birds whose bodies floated out to sea in order to obtain the highest damage award possible. Bird Study #1 was ordered. FWS (Fish and Wildlife Service under the U.S. Interior Department) ordered birds killed, immersed in oil and fitted with transmitters and floated out to sea. By tracking them it would be possible to estimate what percentage of a known number washed up on beaches and what percentage simply sunk in the sea and extrapolate from there. The actual killing was contracted out to Ecological Consulting Inc., a Portland, Oregon research firm and the $600,000 fee was paid by taxpayers. According to Glenn Lammi of the Washington Legal Foundation, The hired killers shot 250-350 murres, scoters, cormorants, and ancient murrelets on remote Alaskan islands, many of them protected national wildlife refuges, and returned them for use in the study. The Alaska Department of Fish and Game killed ducks to approximate the number of birds killed and treated them in the same manner. They then went after and killed 17 Stellar's sea lions, 3 sea otters and minks, 28 harbor seals and 32 deer. The governments' case against Exxon was finally settled on October 8, 1991. $900 million is to be paid over ten years, plus $100 million more under a "re-opener" clause if more spill-damage is discovered. $56 million was the sum collected between 1983 and 1990 in fines, restitutions and forfeitures in all other environmental cases.$2.5 billion already spent on the cleanup itself, amounted to Exxon's income worldwide in 1989, the year of the spill. But Exxon made $5 billion in profits the next year. That has some environmentalists and others angry over the settlement. They set the damage at close to $15 billion and say the agreed settlement is neither an adequate compensation nor an adequate deterrent.

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Du Pont, a leading producer of CFCs, accelerated an already planned phase-out of CFC sales to other countries by two years. also said it would eliminate one of its CFC substitutes, HCFC-22, more quickly than would be required under federal law because it still is detrimental to the ozone layer.
If

It's amazing that a large company like Du Pont would fall all over itself in an attempt to look good and comply with inconclusive speculations. The Wall Street Journal on October 23, 1991 said, But so far, experiments in Antarctica—where a continental-sized "hole" in the ozone layer opens most springs because of CFC chemistry—have found hardly any damage to plant life in the sea. .. .The report attributed the thinning of the ozone world-wide to the spread of ozone-poor air from the poles and chemical reactions involving CFCs and sulfur particles from volcanoes. But the scientist acknowledged they didn't fully understand these mechanisms and suggested other factors may be at work. So what if the cost to the economy could approach $150 billion, with the possibly needless changeover of equipment such as air conditioners, refrigerators, supermarket display cases, and oh yes, the nation's trucks and automobiles. Why not give up all the work that went into HCFC-22? Why shouldn't the private sector defer to bureaucrats and pseudo-scientists? CFCs are "in" one day and "out" the next. Small gasoline dealers are being driven out of business by the phenomenal cost of meeting tough environmental regulations. California'sProposition65,whichpassedinl986, put the onus on business to show its actions are safe rather than on regulators to establish that practices are unsafe. But that's OK, play their little games because if business people refuse to question and fight back when these regulations are arbitrarily and prematurely slapped on, the country is finished anyway. Thousands of people are working on new approaches to heat generation, electric power and a room temperature superconductor that could be used to produce refrigeration chips. These developments would supersede the need for freon and similar substances which are often blamed for depletion of the ozone layer. There are already breakthroughs in new electric generating systems that reduce greenhouse gases, smog and other air pollutants. The potential for solid-state fusion is mind boggling ---------------solid-state power plants small enough to be installed in individual homes

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may be just around the corner. The future holds limitless possibilities for clean, cheap efficient power. Alan Reynolds, a man of great common sense, wrote in the October 14, 1991 issue of Forbes, Bootleggers and Baptists both want to ban liquor sales on Sundays. Similarly, there is a lot of money to be made from whipping up phony energy and environmental scares and then passing a law requiring the public to buy snake oil as the official cure. Like nuclear energy, although irradiating food is the norm in many industrial nations, we have let the scare mongers rule the day in this country. Dr. Ray said in her book, If the proponents of banning CFC are so anxious to reduce its use, why aren't they out campaigning for irradiating food as a substitute for refrigeration ? Food irradiation is an available technology used by all our astronauts and in hospitals for patients that require a sterile environment.

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Alternative #140

Alternative to costly recycling programs.
Goal: To protect the environment without sacrificing economic efficiency.

How: Let the marketplace determine what kind of recycling makes sense.

Practical Benefits:
The nation will avoid the energy intensive recycling programs so often mandated by various levels of government which frequently waste more than they save.

Soft Power Benefits:
Mandates are hard-power and people will feel less oppressed if they are permitted to weigh various alternatives and then take the action they determine is best. That's soft power—motivation from within.

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Background for Alternative #140
Green Seal is a nonprofit organization, founded by an Earth Day organizer. The seal itself is kind of like the Good House Keeping "seal of approval" which used to be greatly coveted as a great marketing tool. Sales increased if the seal was affixed to products. Green Seal is hoping to have its stamp of approval mean something commercially when affixed to tight bulbs, soap, recycled paper, motor oil, toilet and facial tissue and so forth. They want to influence the market towards products which they deem to be the least destructive to the environment. Polls show 90 percent of women and 87 percent of men are willing to pay more for products and packaging that are good for the environment. The hottest words in advertising have become "recyclable", "biodegradable", recycled", environmentally friendly" and "compostable." In Nov 1991, Rhode Island put the nation's first environmental labeling standards into effect. No longer can advertisers in that state proclaim something is "recyclable", it must adhere to a bunch of regulations and requirements. For instance there must be a program where consumers can in fact recycle something labeled "recyclable". California, Connecticut, New Hampshire and New York are working on similar regulations. The aim is to control what benefits can be claimed. The National Food Processors Association and ten other trade and advertising organizations want the FTC to define nationwide environmental marketing terms. Green Seal and other environmental groups are opposed because that is the area they had hoped to carve out for themselves. A New Jersey study showed recycling programs can cost cities as much as $200 per ton of materials collected. Officials discovered it was more economic to deposit trash at an average landfill fee of $28 per ton. $40 per ton is a low cost recycling program. There are legitimate reasons for the higher cost of recycling. Curbside recycling means more fuel consumption and air pollution because of the trucks. Some recycling processes are energy intensive and produce volumes of wasted water. Sure you save landfill space at the cost of water, fuel and other forms of energy with their pollutant by-products. Local governments never charge the consumer anything near what it costs to recycle and many cities never directly charge residents for garbage collection. When the costs are hidden in taxes there is not the incentive to recycle and reduce waste as there is when a consumer is charged on a per can basis. The marketplace should determine what kind of recycling makes sense. Recycling aluminum cans takes less than ten percent of the energy necessary to change bauxite into aluminum. In the sixties it took 164 pounds of

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aluminum to make 1,000 cans, in the nineties it takes only 35 pounds. This was a result of competition between the can manufacturers, not mandates from environmentalists. The percentage of old motor oil recycled is up to 10 percent in 1992 from only 2 percent in 1988. A company in Chicago with a new $50 million rerefinery is hoping the EPA classifies used oil (which contains chlorinated compounds and lead) as a hazardous waste which would force some used-oil burners out of the business and drive disposal prices up, making re-refineries more profitable. Environmentalists claim that environmental protection and economic efficiency are in competition but that is not necessarily so. Lynn Scarlett, an expert on solid-waste management says, "Product bans and waste reduction engineered by government central planners interrupt this process and force inefficient production." She tells of a ban by Maine of the little boxes that hold juice in favor of glass bottles. The state unwisely overlooked the extra energy expended in filling glass bottles (twice as much) and fifteen times as many trucks to transport juice in glass rather than aseptic boxes. Ms. Scarlett claimed transportation of the boxes per unit takes 35 percent less energy and because dairy products do not require refrigeration if transported in these boxes, CFC is reduced. Cities in New Jersey and Oregon have banned polystyrene even though it has been shown that substituted paperboard takes 30 percent more energy in its manufacture, gives off 46 percent more air pollution and contributes 42 percent more water podution. Newer packaging materials like polystyrene, are also responsible for a reduction in food waste (retard spoilage). It's easy to treat one resource, landfills, as the most significant, and fail to recognize the whole set of resources that any product uses from its initial production, through its consumption, and then on to its disposal. We have to remember that resource conservation, not recycling, is the fundamental goal.

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Alternative #141

Alternative to old ways of doing things.
Goal: To find a variety of new and better ways of doing things. How: We must not resort to government mandates in the form of national policy dreamed up by elite commissions and panels of experts. Let two hundred million ordinary every day folk loose with their dreams and schemes and the market place will determine the best. There are ways to preserve and manage while still allowing growth and development. We must not give in to those who claim it is impossible. Practical Benefits: 1- More and better ideas than could be achieved through government planning. 2 - Expanding the pie means a higher standard of living and less envy and strife among the people's of the world.

Soft Power Benefits: When people's physical needs are taken care of via economic gains they will turn within to develop their character. People will be empowered and feel more confident when they know they can make a difference. Too often leaders treat the general populace as children and act as if only elected officials and their handpicked appointees are the only ones capable of coming up with creative solutions.

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Background for Alternative #141
There are plenty of good creative minds out there working on our problems. In fact in Providence, Rhode Island in July 1989, someone came up with an innovative way to transform raw sewage into clean drinking water. Waste, flowing from one tank to another, is broken down in stages by bacteria and algae into nutrients that are digested by aquatic plants... By the time the waste water reaches the final tanks, it's crystal clear. The sun powers the system—hence the name; solar aquatic waste-water treatment. Treating sewage with chlorine and aluminum salts makes the water unacceptable for drinking and poisons the earth when you put the solid wastes in a landfill. San Diego, where 90 percent of the water is imported, is a pioneer in alternative waste-water technologies that yield potable water. It has been experimenting with a solar aquatic system that uses ponds instead of greenhouses. Conservation is one area where private industry is ahead of the pack. Wood preservatives are widely used in lumber used for fences, decks, porches and in all aspects of construction. Their use has been estimated to save "a forest of trees two times the size of New England." According to Charles Komanoff, who gave expert testimony before a Senate Subcommittee on January 11,1990, it is better to urge a federal role in planning for conserving energy than to encourage use of nuclear. Energy efficiency is Mr. Komanoff's answer. No doubt conservation is another alternative. One of its leading proponents is Senator Paul Wellstone, the freshman senator from Minnesota and a member of the Energy and Natural Resources Committee. He argued against the JohnstonWallop energy bill (S 1220) claiming the best and cheapest way to increase our energy is through conservation and efficiency measures and the development of renewable sources of solar, wind power and ethanol. He wrote the following in a special Policy Briefing # 33 dealing with "Natural Resources" in Roll Call ("The Newspaper Of Capitol Hill"): Overall, S. 1220... gave far more weight to energy production than to conservation, efficiency and renewables. . . .75 percent of funding in the bill was for production-oriented titles, and less than 25 per cent for efficiency and renewables—in fact only 2 per cent for renewables!... (the construction of) 250 nuclear plants.. .This is a clear example of thinking locked into the past rather than of looking to the efficiency revolution of the future.

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/ want a national energy policy... It must be the kind of policy the American people want, stressing conservation, efficiency and renewable resource. Consolidated Edison spent over $8 million in January and February 1991 on rebates to customers who traded in their old air conditioners and lighting fixtures for more efficient new models. During the eighties we got seven times more savings from conservation than from all the net increases of energy supply. Why do we add expensive scrubbers to coal-burning plants instead of switching to cleaner nuclear fuel? How can it make sense to use coal rather than nuclear energy for safety reasons when annually 500 deaths are coal related and deaths from nuclear energy are close to zero? It makes sense to the same extent that liability from one death traced to a vaccine can prevent the vaccine from saving 1,000 lives. Take the poultry inspections we were discussing earlier. What good does it do to complain about antiquated inspection systems when irradiation, a technique used successfully and safely in other countries, can kill salmonella before fresh chickens ever get to the market but applying the technology to poultry is outlawed in this country? Chemical Waste Management, a private company, battled for years to get permission from the Environmental Protection Agency to use new technology to incinerate waste on its ship on the ocean. Meanwhile it was being done successfully for 15 years off Europe. The Clean Air Act of 1990 avoided a mandatory alternative fuels program. Alternative fuels would have been hard pressed to compete with the huge investment already made in gasoline fuel. Arco's CEO testified at a congressional hearing that his company was confident it could easily meet S.B. 1630's (The Clean Air Act of 1990) standards. It has already had successful sales with RC-1, an earlier reformulated gasoline. It also has come up with EC-1 which would clean up the air significantly. Arco estimates its reformulated gasoline fuel could be responsible for the reduction of 350 tons of pollutants each day. The company is working on EC-X which should be ready in 1992 or 1993 and would meet the most stringent requirements and be a ready match for any alternate fuel. Reformulated gasoline, according to car manufacturers, and certainly the oil industry would agree, is the best and least disruptive approach to clean air. Service stations will not be required to carry any one specific fuel. Ad fuels that can meet the EPA standards are now allowed to compete in the marketplace. But no fuel can effectively compete with gasoline, at least in price. In his 1990 book The Prize, Daniel Yergin claims that correcting for inflation, gasoline in the 1960s actually cost $1.50/gallon. Between 1988-1990 it was selling at bargain prices, the cheapest it had been since WW II.

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He pointed out that the U.S. gasoline tax is only ten percent of the taxes levied on this fuel by other countries. Gilberto Mestrinho Governor of Amazonas complains that environmentalists from other nations are interfering with the rights of the Brazilian people to develop their own land. As for the contention that rain forests are treasure troves of medicinal plants which may someday benefit all of mankind, do you think the environmentalists would allow us to exploit the rain forest, even though the cause were humanitarian? They put up a pretty good fuss over the harvesting of the bark of the Pacific Yew, used to make Taxol, a new drug in the war against cancer. Any harvest, even for medicinal purposes, is likely to interfere with the sex life of some reptile or rare bird or insect. If I were you I wouldn't count on being able to derive much benefit from harvesting the rain forest no matter the reason. The rain forests are supposed to contribute an enormous amount of oxygen to our atmosphere and because of this belief they are sometimes referred to by radical environmentalists as the "lungs of the world." The truth is 90 percent of our oxygen supply comes from the world's oceans. If old trees were harvested before they went to waste and started decaying, a process which uses oxygen, then the rain forests might add to our world oxygen supply. As it is, the production of oxygen through photosynthesis and the depletion of oxygen through decay results in a break even situation. If the forests were managed and young trees, which do produce large amounts of oxygen, were tended, there would be an increase in the supply of oxygen. Young trees remove five to seven tons more C02 per acre annually than old growth trees. Young living things metabolize more quickly than more mature specimens. Also lumber, and perhaps useful ingredients for medicine, industry and science could come from harvesting the rain forests. Employment opportunities in the harvesting and tending of the forests and from its products would create a higher standard of living for the people of Brazil.

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Alternative #142
Alternative to the theory that less is better.
Goal: To recognize the power inherent in a free people—the unlimited potential
to create, to design, to build and expand.

How: Scarcity leads to conservation, substitution or improved productivity.
When faced with a shortage of resources, people create more and different resources.

Practical Benefits:
Technological breakthroughs occur when people are under pressure to solve problems, to find substitutes.

Soft Power Benefits:
If our citizens are given the freedom to think and to use their abilities without undue interference—without oppressive regulations and heavy taxation—then the limits to their accomplishment will be found in their own behavior. When people are free from outside force they will begin to look within themselves and to develop soft power.

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Background for Alternative #142
Conservationists long for "the good ol days" and go along with the Orwellian thought process that "less is more", that somehow small is beautiful and the growth of modern technology is ugly and even evil. Irwin Stelzer has some interesting things to say along those lines too: So why not legislate lanes for bicycles, which involve ennobling human effort and discourage the use of gasguzzling cars; why not set electric rates so as to discourage use of self-cleaning ovens, and encourage the use of good, old-fashioned elbow grease? Such is the stuff of energy policy—battles over hidden agenda about how life should be lived, resources used, regions favored, incomes distributed. Adjunct professor of botany and geography at Arizona State University, told the California Energy Commission that "essentially everything that plants do, they do better with more carbon dioxide in the air." According to a report in Business Week, Professor Idso said that if the government is going to assess penalties against (coal burning utilities) for the detriment they may or may not cause to the environment, justice demands they be given credit for the proven benefit. When confronted by another point of view (planting trees to offset coal plant production) James MacKenzie of the Union of Concerned Scientists ridiculed the idea, claiming that if the trees were destroyed by disease or fire for instance, we would still have the coal mining pollution without the offset. His idea is to tighten belts and get set for a reduction in living standards. "The world doesn't need more energy; just use what we've got more wisely." Data collected by Nobel Prize winner Simon Kuznets in 1967, showed there was no observed relationship between population growth and economic development. Data on a nation's rate of population and economic growth show countries with high population growth also had the highest economic and standard of living growth, at least where there were incentives for working hard and taking risks. University of Maryland Professor Julian Simon came to understand that economic liberty, respect for property and the fair and sensible rules of the market had to be part of the picture. We have more living space now than we did 20,40 or even 100 years ago. Even agricultural land is becoming more abundant. Professor Simon says, There's no physical limit to the number of human beings who can live long, healthy and well fed lives on this planet of ours.. All the

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people in the world can live in luxury-sized apartments in 100-story-buildings in an area no larger than New York City. We have endless places to go. There is no known limit—especially not in energy, because nuclear power gives us an unlimited supply of energy at a constant or declining cost forever. Ultimately, cheap energy can provide all the desalinated water we want and all the land that we need, so that even this constraint is not upon us. Paul Ehrlich bet that over a ten year period five natural resources would become more expensive as population grew and Julian Simon bet they wouldn't -------- Simon won. Population grew by more than 800,000,000 between 1980-1990 and the real (adjusted for inflation) price of just about any commodity fell including the five chosen for the bet; tin, chrome, tungsten, nickel and copper. Simon's point was that man's ingenuity will overcome any shortage and is the most certain source of value in the world. Dennis Avery, author of Global Food Progress 1991 says we could feed another two billion people right now, on the good land diverted from crops by government policies just in the USA and Argentina. If the Third World adopted the latest high-yield farm technologies, including hybrid rice, high-protein com and acid-tolerant seed varieties for a billion acres of currently barren acid soil savannahs, we could feed another four billion people. Mr. Avery insists that instead of world food production falling behind population growth, per-capita food supplies just in the Third World have increased 25 percent above subsistence levels since 1960 and Third World birth rates are slowing more rapidly than anyone had predicted—food production continues to rise at twice the rate of population! Half the world's population was threatened by hunger right after the second world war, whereas today in most years, 3 to 5 percent is threatened. Thanks to science-based agriculture the same farm land now feeds twice the number of people as it did in 1960. Innovation has always been our hallmark. Electricity was brought to rural America in the 1930s and relieved the farmer and his family of much manual labor and gave us the modem problem of agricultural surpluses. Over abundance of food is a new problem. During the 6,000 years of recorded human history food surpluses were unheard of until recently. In 1910 25 percent of a farmers land went to feed farm animals. One farmer could feed 7.1 people. Today one farmer feeds 59 people. A team of horses could plow one acre of land a day. Today a tractor plows 35. In 1910 that acre yielded 26 bushels of com. Today the same acre yields 97 bushels. Without modem technology, instead of the four million farmers that grow our food, today we would need 31 million. We have only 4 million horses

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and mules and it would take 20 years to breed the 61 million that would be required to farm without electricity. With the help of man-made pesticides and chemicals, in the 1980s farmers were producing 275 100-pound sack of potatoes per acre compared to the 75 they were able to produce on good soil with the help of only animal fertilizer in the 1920s. During the nineties world food demand will rise 18 percent. Add the demand for improvements in diet and agricultural resources will face a demand to increase output by 30 to 50 percent during the 1990s according to Mr. Avery. We need to keep agricultural technology flowing, especially to Asia. Today we are able to control soil erosion and avoid experiences like the dust bowl of the 1930s. We generally attribute this ability to contour plowing, better sod management and windbreaks. I've heard criticism of Mr. Avery's optimistic estimations of our ability to handle any population boom that is likely to materialize. He may not have considered the possibility of advanced technology having to deal with natural catastrophes, such as pests, disease, climate change and so forth. I guess you know that Lester Brown, founder of the Worldwatch Institute, says our gains in agriculture are at the expense of mining underground water and destroying topsoil. He is silent on the progress we have made. The truth is conservation tillage has cut soil-erosion rates in half while alley cropping in West Africa has virtually eliminated the need for slash-and-burn farming. In the Amazon rain forest, a legume called Kudzu can cut the environmental impact of slash-and-burn farming by 90 percent. Farmers waste a third of the world' s water with flood irrigation, but new sprinkler, drip and trading-tube irrigation systems could double water-use efficiency. Soil erosion problems abound in areas where more people are fed via traditional agriculture. Genetic engineering with its promise of miracles like the production of 30 million to 40 million tons of feed corn a year from laboratory bacteria. The forest products we need can be produced on less acreage because cloning and tissue culture can now quadruple tree yields. These food and environmental gains are published in the United Nation's Food and Agriculture Organization, the U.S. Department of Agriculture and numerous other reputable studies. But who tells us about Tanzania doubling its grain production? Those pushing zero growth and expansion of wilderness areas are hoping to back us into a corner. They want us to see the choice as either economic stagnation or suppression of the population. On the other hand, farmers like new technology if it adds to their profits, but not if it permits farmers in other countries to produce more. It's hard to get at the truth. Even the researchers applaud the fear mongers hoping they will generate more research funds

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Alternative #143

Alternative to government boondoggles.
Goal: To eliminate the numerous benefits given by federal agencies to specific industries or groups of people at the expense of all taxpayers. How: Enforce directive A-76 which prohibits federal agencies from doing what can be done more economically by the private sector. Practical Benefits: The elimination of waste by the federal government means less government debt and its accompanying interest cost ($316 billion in interest payments alone projected for 1993). Soft Power Benefits: Patronage is demoralizing to citizens. People will feel better about one another, their government and face their own circumstances with more optimism when favoritism has been eliminated.

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Background for Alternative #143
According to United Nation's data, which has been gathered on deforestation over the past 50 years, there are no fewer trees on earth now than there were 50 years ago. (In the USA) the average annual wood growth is now more than three times what it was in 1920, and the growing stock has increased 18 percent from 1952 to 1977. Forests in America continue to increase in size, even while supplying a substantial fraction of the world's timber needs. As a job-creating measure in the 1950s, the Forest Service gave two pulp companies 50-year contracts at ridiculously low timber prices and proceeded to build them roads costing $150,000 a mile. It has been determined that each job costs the federal government $36,000 a year meaning taxpayers pay more for this boondoggle program than timber companies pay for the wood. The Forest service has been losing over $50 million a year on this project, as well as trees. Not to mention the harm caused to small independent private timber producers who have to compete with those receiving these large government subsidies. It sounds like the U. S. Forest Service has been running a lose-lose operation. Federal timberland is valued at more than $100 billion making the capital costs of these timber resources about $10.4 billion a year, costs not accounted for anywhere on the government's books. The U.S. Forest Service runs a negative cash flow of about $ 1 billion a year. Nevertheless, according to a distinguished Washington University Forestry Professor, these costs have to be weighed against any benefits produced by the national forests and in fact cost the average American at least $50 a year. You may well wonder why the government is in the business of producing timber, especially since there is evidence that it doesn't do very well at it. Spending more on the sale process than is gained in sale revenues is not a sign of business acumen. Besides, the private industry utilizes more advanced technologies to increase the forests' health and growth. Forests in this country continue to increase in size, even while supplying a substantial portion of the world's timber needs. The Pacific has a timber inventory three times greater than the South, but most of it is in public ownership while most of the South is privately held. Better forest management, improved seedlings, and informed use of

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fertilizers and pesticides have made this possible. With 32 percent of the land in this country in forest or woodlots the annual wood growth is three and a half times larger than it was in 1920. Some critics claim the EPA proposal was weighted towards methanol. On the other hand, the methanol industry is concerned about ethanol's subsidies which hurt methanol's ability to compete. Ethanol has garnered support from those who represent the farm states because its use greatly reduces grain subsidies. Ethanol, which is 90 percent gasoline to begin with, costs twice as much as gasoline and gets a tax break equal to 54 cents a gallon. Methanol emits formaldehyde and "tends to explode". Deferring once more to my favorite authority, Dixy Lee Ray suggests federal funds be spent on research not on boondoggles to satisfy the mindless cries to 'to do something' from those who would substitute passion for science. To intimate that ifS02 is eliminated then acid rain will disappear is not only simplistic and unscientific, it is grossly misleading as well. Yet that is what the federal government has done. Urged on by his image-conscious staff and reports on acid rain problems in south-eastern Canada, and apparently motivated more by politics than by scientific evidence, the President would have us believe that if enough money were spent to devise ways to reduce S02 in the effluent from the stacks of midwestern coalburning utilities, the acid rain problems would go away. They won't. (Trashing The Planet p. 66) It was amazing to me that The National Acids Precipitation Assets Program Report was hardly mentioned in the media although it cost the government (taxpayers) $537 million over a ten year period. Can you believe it? 700 scientists studied the acid rain situation for ten years and concluded acid rain was not a serious problem. They found no evidence of widespread forest damage attributable to acid rain and further concluded it is not causing any reduction in crop-yields. Lakes were found to have the same acidity as in preindustrial times. They suggested, in order to achieve any desired deacidification, that limestone might be spread around an affected area. That would cost, at most, a few million dollars a year. The acid rain program calls for cutting S02emissions in this great country by

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ten million tons a year from their current level of 22 million tons. The goal is to be reached by 1999 at an estimated cost of $7 billion a year, yet it has been reported that neither the President nor the Congress bothered to read the study. It was even rumored that EPA Administrator, William Reilly, just before final passage of the Clean Air Act, went into hiding to avoid being confronted with new evidence concerning the acid rain issue. The only portion of the bill that pleased environmentalists was on acid rain and proposal for clean fuels. For years the federal government has channeled underpriced water from public lands to agribusiness by damming hundreds of rivers. The resultant water-distribution systems cost taxpayers billions of dollars, but the water is sold to these business people for a fraction of its true cost. California congressman George Miller is chairman of the Interior and Insular Affairs Committee in the House of Representatives and pushed through legislation to reform the water contracting process in California. California has almost 300 federal water service contracts coming up for renewal during the 1990s. Most of the contracts were made in the 1940s when California was considered to be an agricultural state. Today agriculture accounts for only about three percent of the state's economy and yet agriculture has been using close to four-fifths of the state's water at subsidized rates. The problem is that the Secretary of the Interior, Manuel Lujan, Jr., claims the terms of the federal government's water contracts cannot be changed. The quantity of water delivered under the contracts is supposedly non-negotiable. Nationwide the federal Bureau of Reclamation recovers only 17 percent of the cost of its irrigation projects, which comes to a taxpayer subsidy of more than a billion dollars every year. As politicians are so fond of saying -------- it's time for a change!

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Alternative #144 Alternative #144

Alternative to government mandates.
Goal: To allow states and individual citizens to make decisions without fear of
government reprisals.

How: Dismantle government agencies which oversee the actions of citizens and
let those who believe they have a legitimate grievance take it to court.

Practical Benefits:
Money and time can be put to better use.

Soft Power Benefits:
Citizens will not have to be looking over their shoulder and wondering what agency will come down on them today for what infraction.

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Background for Alternative #144
A resident of Springfield, Ohio was ordered by his local government to get rid of the troublesome pigeons that had been congregating on his trees. The poison he laid out in order to comply with the demands of one level of government was determined to have caused the death of a mourning dove and two common grackles. The federal government, represented by the U.S. Attorney's office, prosecuted the hapless citizen under the Migratory Bird Treaty. It is not uncommon for a citizen to be prosecuted for killing some form of wildlife that has threatened his private property—a domestic animal, or animals, or fowl or even crops. The President has waivered back and forth over the definition of wetlands and just how restrictive policy should be. Attempts to satisfy environmentalists sometimes backfire on the economy. Donald Schaefer, Governor of Maryland said one county in his state was designated as a wetland and all development stopped. It's even hard to get agreement on the number of wetlands because they come and go. Some are lost to water. Ponds are no longer classified as wetlands. Also when they are transferred from private to government ownership they lose their wetlands status and of course this skews the statistics. There is pretty much universal agreement that wetlands are important and need to be preserved. The argument centers around the definition of wetlands. Four federal agencies spent more than three years on the problem. The official definition of a wetland is any depression where water accumulates for seven consecutive days during the growing season, where certain water-loving plants are found and where the soil is saturated enough with water that anaerobic bacterial activity can take place. In the summer of 1991 Bush proposed a more liberal definition; 15 days during a growing season or 21 days in which the soil is saturated with water up to the surface. The "growing season" is now shorter. There is a more extensive "mitigation banking" which forces landowners to restore lost wetlands or create new ones in exchange for destroying an existing site. The trick is to protect true wetlands while preserving property rights. Proponents say the new rules bring some common sense back to wetland policy, but environmentalists say it opens the way for profiteers. The administration can't win. And neither can private citizens, or so it must seem to Bill Lyons. Bill Lyons, a California farmer, irrigated

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(his land was dry, not wet!) and his cattle walked through a narrow gate and dragged mud out on their hoofs, which understandably eroded the land in that narrow area. He then, also understandably, brought in a couple yards of dirt to fill the hole under the gate and got cited for filling a wetland. As far as farmers and ranchers are concerned the definition of wetlands is extremely ambiguous. What kind of country are we creating when some farmers are afraid to give their names because of fear of government retaliation. Farm land comes under the control of four different agencies: the Environmental Protection Agency, the Corp of Engineers, the bureaucracy for Soil Conservation and the Fish And Wildlife Bureau. They all interpret laws differently. A farmer had a 10 by 10 foot plot in the middle of a field which couldn't be plowed because it was used by ducks. Ducks landed on it even though it was dry. Nevertheless, use by the ducks justified the designation of "wetlands". Massachusetts has a Wetlands Protection Act under which two property owners were denied the ability to rebuild seawalls to protect their homes and of course they brought suit. Florida property owners not only have to conform to federal environmental laws but it has its own, frequently overlapping and contradictory environmental regulations to contend with. One pundit gave the Florida definition of "wetlands" as any place a bird could land and get its feet wet. The Senate voted 81-17 on April 24,1990 to allow Western states to restrict exports of unprocessed timber from Western federal lands. The states lacked the authority to restrict exports in matters of international commerce and Japan, South Korea and China had been limiting imports of U.S. finished lumber but were anxious to import our uncut logs. The legislation was an effort to put American mill workers back to work. Not that there is anything wrong with exporting finished lumber as opposed to uncut logs, but central management is evident everywhere. The long-range plan of the Forest Service is to allocate more federal land to wildlife and other purposes, and in an attempt to implement that overall plan just in 1990 it cut timber sales by 20 percent.

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Alternative Alternative #145

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#145

Alternative to setting safety standards to the "nth" degree.
Goal: To take cost-effectiveness into consideration when setting standards.

How: We have to be realistic and prioritize. It is unrealistic and foolhardy to
demand the last percentage of purity and the highest margin of safety in setting new standards. Progress cannot be made under those conditions.

Practical Benefits:
If more realistic standards are recognized more products and services can be brought to market.

Soft Power Benefits:
People will be inspired to be creative when they know there is a possibility of getting their idea to market. With less stringent overseers people will develop the character to do what is "right" from within.

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Background for Alternative #145
Since passage of the Clean Air Act of 1970, sulfur dioxide, produced by factories and utilities, has been reduced by over forty percent. From here on we are likely to get diminished returns for our dollars. Many people believe Clean Air legislation in the 1970s worked and was well worth it, but we have reached the point of diminishing returns. It was cost effective when we had to pay less than $600 a ton to cut the first 96 percent of tail-pipe emissions from autos, but squeezing out the last 4 percent on new models will cost $13,000 per ton and will slow down fleet turnover by raising car prices and make ozone pollution worse. We are even concerned about what occurs naturally. Cows produce gas without any help from man, yet in January 1991, three researches got $70,000 for each of three years to study the effects of bovine burping (cow belching) on the environment. The theory is that it adds to the gasses which make up the "Greenhouse Effect". Everyone agrees only 4 percent of Greenhouse gases are man-made—there's 96 percent we can do nothing about. At any rate, warming at night has resulted in lavish grain crops and other beneficial effects. Alarmists claim the average concentration of C02 throughout earth's history has ranged between 260 to 280 parts per million whereas today the level is up to 340. In the increases in methane, hydrocarbons and other so-called greenhouse gases, we see concentrates in C02 as high as 407 parts per million. If that were true we would have a warming of two to four degrees Fahrenheit, which cannot be documented. Instead fluctuations have been recorded which show no net warming over the past fifty years. You've got to understand that the oceans hold 60 times more C02 than does the atmosphere. The residues from today's pesticides are less toxic to humans or wildlife than are mustard or pickles. At the beginning of 1991 Doctor Fredrick Stare, who founded the Department of Nutrition at the Harvard University School of Public Health wrote a letter to the Wall Street Journal congratulating the paper for "standing up to the scaremongers" who he suggested were exaggerating the situation with their alarms about what he called "the presumed risks to human health from minute amounts of pesticide, insecticide and other chemical residues on many of our foods." Dr. Paul Muller was awarded the Nobel Prize in medicine in 1948 for his development of the insecticide DDT. DDT was widely hailed as a historic event in the field of world wide public health and agriculture. No

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harm has ever been demonstrated to have been caused by DDT, according to Dr. Ray. In fact the 130,000 men who were exposed to the highest concentrations of the insecticide as sprayers during the malarial spraying programs showed absolutely no ill effects. Under normal environmental conditions, DDT loses its toxicity to insects in a few days. But its overuse resulted in its being detected in soil, water, fish, fowl and domestic animals, and even in man. In her book Silent Spring, Rachel Carson, claimed DDT could lead to the extinction of certain bird populations, that it could never be eliminated from the environment and that it might cause cancer in humans. According to Dr. Ray, thin-shelled eggs were evident before DDT was discovered and could be caused by numerous things. In attempts to place the blame on DDT, pheasants and quail were purposely fed food containing 6,000 to 20,000 times more DDT than they would normally consume in their own search for food. No shell-thinning was reported. Dr. Ray says the Audubon Society's own records show that many bird populations increased during the years of heaviest DDT use. Robins, who were said to be doomed by DDT enjoyed a 12 percent increase in their population between 1941 and 1971. As for the extinction predicted for the osprey and peregrine falcon, At the Hawk Mountain Sanctuary in Pennsylvania, annual surveys show 191 ospreys in 1946, compared to 600 in 1970. . . . For the peregrine falcon, the numbers fluctuated from a low of 14 in 1965 to a high of 32 in 1969. Dr. Joseph Hickey, an authority on peregrines, testified at the DDT hearings that the falcon population had been declining since 1890. The decline in peregrines was said to be linked to lack of nesting sites and prey. The study relating to humans was unrealistic. The amounts of DDT fed to mice and extrapolated to humans were far in excess of any concentrations that would conceivably be ingested outside a laboratory. DDT is not a carcinogen. Laboratory studies have reported liver deformations in mice, but not in any other experimental animal (including rats). This is the basis for the charge that DDT is 'cancer causing." The doses, given by injection, required to cause the deformation of a mouse's liver were about 100,000 times higher than any possible ingestion from DDT residues in food.

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Here again deaths from liver cancer decreased by 30 percent during the years of heaviest DDT use in this country. Paul Ehrlich claimed DDT in sea water would kill all algae and deplete 40 percent of the earth's oxygen. 150 scientists testified against the ban on DDT and 300 technical documents proved their point. In 1968 EPA head, William Ruckelshaus, supported DDT but changed his mind and since 1971 it has not been permitted unless an essential public purpose if first proved. The EPA has now ruled that dioxin isn't as potent as previously believed and downgraded the risk by a factor of 16. The Center for Disease control is planning to downgrade by a factor of 20. If instead of the current standard of one part per billion, the EPA were to adopt the Centers' new standard of 20 parts per billion, many sites could be cleaned up at a fraction of the projected cost or might not need to be cleaned up at all. The dioxin scare came about by scientists painting it on the skin of mice and watching to see which ones developed cancer. Only those already exposed to initiators, like radiation, developed tumors. If dioxin is determined to be a promoter it would join a group of substances including cigarette smoke, asbestos and certain hormones and foods. As opposed to "initiators", which "promoters" become in very high doses, promoters are reversible. The dissenters would prefer the simple definition that if a chemical causes cancer in an animal (no matter the concentration and so forth) it's a carcinogen. Less than eight percent of all cancer deaths in America can be traced to all the carcinogenic substances targeted by the EPA—including our polluted environment, additives in our food and water, industrial products and chemicals in the work place. In fact there is evidence that behavior such as sexual activity, diet, drug abuse as well as genetic make up and just plain viruses have more to do with contracting cancer. In speaking about identifying and regulating carcinogens the EPA admitted "Our priorities appear more closely aligned with public opinion than with our estimated risks." Near the beginning of Trashing The Planet, Dr. Dixie Lee Ray gave a summary of a story in her local newspaper. The story and its headline gave the impression that the EPA suspected that local fish might be contaminated with dioxin. Who among us would be foolish enough to purchase fish if there was the slightest chance of contamination? True or untrue, the report could destroy the livelihood of local fisherman. As a scientist Dr. Ray knew what questions to ask and concluded that the amount of dioxin detected in

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the fish was far too small to be considered hazardous and that the tests done on the fish were unscientific and misleading. Nine flounder, including skin and internal organs which normally contain high levels of pollutants and which nobody ever eats, were blended together to determine the parts per trillion of dioxin present. Dr. Ray was incensed that On the basis of a trivial 1.5 parts per trillion—not per flounder but in the total of nine flounder mashed up together, guts and all—the EPA proposed a national program to examine the aqueous environment around every pulp mill in the country! Well, that's one way to keep a job going and to keep spending public money. Too many activists see it as a war—business against the environment. Companies naturally have favored a relaxation of cleanup standards for economic reasons. Syntex, in Palo Alto faces $15 billion in liability suits but claims dioxin isn't as dangerous as the EPA has maintained. Dioxin is often referred to as the most toxic chemical known to man even though there have been no documented instances where humans have been harmed. Times Beach, Missouri gave dioxin the most publicity and caused people to fear it, rationally or irrationally. Petrochemical Corp., a subsidiary of Charter Oil Co., had arranged for a contractor to dispose of waste containing dioxin. The contractor disposed of it by spraying it on roads around Times Beach. The federal government spent more than $100 million to clean up the pollution and purchase the affected private property. Now the federal government is seeking $96 million from the manufacturer who is suing 28 insurers demanding that they cover the cleanup costs. The U.S. government first sought reimbursement for the cleanup in 1988 under the Superfund laws. It sued Nepacco (the producer of dioxin, Northern Pharmaceutical & Chemical Co.) and the ruling was Nepacco wasn't entitled to insurance coverage. The issue of who pays the government for environmental cleanups could be a $500 billion question. Insurers never anticipated paying a significant fraction of superfund costs and cannot afford to do so. Now scientists wonder if perhaps they acted hastily in condemning Times Beach and ordering the community's permanent evacuation. Ten years later they began to question the seriousness of the dioxin threat. Vernon Hooks, the federal official who recommended the Times Beach evacuation has had the guts to express skepticism and admit that what was done was probably ill conceived. They way he explained it, an alarm is sounded even though what causes problems in lab animals may not affect

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humans in the same manner. Another leap of the imagination is made by postulating a linear relationship between the amount of toxin consumed and malignancy. If a pound caused problems in 100 animals then a tenth of a pound would affect 10 animals. That's a linear relationship. This would mean that ingesting even the tiniest amounts for a long enough time could lead to trouble. More recently it was discovered that tiny amounts probably have no affect unless a threshold is already present. This finding means the current safety levels on many substances could be raised over a 1,000 times and the substance would remain harmless. Those findings could let paper mills off the hook—they have been under pressure to reduce the level of dioxin and were gearing up to face the usual flurry of sure-winning lawsuits and expensive cleanup costs. By 1990 only a dozen of the one thousand sites slated for cleanup under Superfund legislation, had been cleaned up at a cost of nine billion dollars. According to Dixy Lee Ray's book, "The average cleanup cost for each site is estimated to be at least $12 to $15 million, with some going as high as $100million." Estimates for all sites have been as high as $ 10 trillion. That undoubtedly led to the downgrading of dioxin by the EPA. It became a political necessity in order to avert economic calamity and an uncompetitive America. Changed standards could also affect the incinerator paper industries which have been battling the EPA on proposed dioxin-related rules. There are white, red and blue types of asbestos with quite different fibers. Blue and red (crocodolite and amosite) are dangerous and make up only five percent of what is used in this country. White fibers (chrysotile) are relatively benign and make up the other 95 percent. Most experts agree it was a costly blunder to go around ripping asbestos out of the schools. As Dr. Ray said on page 86 of Trashing The Planet
School rooms, measured before asbestos removal, reveal that the air usually contains about 0.00009 fibers per cubic centimeter; after removal, that number typically rises to 20 to 40 fibers per cubic centimeter—a 40,000-fold increase ----------------- and it may stay at that elevated level for years.

Any fool should be able to see that everyone would be far better off if the material were undisturbed. At most a good coat of paint might have increased the chances of the asbestos fibers staying put. But the powers-that-be have decided that spending $ 10 billion for removal and replacement in the nation's school rooms would be the better choice. The study found danger to children quite small; death per million was only .0005 to .093

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which compares to the danger from whooping cough vaccinations as 1 to 6, drowning 1 to 27 and high-school football 1 to 10. We won't even mention smoking, substance abuse and driving. A 1989 Harvard study concluded that Asbestos fears were out of proportion to the existing public health risk and that fiberphobia (one fiber causes cancer theory) were causing administrators to divert badly needed school money to unneeded removal. Dixy Lee Ray says And what will be used to replace the asbestos? Fiberglass? Rock wool? Both are much more carcinogenic than common chrysotile asbestos. But we can't expect OSHA or the EPA to know that. Our government agencies have to create crises and interfere in our lives to feel needed. The report was commissioned by the EPA and prepared by the Health Effects Institute and Asbestos Research, a nonprofit organization formed in 1990 to collect data on asbestos in commercial and public buildings. The Asbestos Research group gets half its budget from asbestos manufactures and the insurance and real estate industries. I know that the unions claim eight of the seventeen panel members that issued the report were also available as expert witnesses for asbestos manufacturers in lawsuits. The allegiance of the other nine panel members was not pointed out but it seems likely there was an attempt to balance the panel. The report found that removal of asbestos would increase airborne concentrations and that asbestos is not dangerous if left alone. Nevertheless the EPA decided that asbestos car brakes should be phased out by 1997. But in 1991 a federal court objected and asked for a reevaluation of those requirements in light of the hazards from unsafe brakes. A spokesman for a trade group of brake-lining manufacturers was quoted in the November 12, 1991 Wall Street Journal: Do you kill people with asbestos 30 years later, or do you have them wipe out in traffic accidents because the brakes didn't work? The EPA estimated that by phasing out asbestos-lined brakes 152 lives would be saved over a 13 year period from diseases such as lung cancer. But an engineer from Ford Motor Co. claimed that by switching 18-wheel trucks to non-asbestos brakes there have already been more highway deaths attributed to brake failure than the EPA hopes to save by the transition! William Reilly, head of the EPA, said on June 12, 1990,

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Too often our priorities are set, not by our best judgment about relative levels of risk but by public opinion. Regulators and legislators alike can become absorbed in responding to public perceptions that are driven by the dramatic, the sensational and the well publicized. Asbestos is an excellent example of the clash between real risk and public perception. Alar is a growth regulator which keeps apples on the tree longer and allows them to attain a better color and crispness. During the Alar scare the apple industry lost $200 million and many growers were put out of business when the wholesale price of a box of apples dropped below production costs. A person would have to eat 28,000 pounds of apples every day for 70 years to produce tumors similar to those suffered by mice exposed to megadoses of Alar. Mice fed the equivalent of half that amount— equivalent to a man eating only 14,000 pounds of apples a day for 70 years—suffered no ill effects. That's something Meryl Streep failed to mention in her commercials. There are more carcinogens in a cup of coffee than in the amount of alar on an apple. The difference is coffee beans grow in nature and alar is a synthesis which was created by man. Amendments to the Clean Water Act have tightened standards for water quality, forcing expensive and sometimes impractical alterations to conventional treatment plants. This is one more example where the last dollar is not costeffective. These new EPA standards are estimated to cost the nation (taxpayers again) $88 million every year. In some areas water bills may increase as much as $800 a year. It is estimated that 75 cases of cancer may be prevented every year by the more stringent regulations and it's certainly worth the higher water bill if you or someone you know and love fads into that group of 75. But do we want to pay what it costs to have die "safest drinking water in die world" and limit 38 possible contaminants? It is the last percentage of purity, the last margin of new standards that have the highest price tag and the lowest return. It's important—it's good, but we have to be realistic and we have to prioritize! We simply cannot take all the risk out of life without dire consequences to our freedom and standard of living. There is a natural tendency to exaggerate needs if someone else is footing the bill. Communities may not really need storm sewers capable of handling the heaviest downpour on record. And what's wrong with closing some bridges to ultra-heavy trucks? A large portion of the gap between resources and needs will be covered when we find more realistic ways to deal with situations. The alternative is to sign a blank check and be prepared to pay for gold-paved streets.

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Alterative #146

Alternative to berating scientists
Goal: To be able to count on the objective soundness of scientific inquiry.

How: Determine whether those who are quoted or who speak for a point of
view in the media are legitimate qualified scientists with impeccable credentials or are in fact scientists in an unrelated field, pseudoscientists or simply charlatans.

Practical Benefits:
When pseudoscience is discredited genuine scientific evidence will be more readily accepted and deferred to by those in decision making positions.

Soft Power Benefits:
Without a sense of objectivity and truth people find it difficult to relate meaningfully to one another or to anything conceptual.

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Background for Alternative #146
Good scientists dodge headlines and leave the field wide open for those who would play on the public's fears with their campaigns, newsletters, memberships and so forth. If the public believes farm science is bad we could lose momentum and progress against hunger and economic growth in the world would abate. This would threaten the environment and wildlife more than any pesticide. I believe scientists, with their extraordinary confidence in the power of reason to solve problems, have a role to play in reassuring the people that a better way of life and cleaner environment is possible. They, of all people, should be convinced that man has been and will continue to be a catalyst for good and a problem solver rather than the cause of this planet's deterioration. Since laymen, including those in the media, can't be expected to pass judgment on the scientific community, they have to defer to highly credentialed common sense scientists. Apparently there are renegade organizations out there who purport to speak for the scientific community. I, and maybe you, wouldn't be able to identify them, but they are recognized as phony by credentialed scientists. As examples Dr. Ray cites the Union of Concerned Scientists and Physicians for Social Responsibility as wed as pediatrician Helen Caldicott, one-time geneticist Barry Commoner, Amory Lovins who she says has no training and no degree in his purported field of expertise and the host of movie stars and other sports and entertainment celebrities. If approached by mail, television, print advertising, phone or any other way by these people or organizations, be particularly rigorous about seeking well-credentialed opinions before signing on to their agendas. Perception is a problem. The public is more likely to believe the opponents of science and technology, especially a Ralph Nader or Helen Caldicott, than its supporters. Billions of dollars are being wasted and will continue to be wasted because of the false fears generated by the media. Perhaps the most widely quoted indictment of the media comes form Ben Bradlee, editor of the Washington Post: To hell with the news! I'm no longer interested in news. I'm interested in causes. We don't print the truth. We don't pretend to print the truth. We print what people tell us. It's up to the public to decide what's true. I guess that's how Mitch Snyder, former advocate for the homeless, felt

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when he purposely exaggerated the number of homeless people throughout the country. His avowed goal was to arouse emotions and illicit action on behalf of the homeless and he was not ashamed to use lies to accomplish his purpose. Discovery magazine offered a quote by Steven Schneider, a true believer from Colorado: "We have to offer up some scary scenarios. Each of us has to decide what the right balance is between being effective and being honest." "If science doesn't have integrity it isn't much use to people." Professor Richard Lindzen of MIT offered the second quote in response to Mr. Schneider. You just can't say the hell with news, you're only interested in causes. A noble attempt to wake people up and make them aware of possible future problems does not justify those means. In 1985 Vaclav Smil wrote Acid Rain: A Critical Review of Monitoring Baselines and Analyses : The history of science is replete with episodes where cases of dubious veracity were publicized as irreproachable truths.... It may be irrational, but even in science those who make the first and often sensational claim get much wider attention and are credited with more credibility than those who come later with calm facts. Dixy Lee Ray traces "the technique of making unsubstantiated charges, endlessly repeated which has been used so successfully against asbestos, PCBs, dioxin, and of course. Alar" to the probably politically motivated ban on DDT made by then EPA head, William Ruckleshaus in 1972. I've read that there are poisons and substances officially identified as carcinogens that occur naturally in our bodies. The amount is all important. For instance a human normally has one hundred thousand molecules per cell of arsenic, two million molecules per cell of cadmium and seven hundred thousand molecules per cell of chromium. A few more will hardly cause illness or death as some scare-mongers would have you believe. Dr. John Eddy of the National Center for Atmospheric Research is working on the correlation between sunspot activity and climate changes on earth. He has been able to correlate the amount of Carbon-14 found in fossils with variations in sunspot activity. Higher sunspot activity as evidenced by higher concentrations of C-14 correlates with colder periods on earth and lower concentrations of C-14 correlates with warmer periods. According to his hypothesis it is quite possible that the earth is entering one

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of those ice age which have been occurring every 11,000 or 12,000 years on this planet. If that's the case global warming will not be the issue facing our descendants. In August 1991, the British showed a science documentary called "The Greenhouse Conspiracy" which claimed global warming has no scientific sustainable basis. It purportedly documented the following weaknesses in the theory: (1) evidence earth is warming is weak (2) evidence C02 has been the primary cause is non-existent (3) climate models can't predict far-future change (4) the underlying physics is still wide open to debate. There is a new proposal by the Bush administration to provide $500 million to study the global warming problem as they did the acid rain problem. Let's make sure this study gets publicized. It has been suggested that the spent fuel rods, a by product of nuclear energy, be buried in steel canisters thousands of feet below the earth's surface. Risks from earthquake have been considered and experts predict there is a high degree of probability that an intelligently chosen site will remain stable for hundreds or thousands of years. Risk is part of living. We ad take a much higher risk of harm occurring every time we cross a street or drive or ride in a car, airplane, bus and so forth. The pubic is far more worried than many scientists. The Audubon Society as wed as the Sierra Club and the pubic in general supported nuclear energy when it was first proposed in the sixties. Ralph Nader in 1973 was die first opponent and most formidable opponent to focus attention on die fuel's short comings. He stirred up the fear that nuclear power plants might leak radioactivity and suggested that there were better ways to produce electricity. The nuclear power industry has invested $1 trillion over a thirty year period to make nuclear safer and cheaper. Now its up to government to educate the public and streamline the licensing process. To spread the risk the utilities could joint venture with engineering companies. And don't forget the new exciting breakthroughs in energy which are lurking in the background and could burst forth at any time making ad known power sources obsolete. We are living in exciting times with the promise of peace and prosperity within the grasp of all mankind. Let us be thankful, aware and supportive.

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ft

Alternative

Alternative #147

#147

Alternative to hasty and emotional regulations.
Goal: Few regulations and then only those that are based on reason and enacted
after careful and thorough consideration of the likely consequences.

How: Sunset current and proposed regulations and make certain that
representatives from groups likely to be adversely affected are given a fair and impartial hearing before the fact.

Practical Benefits:
The reduction of unnecessary and unsubstantiate restrictions.

Soft Power Benefits:
Fair play will be recognized and reciprocated by citizens. Freedom from an abundance of restrictions promotes optimism and confidence.

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Background for Alternative #147
No harm has been substantiated as coming from the use of PCBs (polychlorinated biphenyls—chemical compounds used as coolants, insulators and lubricants.) but they too have been banned. PCBs have been used commercially since 1929 and permits were issued allowing manufacturers to use rivers and waterways for disposal in the early years. That meant that eventually harmless traces of PCBs could be detected in fish. They were banned in an emotional response to a 1968 incident in Japan which unfairly targeted PCB s as the cause of contaminated rice which caused illness among those who consumed it. The banning in this country cost utilities millions of dollars to convert their equipment to other less efficient and effect insulating substances. Consumers suffer as fire retardent PCBs were replaced by these other substances which result in transformer fires from time to time. To top it off, there are bacteria that degrade PCB and are able to reduce concentrations in water or soil by 60 to 65 percent every twenty days. Ozone is supposed to block ultraviolet light from the sun and ultraviolet light is the suspected culprit in recent increases of fatal skin cancer, eye problems and plant damage. The Wall Street Journal ran an article at the end of October, 1991 which said,
The EPA estimates that the thinning of the ozone shield will lead to as many as 12 million more skin cancers and more than 210,000 additional skin-cancer deaths in the U.S. during the next 50 years. Heavy doses of ultraviolet rays also can stunt crop growth.

The type of skin cancer which is generally fatal and has been increasing, is unrelated to ultraviolet radiation. And even if a connection could be established somehow in the future, recording instruments set up in 1974 show less ultraviolet light has been penetrating the atmosphere over the ensuing years. And besides, a thicker ozone layer does not seem to block ultraviolet light. The thickness of the ozone layer changes periodically. Data shows it was thicker during the 1960s and grew thinner between 1979-1986,

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putting it about where it was over a thirty year period. Sometimes things get blown out of proportion through ignorance. In 1975 Mount St. Augustine in Alaska spewed 570 times the chlorine fluorocarbon compounds produced in the entire world during the previous year. At its peak, the world production of CFC (chlorine fluorocarbon compounds) was equivalent to 750,000 tons of chlorine which pales when one considers that 300 million tons of chlorine are released into the atmosphere every year just through evaporation of sea water. Dr. Ray quoted Robert Watson, head of NASA's upper atmospheric research program in her book. He did not believe changes in the ozone were caused by man-made CFCs but suggested that meteorological processes could bear sole responsibility. Although direct evidence was not yet available "data from the National Oceanic and Atmospheric Administration show 60,000 ozone molecules created for every one destroyed by chlorine from a CFC molecule." This, Dr. Ray says, may actually mean that ozone is increasing in our atmosphere and that depletion of the ozone level is one more example of "crying wolf. But even though there is no conclusive evidence, and there is even evidence to the contrary, policy makers seem eager to reduce, or even ban, CFCs. It's apparent economics has little or no part to play in politically popular decisions.

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Alterative #148
Alternative to micromanagement by government.
Goal: To have a society where government has the smallest possible role in
managing the lives of citizens.

How: Dismantle many government agencies over time and slowly reduce staff.

Practical Benefits:
The nation will function more efficiently and creatively in the long run when citizens are not treated like children.

Soft Power Benefits:
People will develop a sense of responsibility and discipline when they are allowed to look after their own welfare and not told what to do every step of the way.

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Background for Alternative #148
The desire for excessive control—to micromanage—is one of the temptations of power. When Louis XIV was king of France he tried his hand at micromanagement. He managed to bring the entire French economy almost to a standstill. The textile industry was in a shambles as weavers waited for permission to weave their cloth. The regulations concerning that one industry filled a book more than 3,000 pages long. The weavers of Saint-Maixent negotiated with the government for four years in order to gain permission to use black warp. When the permission finally came it did them no good because they were never able to get permission to use black woof and it takes "two to weave"— two threads, that is. Cars with catalytic converters are the cleanest cars on the road today. The Bush administration originally wanted to introduce ten million alternatively fueled vehicles into the nine most polluted U.S. cities. Instead the 1990 Clean Air Act mandated a pilot program which requires the sale of 150,000 cleanfueled vehicles in California in 1996, 1997 and 1998, increasing to 300,000 vehicles in 1999 and thereafter. Critics of the 1990 legislation claim it asks citizens to accept dirty unhealthy air for up to 20 years in some places. They want further restrictions on tail pipe emissions and they don't want to allow cities to "opt out" by turning down federal funds. They claim such an allowance would be tantamount to issuing those cities a right to pollute. They favor tough mandates with no choices and offer Denver as an example where oxygenated fuel was mandated and accepted. The South Coast Air Quality Management District —AQMD—de-vised a plan that would permit broad-based trading of emission credits among many different sources of pollution allowing industrial companies to keep their smoke stacks burning for example in exchange for an increased number of employees who car pooled. It permitted Unocal, an oil company, to to offset air pollution at its refineries by purchasing old high-pollution automobiles and taking them off the road . An early version of the Clean Air Bid of 1990 called for auto makers to comply with a government mandate that 30 percent of all cars produced by a specific future date (arbitrarily agreed to by elected officials) be able to use fuels other than gasoline. Original proposal from the administration provided for a fine if manufacturers faded to meet a mandated number of vehicle sales in a specific city. It's difficult to keep a production line open while waiting for demand to materialize. It might be better to have manufacturers ready to sell vehicles

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up to demand and even to promote the sale. Anyway you look at it, the original administration proposal of a fine was blatantly wrong. A recent USA TODAY poll showed that 68 percent of respondents want alternative-fueled cars and 50 percent would be wilting to pay more for them. But a sales mandate would have put undue pressure on auto dealers. Already dealers have no influence over the models which manufacturers could chose to produce as dual-fuel cars, no control over their performance, their range or their cost. Many dealers suffered when the public rejected diesel-fueled vehicles. Under Senator Chafee's early version of the bill, manufacturers were required to provide altemative-fuel-autos to dealers on a 12 month consignment program. Dealers wanted that consignment period lengthened and fought for a provision relieving dealers of pressure by manufacturers to purchase these vehicles as part of an overall package deal. They wanted to be relieved of the horse trading which could result. They suggested that the bill specify that the alternative-fuel vehicle either be sold or returned to the manufacturer at the end of the consignment period. Their hope was to shift the expense of any unsold vehicles back to the manufacturers. Some legislators would like to require that so much of this fuel and so much of that fuel be carried by service stations? Once people start thinking along those lines ("Why not make everybody do what I want?") there's no stopping the trend. Unhappily the Bush administration did give serious thought for while to making alternative fuels available across the country. The mentality to control is alive and well even though it didn' t win all of this round. There was talk to the effect that government can't just allow stations that want to carry alternative fuels to do so. States are not allowing utilities to decide for themselves how to clean up their pollution. Even if it seems more economic to switch to cleaner out-of-state low-sulfur coal, some states in the Midwest are insisting the utilities install government subsidized scrubbers in order to keep jobs at home. Ohio is even offering a $1 tax credit for each ton of Ohio coal burned at utilities that use at least 80 percent of Ohio coal. Do you think 18th century French weavers and 20th century utilities could possibly have something in common?

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Alternative #149

Alternative to the old ways of dealing with garbage. Goal: To
adopt cost efficient creative new ways to deal with refuse.

How: Duplicate some of the innovations instituted successfully by private
companies across the country such as Signals garbage-to-energy system. Encourage other companies to test out new procedures.

Practical Benefits:
Instead of paying a high price to pollute the environment we can gain a new source of energy which is also environmentally sound. Turns waste into profit.

Soft Power Benefits:
Programs such as these bring out a caring attitude in people. They express their concern for the environment, develop prudent habits and abandon wasteful practices. All this carries over into other aspects of living.

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Background for Alternative #149
We're supposedly running out of space to use as landfills. Sometimes the land can be used for multiple purposes as in Tokyo where a $42 million public golf course was recently built on 18 million tons of garbage. 74 vent pipes were installed along with signs prohibiting smokers and their lighters from setting the gas on fire. As for the smell, it is slight and only on certain days and is readily borne by golf-happy Japanese in return for green fees that are a fraction of the cost of fees at private clubs that already have long membership waiting lists. Under a state law approved last year, counties and cities in California must reduce the waste that they put into landfills by 25 percent by 1995 and by 50 percent by 2000. Los Angeles has plans to haul trash by rail to the desert and deposit it in an old Kaiser Steel iron ore mine, two miles long and a half-mile wide and a quarter mile deep. The site, located in Riverside county, would hold 700 million tons of garbage or about 100 years of garbage at 20,000 tons a day. That's a thousand times larger than large dump sites elsewhere. Los Angeles county generates 50,000 tons of trash a day. But state and local permits could halt the plan. Signal Environmental Systems may have been the first commercial garbage-to-energy system in the nation. Towns in New England pay Signal $22 per ton to take their garbage compared to $100 per ton at regular landfills. Signal burns the trash to boil waterand make steam for electricity, producing 37 megawatts of power, of which 3 megawatts power the plant and the rest is sold to a Massachusetts electric company. This resource-recovery-process filters out 99 percent of particulates flowing through the plant smokestacks before the exhaust reaches the outside air. Ash must still be buried the old fashioned way, but there is less of it, and it is less likely to contaminate underground water. Westchester County got an environmentally sound waste-to-energy facility for no capital outlays, and all the costs and risks associated with performance remain the responsibility of the private-sector provider. The new technology turns garbage into natural gas, resulting in power for producing electricity. A recyclable residue of carbon is all that remains of the garbage after processing. There may be drawbacks, but it is cheaper to install this process than to install incinerators and there are fewer environmental concerns to boot. With Americans spending an estimated $100 billion annually on garbage disposal, I'm sure you agree this process needs further investigation and possibly dissemination.

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Alternative #150

Alternative to worrisome acts by members of congress.
Goal: To have a congress which represents the highest ethics and morals in the
land.

How: The electorate must raise its expectations in choosing new office holders and recognize and honor the many in congress who are worthy of praise. Stop excusing the reprehensible conduct of many of our elected officials with the trite dismissal, "Nobody is a saint." We will get people of no better calibre than we demand and history has shown that citizens generally get what they deserve. Do not be lulled by the silly people who claim if we raise our sights no one will be able to qualify for public office. These people represent us as Americans. Think about it!

Practical Benefits:
We may see that many new highly qualified people of good character are willing to step forward to serve their country once the stigma on holding office, left by those of a lower calibre, has been removed. Young people may be inspired by more honorable role models.

Soft Power Benefits:
Respect, hope and appreciation might be awakened in voters whereas politicians should have a renewal of self-esteem, determination, accountability and optimism.

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Background for Alternative #150
The 102nd Congress opened with a shameful debate on the House floor in which Republican Representative Nancy Johnson of Connecticut emerged as a heroine in my book. She refused to be silenced by House rules until she had had her full say on what she regarded as a shameful disregard for law and justice by the majority party in the House. The problem was the reneging on the terms of the long negotiated budget compromise wrench-ingly reached at the end of 1990. The budget negotiators were very much aware that the OMB (Office of Management and Budget) has a bias for controlling spending whereas the CBO's (Congressional Budget Office) bias is toward expanding spending. It was only because the negotiators finally agreed to use OMB figures that an agreement was reached. The first act of the 102nd Congress however, was to change the term of that agreement—not with a bill that would surely be vetoed by President Bush, as the budget compromise itself would have been if it were not for the stipulation that OMB figures were to be used, but by using new House rules. The new rules say any bill that doesn't use numbers from the CBO or the Joint Tax Committee can be ruled out of order on the floor of the House. This stipulation kills a capital-gains tax cut before it is even formulated. OMB estimates additional revenue from a reduction in the capital gains rate over six years of $ 12.5 billion in contrast to the $ 11.4 billion loss predicted by the Joint Tax Committee. What does that tell you about relying on figures? In the fall of 1991 the administration was able to get the support of a majority of senators to decrease the tax on capital gains but that wasn't good enough. "Point of order" refers to a Senate rule whereby a senator can declare legislation (usually in the form of an amendment, which is tacked on to original legislation) to be non-germane, unrelated, or extraneous. A point of order was raised by Senator Robert Byrd of West Virginia with regards to the capital gains reduction proposal. That proposal was tacked on to the Senate reconciliation bill in the form of an amendment advanced by Senator Packwood of Oregon. By raising the point of order the Senate avoided bringing the capital gains legislation to a vote. Senator Byrd was aware that it would have garnered 57 votes but reasoned it would take 60 votes to overturn his point of order. The House, for better or worse, does not have a rule like "point of order". There is commercial value in currying favor with polcymakers. Third-world countries have had this type of arrangement for centurieusually the grantor-ofpermissions ends up with a piece of the commercial benefits.

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Although the United States of America may not yet be a perfect place, its laws and its people do not condone under-the-table action, and if government officials at any level are caught and convicted then it is generally the end of their career. However, many people feel campaign contributions amount to taking bribes. I find this notion ludicrous and the solution most often proposed even more ridiculous—to get rid of political action committees or to limit contributions. On that rationale we might as well close banks because they are attractive to robbers, ban automobiles because some drivers are reckless, keep our children indoors because there are kidnappers. That is going after the victim not the perpetrators. Instead we should bear down on bank robbers, reckless drivers, kidnappers and members of congress. The junior Senator from New York is up for election in 1992 so you'll have to see if the people return him to office or overlook what many think may be a transgression. The public seems to go easy on officials involved in scandals involving their very personal life, at least a congressman and senator from Massachusetts continued to hold on to their respective offices and a 1992 candidate for the presidential nomination declared himself "the comeback kid" after receiving support from the voters after an alleged personal scandal. However, constituents are not so tolerant with politicians who choose to play favorites. Let me tell you what happened in New York. Use of tax-free industrial development bonds are a creation of federal law and are designed to provide cheap loans to local developers for projects to stimulate local economies. They are designed to keep people from using the bonds on speculative deals. However, it is impossible to keep people from doing what they want to do; and I might add, "thank goodness"- most people will find loopholes every time. In 1984 Congress changed the law to prohibit the use of industrial development bonds for gambling establishments. The Senator went to bat for a few of his friends and made-to-order a tiny loophole in the law to exempt their particular situation. The loophole allowed bonds to be used for some gambling operations for a specified time. This was an example of using the law to favor some over others and is the worst form of corruption! This kind of service may be available to others, but it doesn't hurt to have a person writing the laws to your specifications and making sure you know about the goodies as they become available. An unhealthy tone is set in a country when one group of people has power to give or deny favors to others. Government is susceptible to string pulling and apple polishing. People are rewarded, not by who they are, but by who they know. This is the way it is ad over the world but it's not supposed to be that way in America. Equality and freedom is what the

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United States of America is all about! I became involved with public policy when I was preparing to become a tax attorney. While waiting to qualify as a tax law specialist I decided to open a solo law practice specializing in financial planning. (I was a Certified Financial Planner.) The more I studied the more I realized that whatever plan I set up for my clients could be undone in a few minutes by un-knowledgable meddlers on Capitol Hill. Is it so hard to understand why manufacturers don't expand, researches don't innovate and employers don't hire? Why savers don't save when inflation can devalue savings? Why investors don't invest when what might make sense under one depreciation schedule and with tax credits or deductions involved might be disastrous if they are arbitrarily and retroactively removed? People tolerate the nonsense written into the Internal Revenue Code only because they have no idea how ridiculous, unfair and cumbersome it is. They just aren't aware! Make yourself read the internal revenue code for an hour every night for a month and I guarantee you'll be saying I'm mad as #*AA and not going to take it any more! I was incensed when the numerous changes in the tax code in 1986 were hastily pushed through. Although everyone involved admitted they hadn't read the legislation in its entirety, they signed on. How can anyone that knows the facts sit by and tolerate the ridiculous, oppressive and progress-stopping situation where a course of action that appears to be perfectly legal and financially sound one month can be out of bounds and even financially harmful the next? Even worse, regulations which involve penalties are made retroactive by congress and administrative agencies. How can we live in a country where a course of action that was perfectly legal and common practice when engaged in, become illegal after the fact? The rules are changed by our imperious congress so that the people no longer have a chance. It's like playing monopoly with a king who declares when you rolled a three which lands you on luxury tax that today all threes on the dice count as fours and so you really landed on Boardwalk where he just placed a hotel. You haven't got a chance playing with someone who has the power to arbitrarily and at any time change the rules and then exempt himself. We've got to change things so your children and mine have a chance.

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am

Alternative #151

Alternative to exempting congress from laws we must live under.
Goal: To clean house in congress. How:
1 - Watch congress in action via C-SPAN at least twice a week. Tape sessions to watch when you do have time instead of some of your normal TV viewing. Your country needs you! 2- Encourage some of the people you know to run for office, or better still think seriously of preparing yourself and running. Your country needs you! 3- Salaries of congress could be linked to the average salary in the nation or perhaps the median wages in their district. This would provide congress with an incentive to see that the average citizen prospers. 4 - Members of congress could be given vouchers for housing (could even have congressional apartments provided, owned by the government as many parishes provide housing for clergy) and transportation vouchers to take them home as often as once a week no matter how far away their district. 5 - Require congress persons to show evidence of having attended classes in psychology and history twice a year so they might more competently consider the effect legislation is likely to have on constituents and realize they are often encouraging citizens to cheat and steal to get around their too numerous and oppressive laws.

Practical Benefits:
More people will hold office for reasons other than power and the perks.

Soft Power Benefits:
The average citizen will feel less oppressed and more involved in public policy.

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Background for Alternative #151
Many people are incensed because congress exempts itself from many of the laws it makes for the rest of us to live under. Congress exempted itself from the civil rights legislation because, as Senator Rudman put it, congress would be subject to the whims of a U.S. district court judge who "would have the power to overrule the considered judgments of 100 members of this body." Of course it's perfectly all right for a judge to overrule the considered judgments of thousands of executives of corporations and manufacturing firms across the country. Public sector institutions like the Department of Defense are exempt from the environmental regulations imposed on the private sector and local governments. The most poisonous spot in the world is ten miles northeast of Denver, home of Pat Schroeder, a member of the House Armed Services Committee. The cleanup costs for the DOD could easily top $20 billion. DOD generates more than 400,000 tons of hazardous waste every year— more than is produced by the five largest private sector chemical companies combined. The Tennessee Valley Authority refuses to comply with the clean air standards of the states in which it operates its 59 coal-fired power plants. Where is champion of the environment, Al Gore? Everyone says there are too many lawyers in congress. Lawyers are trained in logical thinking but unfortunately logic is not evident in most congressional debates. Whatever sounds good—never mind the facts! A congressman in the early 1980s had carried on about the changes in cost-of-living-adjustments (colas) over the past twenty years, apparently unaware that colas didn't take effect until 1975! The last session of the 101st congress passed 228 commemorative bills such as Buffalo Soldiers Day, Prune Day, Tap Dance Day, Patient Account Management Day, and Dairy Goat Awareness Week. What can we do? I'm tired of the endless berating and rehashing of pay raises, bank overdrafts, and extensive perks. How about a law that ties the pay of our representatives to the median income in their districts? After all, the House of Representatives is supposed to represent the common man. How can they do that if they are making four and five times the amount made by the average person they represent? Maybe having such a direct economic tie with their constituents would give them the incentive they seem to need to enact legislation that will stimulate the economy. For too long they've been sailing in their own recession-proof yachts. Let them switch to row boats like the rest of us and pray for those high economic tides to lift us all off the sandbar. Perhaps it would be a good idea to compel some continuing education

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for members of congress. Just as real estate professionals, accountants, doctors and so forth must show proof of courses keeping them current in their field. How about refresher courses in history so they learn from past mistakes. A little psychology might be good so they can understand why constituents get so angry when they are hamstrung by hasty legislation. Senator Robert Byrd was first elected to the Senate in 1959 and after 32 years he has garnered power in the Rules Committee and is Chairman of the very powerful Appropriations Committee. His seniority and age make him immune to criticism. He openly uses his power to enrich his West Virginia constituents. Investigative reporter and author Donald Lambro. claims Senator Byrd has personally delivered $1 billion worth of pork to West Virginia—he refers to a "monument of pork". "Pork-barreling" among House members who represent narrow districts, is not uncommon. Bud Shuster, serving his tenth term, uses his position on the Public Works and Transportation Committee to bring the pork home to Altoona, Pennsylvania. He slipped thirteen demonstration projects for his folks into the 1991 highway bill, which if passed, would have cost tax payers across the nation $287 million dollars. The check bouncing scandal in the House of Representatives was a tempest in a teapot. It hurt the Institution. When a government employee—a private in the army making $750 a month writes a bad check he can get a dishonorable discharge. When a Congressman making $10,750 a month writes a bad check and it is considered "business as usual" the public is incensed, to say the least. The nation needs someone besides the president looking out for its good. Ideally that would be United States Senators. That body should be immune to provincial short-range thinking which is universally accepted and almost expected of congressmen and congresswomen. The U.S. Senate, however, should reflect the long range more encompassing vision that the entire country so desperately needs. Those in positions to make hard choices are also, in positions that receive tough criticism. Until we make the status quo more uncomfortable than the discomfort incurred in making necessary changes the country is going to suffer. We can no longer afford business as usual and must push the chicken-hearted out of their places of power. Senator Connie Mack of Florida told members of Citizens For A Sound Economy on April 7,1989, of an experience he had as a newcomer to Capitol

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Hill. He found that almost everyone was against any new commissions and agreed there were too many already. But when a new commission was named "Select Committee on Families & Children" everyone advised him it would be suicide to vote against it. He didn't listen and sure enough his vote was used against him in the next election. His point was that it is stupid to have to vote for something because of its name instead of what it does! For a long time I favored a turnover in congress without resorting to an amendment to limit terms. But I overlooked the fundamental principle that all men, nations, and in this case, states, are going to act in their own best interest. Because of the seniority system in congress, voting incumbents out would not be in any state's best interest. If California were to substitute fresh new faces for incumbents, all California's representatives would be low men and women on the totem pole. As the most populous state in the nation we'd be giving up all our clout. Now we have representatives, like Mr. Panetta, who chair various committees and have control in what gets brought to the floor, how the debates are set up, the voting and so forth. Congress is not a gentle place and a lot of things are what you and I would call "rigged". Certainly it would look that way to an unsophisticated fair-minded ten year old, and they almost always cad them as they see 'em. Anyone who has been around kids knows that "how they see 'em" is generally stark unbiased reality. I hate to be critical, you hate to be critical, we ad hate to be critical, but this country is in the trouble it's in precisely because nobody likes to be critical. We too easily settle for a congress, that in many instances, is simply not up to the job. If we, as ordinary citizens, choose to be "nice" rather than appear harsh and critical and demand intelligence and integrity, we must be prepared to suffer the consequences. Maybe it will stiffen our backbone if we remember we are choosing, not only for ourselves, but for our children who will suffer after us.

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Epilogue
Every election year we hear we are at a crossroads. In 1992 I believe it. We seem to have lost any shared sense of the past, any vision which can universally be transmitted to the next generation. Our image of America and our common identity is shaky. My personal vision and identity is strong but I am no longer confident that it is shared. How many Americans still view their country as the cradle of individual rights and liberties? The voluntary cooperation of free individuals is a part of our American heritage. The progress we have made in industry and manufacturing would not have been possible without it. Free individuals have greater initiative, they are more ingenious and more resourceful in adapting, they have more to fight for and they don't need to be egged on by propaganda. The voluntary cooperation of the past was based on the recognition of human rights, human obligations and individual responsibility. By judicious use of the golden rule America became the envy of the world. The most amazing increase in living standards took place in this country in less than two hundred years. Why were Americans able to accomplish what men, just as intelligent and living in lands with as many natural resources, had not been able to accomplish in the previous six thousand years? Always, in other societies throughout man's history, humans fought for their share of the existing wealth, believing that it was only natural that A would have to suffer to satisfy the needs of B. That is what our politicians are claiming now as they attempt to revive the old class warfare rhetoric that is so common in other countries. Too many in positions of power in Washington DC subscribe to the zero-sum philosophy which always destroys wealth, dissipates human energy and lowers the living standard of all. It simply is not true that one man's profit must be another man's loss. It simply is not necessary to take from the rich in order to better the lot of the poor-------------------------- and America's experience is proof that I speak the truth. Maybe we need

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to be reminded of what Abraham Lincoln said: You cannot bring about prosperity by discouraging thrift. You cannot strengthen the weak by weakening the strong. You cannot help the wage earner by pulling down the wage payer. You cannot help the poor by destroying the rich. By unfettering those capable of exercising the greatest creativity and productivity the fortunes of all men are lifted. This tried and true precept has been ridiculed lately as "trickle down" economics. When on the campaign trail in early 1992 Tom Harkin had a line guaranteed to elicit laughter: "Trickle down economics is like giving the oats to the horse in order to feed the birds." It has become fashionable to ridicule Reaganomics, but America has always been about the trickle up, trickle down, trickle sideways theory that when human energy and capital is unhindered the whole of society benefits. Unfortunately too many politicians sabotaged Reaganomics and then claimed it didn't work. Many of the Reagan proposals never had a chance. It was as if the adversarial congress put a blindfolded prize fighter in the ring with his hands tied behind his back and then jeered and called his defeat proof that he couldn't fight. But there is no denying the jobs created by allowing capital to accumulate and to be invested in ideas. By using the labor saving devices that flowed out of our factories, ordinary Americans became the most productive workers in history. It's almost impossible to measure the value of any useful invention. Increased industrial production is only part of the story; increased human efficiency may be the larger part. Consider the time wasted by people in daily living just 200 years ago. Just think how much energy was released throughout society with the widespread use of electricity, telephones, engines, machinery, automobiles, airplanes, computers and on and on. American women had washing machines when women, just as intelligent and capable were still pounding clothes on river stones in other parts of the world. When automobiles were still luxuries reserved for the elite, they were considered indispensable to all but the poorest American. The automobile allowed American citizens to get around faster and therefore gave them more time to put their energies into more productive endeavors.

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The story of John Deere is one of the many inspirations which I found some years ago in a marvelous little book by Henry Grady Weaver called the Mainspring of Human Progress. I am sharing some of his ideas with you here. Deere's story is illustrative because it clearly shows how American ingenuity applied to the simple plow changed the nation. For centuries ploughs had been made out of wood. Land in the Mississippi valley was considered worthless because the soil was either too hard for a wooden plough to cut through or so soft the muck stuck to the plough and immobilized it. John Deere was the first to make a steel plow from an old buzz saw disc. It cut through the prairie soil like a "hot knife through butter". Deere's invention made worthless land valuable and opened up a vast area of virgin country. But credit must be given to those who put up the money to make the ploughs and those who invented the reapers and other farm tools and the hard-working, risk-taking farmers who hastened to use them. Deere's story shows the wealth producing possibilities of new ideas. But if John Deere hadn't been living in a free country where a blacksmith could aspire to own a factory, where mobility and dreams were possible, perhaps he never would have applied himself to solving the midwestern soil problem. No bureaucrat could gather the information which resulted naturally from a multitude of market transactions. No bureaucrat could begin to match the market's efficiency for regulating economic activity. It would be impossible, even with today's powerful computers to coordinate the private plans of millions of people making billions of daily decisions. The responsiveness of two hundred fifty three million free people provides America with a better proving ground than could ever be set up by blue ribbon panels. Central planning, with commissions or board members of one sort or another always work at cross purposes to the development of independent thinking. No board is capable of picking the right people or the right project to work on. Personal freedom in this country allowed natural selection to work and we had Eli Whitney, Thomas Edison, Goodyear, Burbank etc. They were all self-selected. Who would have picked Henry Ford or John Deere as promising inventors and probable manufacturers? Genius is an unpredictable quality; it doesn't work according to fixed rules or patterns but turns up in the most unexpected quarters. Inventive or scientific talent of a high

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In the prologue I told the story of the peacetime development of the hydraulic clutch which played an important role in the allied victory in World War II. History recently repeated itself. The Californian dune buggy, manufactured by a former off-road racer, Michael Thomas, played a major role in the Gulf War. The company has a relatively small annual sales record with less than a dozen buggies going to recreational users and another 1,000 subassemblies to do-it-yourselfers. As strictly a sideline, sales of about 400 were made to the military over a twelve year period. They were used in the desert to gather intelligence across enemy lines because they were able to zip across the terrain at 100 miles an hour where jeeps and tanks would have stalled. Their tubular frame had few flat surfaces so enemy radar found them hard to detect. Thomas adapted them for military use by adding a gunner's cage to the back and racks for carrying gear to the sides and painted them khaki. The small entrepreneur was able to meet the military's immediate demand by calling 25 buddies from the race car circuit to help his 35 employees and by having everyone put in 12 hour days. There have been many wonderful and far reaching inventions in the United States of America, but none as important or far reaching as the political structure with its principles of individual liberty and freedom; the principle that each person controls his own life energy and is responsible for his own acts and his relationships with others. This is the foundation and provides the opportunity for all other inventions. Conditions with opportunities and incentives for innovation, production and trade have been more favorable in America than in any other place in the world until recently. It was once a simple matter to go into business or to back up the other fellow's business; to take a chance on making a profit or going broke. Critics refer to free competition as a ruthless and cruel process, but it is not nearly so cruel as the opposite philosophy which for centuries kept peoples ill clothed and ill fed, ill housed and just plain ill. Human effort is motivated by hope of reward and fear of punishment. An ideal society provides rewards that are great and punishments that are not too severe. America's economic progress is a result of conditions which have provided maximum opportunities

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for varied rewards. While financial gain motivates some people others prefer intellectual stimulation, acclaim from colleagues, fame etc. inner satisfaction and recognition. America ideally provides the opportunity for self-expression, self-development and advancement on the basis of merit, regardless of race, creed or class distinction. These are the "carrot motivators". In earlier years people were mainly motivated by "the stick". The knowledge that no one but your own family was going to take care of your old age provided a mighty good incentive to save and invest. As we said earlier, the capital resulting from those savings made it possible to build up tremendous resources in the form of more efficient tools of production thus multiplying the effectiveness of human energy to an unbelievable degree. The savings of millions of Americans who were willing to work a little harder and spend a little less than they earned made the USA the most productive nation the world had ever seen. Very often when one thinks one is helping a problem one is really causing more harm; these are unintended consequences. Often if no one comes to the rescue the situation will be resolved in a more beneficial way by the person, nation or situation supposedly needing help. If nothing else, in the case of the individual, character is built through responsibility. In one of my books on the Deficit I used the example of a Jane Fonda -George Segal movie called "Fun With Dick In Jane". There a couple down on their luck, facing foreclosure of their gorgeous home, halting the construction of their swimming pool and so forth turn to the wealthy parents of the character paid by Jane Fonda. In a scene that is obviously meant to poke fun and show how callous and cold "Republicans" can be, Jane's screen-father refuses financial help and tells her going through the set back will build character and he doesn't want to rob them of this wonderful life experience of working through problems. I said in my book that I could have given the same speech and in fact have taken this approach in raising our own sons—an approach that the film maker obviously expected the viewing public to realize was archaic, cruel and ridiculous. It is up to parents and schools to see that as well as becoming proficient in the traditional three Rs (reading , riting and rithmetic) another three are added— responsibility, risk and reward. By reward I mean understanding that it is acceptable and praiseworthy to spend

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one's life in the pursuits which do not yield large amounts of cash. It must be fashionable again to recognize that their are numerous things of value in this world besides money. It should be commonplace for a man or woman to take pride in having spent extra time nurturing a family, cultivating friends, tending a garden, caring for animals, exercising and/or drawing closer to nature, reading, studying, praying, communicating, creating in any of the arts—all rewarded, not generally with money but with intangibles that demand respect. A persons' life should not be judged so heavily by material possessions but these other things should be taken into consideration when valuing a life—especially when a young person is attempting to find out how to spend his or her life. A 64 year old disabled cook in our area had been getting $417 a month from social security and working three days a week and making $10,000 a year. Social security rules limited his outside earnings to $6,000 a year and so his payments were stopped and Medicare coverage was cancelled also. The Social Security Administration even tried to get the man to refund money it had paid him over time. His $600 a month take-home pay didn't begin to cover the $550 he paid for a studio apartment, utilities, car and health expenses. He overcharged his credit card and has payments to make to the bank which he thought would be handled when the mess with social security was straightened out. Many people are beginning to see that government has overreached its area of competence. Mario Cuomo once said, "It is not government's obligation to provide services, but to see that they're provided." Even one of Ralph Nader's right hand men has advocated privatization claiming "the private sector can be held more accountable to the public for clean water than can government. " (Larry Silverman, anti-pollution lobbyist) It comes down to which vehicle you prefer to get things done. I happen to believe private sector individuals can do a far better job than government bureaucrats. Letting individuals attend to problems ensures a greater variety of solutions from which we can pick and choose, usually at a more efficient pace and less cost. But my main reason for preferring private to government solutions is that government must resort to force in order to get things done; I would rather

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see persuasion and generosity used to address the woes of our society. Loss of a job need not be the catastrophe it is today. It need not be if citizens were allowed to be self-controlling and responsible for their own destinies. Rules and regulations intended to help and protect have rendered people helpless and totally dependent on a government that only exacerbates the hurt. Losing a job from time to time would be unfortunate, but anticipated and planned for, if government were out of the picture. Workers would have their own plans to get by. Now their rainy-day savings are in the hands of government bureaucracies and they are made to feel small and helpless, unnecessarily suffering a loss of dignity as they wait in long lines to apply for and collect unemployment checks made possible by money they earned! How much better they would feel about themselves and how much better they could plan their strategy, if they were in charge of the money that is rightfully theirs—that government has decided it can handle more competently for them. In many instances government is unfortunately right ---------- but it need not be that way. We can develop the power to change it! Today American companies are criticized for locating offshore and using foreign unskilled labor. But it's not a simple choice of using foreign unskilled labor or American unskilled labor. The U.S. government puts barriers in the way of production in this country whereas foreign countries that want the jobs for their citizens lay out the welcome mat. Alexander Hamilton, while praising Adam Smith, thought the infant United States needed protective tariffs and was not ready for free international trade. This shows that the commitment to keep government out of the economy was not uniformly strong even among our founding fathers. But states rights were strong and that meant states, and not the federal government played the major role. The panic of 1837 discredited government enterprise as the Great Depression almost a century later discredited private enterprise. In casting about for reasons for the crash they grabbed on the positive alternatives of Adam Smith and almost total laissez-faire and non-inter-ventionism reigned for the next century. During the 18th century England practiced free trade—the rest of Europe and the USA kept up their tariffs—indeed customs, duties on

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the additional expense involved. A trial of six units with 3 for handicapped and 3 regular will be installed on a temporary basis in the spring of 1992 if everything goes according to plan. A handicapped person said at a public meeting on the issue, "In Europe civil rights aren't so well-developed" to which Mr. Decaux was said to have responded meaningfully, "You Americans may have the law, but we French have plentiful public toilets that are both clean and safe." Where community interests, rather than narrow parochial concerns are represented, everyone benefits. The atmosphere engendered by good government and civic leadership is what this country is all about. I have no quarrel with good managers who keep the business of government moving forward efficiently and effectively. But more often than not committees, boards, supervisors and commissions operate in an arbitrary and inconsistent manner keeping citizens on their toes and fearful. People can be productive only if they can be certain that the rules will not be changed and the carpet won't be pulled out from under them. The existence of consistent plans lets everyone know the rules of the game and allows manufacturers, builders, investors and others to act positively and with confidence. More problems have been caused by government than have been caused by lack of it. Nobel prize winning economist, George Stigler said, "Regulation routinely has been used by special interests to conspire against the public interest." California alone has 178 occupations that require licenses for entry. In Missouri, beauticians are expected to take a difficult written test which includes questions regarding the chemical composition of bones—irrelevant to styling hair, but it keeps many who passed the hands-on practical examination out of the profession nevertheless. A 1980 poll found that 67 percent of respondents thought there was too much government regulation. That figure had dropped to 38 percent in a similar poll conducted in 1987. Does that mean we made progress over that seven year period or does it reflect the mood of the country after eight years of the Reagan administration's deregulation rhetoric? It's well to remember that Ronald Reagan, in this as in so many other areas, was more bark than bite. When I say "rhetoric" that's all I mean! I'm troubled because not only have we ceased to make headway

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in getting "government off our backs" but we seem to be making the problem worse by churning out new restrictions and regulations on a daily basis. For example, increases in the size and coverage of the minimum wage, and continued enforcement of the Davis-Bacon Act in the construction business are two well-meaning but wrong-headed responses to our problems. The Davis-Bacon Act is one of government's attempts to interfere in the market place, this time by specifying that on all federally supported construction projects—and that means even if the government contributes less than one percent of the funding—the "prevailing" (code word for "union") wage must be paid. Naturally this restricts competition from lower-wage, nonunion labor, while keeping prices and wages artificially high and costing taxpayers more. In other words Davis-Bacon distorts the market and keeps entry-level workers from getting a chance. Similarly it is the small or medium sized property owners who are most punished by government regulations. Generally big businesses and wealthy owners have the resources and or the land to conform to just about anything governments dream up. But regulations cost more than money; regulations cost those that are regulated a portion of their independence. People are asked to exchange a bit of their potential for growth and ingenuity in return for an often false sense of security. Regulated citizens are too often lulled into believing that they no longer have to check things out and make decisions on their own. They come to depend on Big Brother to do their thinking and choosing for them and if things do not turn out as expected they turn to the courts. Worst of all, misguided regulations prevent human solutions to problems. I studied law because I was confused by a system which prevented me and others from giving heartfelt responses to social needs. My heritage is Berkeley, California—four generations—and I'm fiercely proud of the intellectual stimulation and tolerance fostered by that environment. I used to shop at the Coop grocery store on Shattuck Avenue and one day I saw an 18 month old baby girl "advertised" on the bulletin board. A San Francisco mother was trying desperately to give her away. There were two pre-adolescent children in the family and this baby was the result of the mother's

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extra-marital activities and had become the lightning-rod for discord within the family. The presence of another man's child was a constant affront to the husband and he took his hurt out on the rest of the family. The poor woman had tried to give the child to the state but felt she could not ask her husband to contribute to the child's welfare on an ongoing basis (a state requirement) so she had tried to lose the child; abandoning her first in a department store and then in a bus station but the police traced her both times. She had tried giving the child to other families, but each time the baby was brought back. The child had a slight physical deformity, and as one might expect, some emotional problems. The situation almost repeated itself a year later. This time I was contacted because I had volunteered to take the children of young couples so they could get away on a special weekend or in an emergency. However, on one occasion the mother wanted more than help for a day or two for her baby—she believed she was unfit to care for the child and that she was in the midst of mental breakdown. The baby could no longer be left with a mother-in-law who was too frail and old to care for him. The mother felt she had nowhere to turn. Of course we suggested government agencies and foster care, but the woman was deathly afraid that once she gave her child up to the state she would never meet their standards for getting him back. She was afraid, and I believe justifiably, of government interference and control over their lives. You have cases where businesses are forced to allow women to work in jobs that threaten the health of unborn babies and for complying these businesses are exposed to punitive as well as compensatory damages. This legislation encourages companies to move overseas and those who need components find it prudent to purchase them from foreign makers who don't face such liabilities. A 1990 case is an example: A women working in a battery manufacturing plant was exposed to levels of lead which she claimed caused grievous birth defects. She sued her employer. The issue: Can firms keep women out of jobs that might cause birth defects? Problems arise when government attempts to legislate social policy. I am not alone in believing that this is not a proper function of government. This is an issue which should be worked out between participants

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without one-kind-fits-all mandates; mandates which keep expanding so that today many businesses find themselves in a straight jacket. There have been exceptions in civil rights laws called BFOQ (bona fide occupational qualification) which justify treating men and women differently. It was recognized that if employers, because of civil rights law, could not ban women from dangerous jobs, possible tort liability could drive U.S. firms out of business. It now drives them overseas. Plaintiffs used to have to prove bad intent in order to obtain punitive damages, but that requirement was dropped in the 1960s. In California in 1989 one third of jury verdicts led to punitive damages averaging $3 million. If government would stop second-guessing business people and looking over their shoulders—stop telling businesses who they can and cannot hire, for what wage, what benefits they must provide and so forth, then employers might be able to rely on their own evaluation of prospective employees, and even rely on intuition if they so desired. United States citizens should be permitted to strike the bargain of their own, not government's choosing. As things stand now, any prudent employer must lay a paper trail, including credentials, in case his or her motives in hiring, firing or promoting are questioned by Big Brother. What if congress decreed that all airliners turn off their engines when they reach 4,000 feet and ride the wind currents to their destinations in order to save fuel? Such a dictum could be considered a repeal of the law of gravity. A repeal of the law of supply and demand would be less obvious. But minimum wage legislation is just that. Those who support the minimum wage do so because they assume higher wages will make poor people better off; that receiving $4 an hour is preferable to receiving $3 an hour. That's also assuming that low skilled workers can't be replaced by technology (as in dishwashers by machines) or the jobs simply neglected (as in picking up trash or scrubbing walls) if the price rises beyond what is a profitable venture for the employer. When the price rises, people buy less. Without the options offered by a welfare state, people would prefer even a $3 an hour job to being unemployed. All too often minute details, which can be manipulated, disguised and compromised, are the focus of sham debates while large prin

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ciples are neglected. The Fair Labor Standards Act itself should be the issue not who is to receive how much and what kind of job training for how long in return for injecting a subminimum wage into some proposed legislation. Until the last 40 or 50 years Americans had been pretty free to decide for themselves how to earn money, free to contract with individual employers as to wages and benefits, to decide for themselves how to budget their earnings for taxes, health care, retirement and current expenses, whether to get more education or go to work, whether to stay with one job or leave and try another, whether to start a business or work for someone else; whether to hire this employee or that; whether to rent a housing unit to this tenant or that; whether to plant wheat or rice and where and how much; whether to rent, purchase or build a house, how big and on what land. Americans were able to weigh the cost and benefits of various activities, products and service and decide upon the risk they were willing to take considering their unique circumstances. I am alarmed by the number of these decisions that have been taken away from today's Americans. Professional planners, bureaucrats and legislators are either making these decisions for citizens or severely restricting and directing their choices. There's a difference between a free people and a people whose needs, tastes and desires are regimented in line with some arbitrary overall plan. Franklin Roosevelt had to battle the courts to get his New Deal legislation enacted. The courts had consistently held that individual rights, according to the U.S. Constitution, took precedence over any attempt to regulate the economy by congress. Minimum wage and compulsory retirement laws were invalidated as violating the due-process clause and were considered to be beyond the scope of the commerce clause. Prior to the New Deal, contracts between two parties as to wages and conditions of employment were upheld time and again despite efforts to impose regulations. "The employee may desire to earn the extra money which would arise from working more than the prescribed time." said Supreme Court Justice Rufus Peckham in the case overturning a New York state law which prohibited bakery workers from working over 10 hours a day or 60 hours a week. The New York law was determined to be an infringement on freedom and

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the right to contract. We get wrong answers, which result in harmful legislation, because we ask wrong questions—pragmatic questions, not questions based on principle. No one is asking if legislating a minimum wage denies individuals the freedom to contract, nor are the results of government interference in a nation's business sector deemed to be relevant. It is considered simplistic to consider proof that such policies historically cause more harm than good. To talk about freedom to contract as a compelling principle, or to lament restrictions on freedom in the name of a public good used to have validity. Besides apprehending and punishing criminals the government has a duty to protect and enforce voluntary agreements between men. Courts of law are necessary to the peaceful workings of a free society. One man's decision to change his mind after a contract is made may cause harm to another who needs protection of the law. A society cannot function if one man receives a benefit and then refuses to pay for it. He would end up keeping the benefit by force, not by the voluntary consent of the second man and to allow this would be a violation of the second man's rights. New Mexico enacted the Uniform Owner-Resident Relations Act in 1975. It codifies the obligations and rights of owners and tenants of residential rental property within that state. The legislation says that if a court finds that any provision of a rental agreement was inequitable when made, the court may limit the application of such inequitable provision to avoid an inequitable result. This interferes with the constitutional guarantee of freedom to contract. By statute, New Mexico, and other states, can decide as a matter of discretion, what is equitable and inequitable and choose not to enforce the agreement made by the parties—i.e. not to enforce the contract. Commonly a landlord refuses to return a security deposit when the tenant reneges on a year lease and the landlord ends up releasing the property for less than his previous bargain. In such cases the ruling is that the original lease was not enforceable because although not unconscionable it is considered inequitable. What the UORRA does is to modify common-law principles by allowing courts to make determinations of underlying fairness of rental agreements when made. It permits selective enforcement of

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contracts in order to bring about what the courts determine to be equitable results. Under common-law, absent unusual circumstances such as fraud or material misrepresentation, duress, or unconscionability, valid contracts were enforced, notwithstanding allegations that one party received a better bargain than another. Courts would not undertake to rewrite the parties' agreement. UORRA is modeled after the Uniform Residential Landlord and Tenant Act drafted and approved by the Conference of Commissioners on Uniform State Laws in 1972. Hooray for New Mexico's Justice Scarborough who dissented in Ramirez-Eames v. Hoover, saying the opinion "opens the way for judicial supervision of residential rents under a nebulous "inequity" standard concerned with the "underlying fairness" of rental agreements. In California we already have supervision by legislators. In San Jose, California property owners are now required to subsidize low-income earners by linking rent increases to tenant income. This is government taking private property by force. There are numerous examples of losses to property owners and to communities at large, which are not compensated. Proponents would be wrong in claiming tenants and social justice are winners because no one wins when there are fewer rentals and a feeling of oppression. Humorist Art Buchwald sued Paramount for 1.5% of the net profits of the Eddie Murphy movie Coming to America. He sent an eight page outline to the studio in 1983; the movie was made in 1985. Courts decided Mr. Buchwald was entitled to compensation but there was a catch; only about six films a year, out of hundreds, ever pay out of net profits. The judge (California Judge Harvey Schneider) agreed the contract was standard in the industry and in good faith Mr. Buchwald would not get any share in any profits because there were not any "net profits". But then the judge went on to contend the entire contracting system was itself unconscionable. As the Wall Street Journal said American courts invented concepts of 'undue bargaining position' and 'unconscionable' agreements but this case goes well beyond protecting widows and orphans from agreements made under duress. (Gordon Crovitz 1-9-91)

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This precedent means a person can make a contract and then claim the price agreed to was so low as to shock the conscience. Under the judge's ruling the studio was forced to pay more than either party agreed to or any studio would ever pay. This precedent will eventually hurt those it hopes to protect. Many people will now have less chance getting a studio to offer them a share of profits since a judge can later decide how much that share can be. Almost every contract could be called "one-sided" if that means people with clout get better deals than others. Employers pay some employees more, some buyers get volume discounts, some authors get larger advances etc. Why should judges invalidate contracts they consider unconscionable? As long as there is open competition, people should be free to make the best deals than can, otherwise there will be no such thing as a legally binding agreement. Over the past sixty years the courts overruled attempts to uphold the due process and commerce clauses in cases where the ability to contract or exercise private property rights were involved. Harvard professor Stephen Macedo has argued that property rights, which were supposedly protected by the framers of the Constitution with the insertion of the Fifth Amendment and its taking clause, were among the rights considered by our inspirational ancestor John Locke as natural unalienable rights. Others believe the natural rights this nation was founded upon pre-date Hobbes, Locke, Rousseau and all of the relatively modern theorists and have their origin in Judaic-Christian ethics. Judge Richard Posner has written, "Economic analysis, at least, reveals no grounds other than fraud, incapacity and duress for allowing a party to repudiate the bargain that he made in entering into the contract." You can't have progress in a society where the legal consequences of economic activities are unknown. Legal uncertainty about the reliability of contracts will make the cost of doing business rise as parties are forced to hedge against the possibility that their deal might be undone. Citizens of other countries realize that ambiguous legalities stifle economic activity. Why are we giving up our stability? Doesn't anyone recognize the root of our own past economic successes?

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Already in this country claims that were once considered nuisances have been turned into successful lawsuits. The RICO legislation (Racketeer Influenced and Corrupt Organizations Act) are an inappropriate attempt to regulate financial markets. The government is now deciding what is moral or immoral behavior. Without relating the offense to any proscribed law and without proof of tangible damage, it still brings civil-damage suits . The FDIC and RTC are attempting to hold lawyers accountable for the costs of Savings & Loan bailouts. They have 1,500 attorneys on their own respective payrolls but they are paying millions of dollars to outside law firms hoping they will recoup their cost, and more, in sticking it to lawyers who worked on real estate transactions which tripped up many of the failed S & Ls. The search for deep pockets knows no shame. Attorneys carry malpractice insurance and that is what the government is after. It is legitimate malpractice if an attorney failed to discover a prior lien on a property or anything that would affect the security interest of the lending institution—that goes without saying. An example of a vague charge would be "knowing participation in a breach of fiduciary duty". It is unconscionable and will discourage business transactions if government is allowed to hold attorneys responsible for the financial integrity of any deal. What if the FHA is successful in shifting its $7 billion loss in mortgage guarantees to private attorneys? The insurance premiums of practicing attorneys will skyrocket and nobody will be able to afford their services. Any deal that is not guaranteed success would not be attempted. The economy could slow to a halt. The EEOC recently charged Delta Air Line with willful discrimination against pilots over the age of 60 by refusing to let them serve as flight engineers. No matter that it lost not only its primary case and subsequent appeals, it filed suit in a different federal circuit and lost one more time—all at taxpayers' expense. Even more flamboyant are the government's charges against Exxon. Nobody in their right minds believes the company intentionally ran its tanker aground in an attempt to scatter refuse without a permit or to kill migratory birds without a license. The government seems determined to criminalize an accident. I agree with Paul Craig Roberts who claims the "U.S. government is running amok—destroying the law of the land, the

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safety of its citizens, and the viability of its economy." It's ironic and a little paradoxical that as the rest of the world seems to be moving toward embracing what was once called the American way of life— free markets, self-reliance, and freedom— and away from government domination, that American citizens are experiencing greater and greater inroads by government—invasions into almost every facet of their lives. Recent interpretation of the general welfare clause in our Constitution (article I, section 8, clause 1) is largely responsible for the present sacrifice of the individual to the state. Property rights underlie all other rights and are rights, not to an object, but to action capable of producing that object. Property rights have been defined as a guarantee to an individual that if he is successful at earning property he will own that property and be free to keep it, use it or give it away if he so desires. A political system affects a society's economics, by protecting or impeding men's productive activities. An American citizen should have the freedom to act according to his own judgment and in furtherance of his own goals; the only restriction being the obligation to abstain from violating the rights of his neighbors. These rights are not gifts but are part and parcel of the nature of mankind. The political philosophy on which the United States was founded intended to restrict government force to retaliating against the initiators of force and to make that retaliation a moral imperative. Government rightly holds a monopoly on the legal use of physical force. But whereas a private citizen may do anything except that which is legally forbidden, a government official, by the terms of our Constitution, must be bound to do only those things that are legally enumerated. The government is to have only those rights delegated to it by its citizens for a specific purpose. That is the genius of the U.S. Constitution. California's Constitution gives local governments the authority to make and enforce "all local police, sanitary and other ordinances and regulations not in conflict with general laws". Until recently in California the trend was to presume a local regulation is not preempted as long as significant local interest could be shown. Just about anything can qualify as a "significant local interest".

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The U.S. Supreme Court ruled in a case from Los Angeles county (6-87) that land-use restrictions, even temporary ones, are inverse condemnations for which property owners must be compensated. Dissenting Justice John Paul Stevens bemoaned the fact that now "much important regulation will never be enacted". I say, thank goodness! I realize that police power can be used to promote the general welfare of the people and constitutionality is to be presumed. Zoning laws and health regulations fall into that category and few people are ready to give them up for individual freedom. In fact in a landmark case in 1922 Justice Sutherland wrote for the court that "public welfare cannot be impeded or thwarted by private loss which is incident to such exercise of the police power." That case upheld the comprehensive zoning plan of the Village of Euclid just outside Cleveland, Ohio. But three Justices dissented from the ruling which points up the controversy. Prior to that ruling courts had consistently cut down zoning laws and attempts at regulating private property. They reiterated the fact that seems to be overlooked all too often today; that private property rights are constitutionally guaranteed. Justice Sutherland got around that guarantee by claiming While the meaning of constitutional guarantees never varies, the scope of their application must expand or contract to meet the new and different conditions which are constantly coming within the field of their operation. For a long time now anything which has a relation to health, safety, public convenience, comfort or prosperity or general welfare has been considered constitutional and well within the scope of the government's policing power. The flexible powers of police, when exercised for the public health, safety, morals or general welfare, cannot be declared to be unconstitutional. Nevertheless I have trouble accepting restrictions based on the judgment of any person or group, elected or appointed, as being "better" than the jousting of conflicting needs in the free marketplace. I have faith in the average man and his judgment above that of governing bodies—always! I favor the greatest amount of freedom and self-reliance for people, consistent

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with safety. I would never dismantle existing programs or abolish long-standing policy quickly, but would work prudently in the direction of greater individual freedom and responsibility and against an amorphous collective will. I think I would be happy in Tehama, California. The landowners bill of rights was actually approved by voters in Tehama California in 1982. The ordinance included provisions prohibiting county government from imposing requirements related to the type of housing that could be built or the size or location of any commercial business within the county. It called for just compensation for declaring any private property a set aside as open space or as a historical site. Both property rights and the right of free trade are moral principles which define and protect an individual's freedom of action. They are political rights. Under Franklin Roosevelt the concept of economic rights was substituted for political rights. All kinds of things were promised but at the expense of one individual over another. An economic right became the right to enslave. To take the product of one man's work and redistribute it to another man who is said to be entitled to it, makes a slave of the producer. Once started there is no end to "rights". If you postulate rights to food, shelter, education, jobs, fair wages, fair prices etc. then those who sell the food, provide the shelter and education and hire workers, set prices and pay wages must have rights too. If more than one person is involved voluntary consent must be obtained by persuasion. I believe there are only three proper functions of government; all of them involved with protecting the rights of individuals: (1) the law courts to objectively settle disputes (2) the police to protect citizens from criminals and (3) the military to defend citizens from foreign invasions. Today the government, instead of protecting individual rights is the worst violator of those rights. The beneficial effect of State intervention, especially in the form of legislation, is direct, immediate, and, so to speak, visible, whilst its evil effects are gradual and indirect, and lie out of sight.. .few are those who realize the undeniable truth that State-help kills self-help. Hence the majority of mankind must almost of necessity look with undue favor upon government intervention. (A. V. Dicey)

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The preceding quotation can be found in a 1988 essay by Milton and Rose Friedman titled Tides I n The Affairs Of Men. The first tide (free markets and laissez-faire) rolled in on a wave of public opinion between 1776-1885 and was acted upon between 1840-1930. The second was the tide of collectivism which had its public opinion dates noted as 1885-1970 and action set for 1930-1980. Public opinion swelled as the third tide, of market economies and limited government, gathered momentum in 1970 and was put into practice with Ronald Reagan's election in 1980. In England between 1830-1860 there was a bias towards individual labor, self-help and laissez-faire. Then came socialism and the welfare state heralded by the Fabian Society and George Bernard Shaw. The Fabians had worldwide and long lasting ramifications as evidenced by the adoption, when they gained their independence, of centralized planning in India and other formerly British or European colonies (with the exception of Hong Kong). The welfare state in Britain was followed by the new deal in the United States, a natural outgrowth of the American Economic Association which first appeared in the USA in 1885. Young economists who had studied in Germany returned to the U. S., imbued with the idea of a welfare state. The in-roads made by collectivism in this country can be read in the history of legislation: Interstate Commerce Commission in 1887, Sherman AntiTrust Act of 1890, Food and Drug Act of 1906, spurred by Upton Sinclair's novel The Jungle. Even earlier William Bryan Jennings popularized collectivist ideas and made the Populist Party dominant in the Midwest so that even today Colorado Congress-woman Pat Schroeder, in her autobiography, speaks of historical populist ties through her ancestors. The first world war expanded the role of government, but still, as late as 1929 the federal government spent only 3.2% of the GNP on military, including veterans benefits and interest on the public debt which accounted for the largest percentage. At the same time state and local governments were spending three times as much or 9% of GNP, mostly on education and highways. Before the New Deal in the thirties, less than one percent of GNP was spent on welfare and similar income support programs. The effect of the New Deal was awesome.

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In just twenty years spending by all levels of government, local, state and federal, was up to thirty-five percent of national income. Between 1970 and 1979 federal outlays rose consistently at an annual rate of about 1.8 percent. Then suddenly in 1979 the spending rate skyrocketed 4.6 percent in one year reaching 23 percent of GNP. Ronald Reagan campaigned on the promise to bring spending down to the 19 percent range again, but after only 3 years in office federal spending had risen to 25 percent of GNP! The worst of it was the intrusion into people's lives; an intrusion that would not have been tolerated fifty years earlier. One major government program after another was started with the best of intentions only to result in more problems than solutions. New government agencies were created involving safety, business practices, education, the humanities and so on and so forth. Added to tariffs and quotas were things like price and wage restrictions, ceilings on interest rates and rents, zoning mandates and building codes. By 1980 almost every plank in the 1928 Socialist party had been enacted into law. Viet Nam, Watergate and the failure of the welfare state in both Britain and the United States, tarnished government's role in this country. On a worldwide basis the results of the Chinese and Russian communist revolutions discredited planned economies in general. But what really paved the way for the Reagan Revolution was the pervasiveness of government and high taxes. Cutting back on government is like trying to put the genie back in the bottle. Everyone knows it's easier to expand than contract, to spend than to save. As government expanded, so did its power to bestow favors. When it comes to limiting government it is only natural that those now vested interests will strongly resist the loss of privileges that they have come to regard as their right. In America, material wealth is the result of an approach based on sound moral principles. The architects of our Constitution showed their genius when they drafted the clause delineating the separation of church and state. State represents hard-power and is used to protect individuals from physical violence from without and within the country's boundaries and to provide a structure where laws can be equitably enforced to protect individual and property rights. The

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state's only function is to enable people to live their lives freely and responsibly. It cannot, as we have seen in the failure of its repeated and expensive attempts, ensure all people happy, healthy and productive lives. The living of their lives is, and should be, up to the individuals who inhabit this great land and depends a great deal on their ability to generate soft-power. I believe separation of church and state means a separation of the hard and soft power roles in society. The phrase separation of church and state does not appear in any of the rulings of the Supreme Court in its first 171 years. Unfortunately for the pasty sixty years we have had the suppression of church and the expansion of state. I think the separation clause in our Constitution has been twisted to suppress one of the necessary underpinings of a successful capitalist nation. Church, or softpower—defined as the nurturing and caring instincts and institutions in the society—instead of enjoying a role co-equal with state or hard-power—defined as police power and synonymous with government—has been relegated to a secondary position and been all but stamped out in our public institutions— especially in schools. I've never been able to understand how taxpayers accept the salaries for chaplains in the armed forces and in congress and provide for prayer before every meeting of the House of Representatives and yet refuse to allow any mention of religion in our public schools. The more we banish religion and morality from the classroom the more ill-equipped and vulnerable our children become. Chesterton said when people stop believing in God they do not believe in nothing; they believe in anything. According to Norman Dorsen, President of the ACLU, the framers of the Constitution intended to prohibit the government from favoring religion over non-religion, not just favoring a particular religion. But there is no doubt that this nation was founded on principles of Christianity. Although the moral code underpinning our system might have been drawn from many religions: Islam, Hinduism, Judaism, Shinto etc. the fact remains that it was established upon the Judaic-Christian tradition. Early America was most definitely not a pluralistic society. That idea took root after WW II. Court decisions up until then were based on solid legal precedent which emanated from Christian moral teaching. Gradually those traditions have been

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displaced by relativism and secular humanism. Mr. Dorsen says religion "is doing very well in the U.S. without government support". Even if that were true, the point is the nation itself is not "doing very well" without religion. Crime, drugs, suicide, cheating all evidence the need for a set of morals and purpose to fill the vacuum left by "non-religion" which has indeed been favored over religion for the last few decades. A free society can only flourish where citizens are willing to exercise self-control and be accountable for their own actions. Congress has a paid Christian Chaplain and begins each session with a prayer. Speaker Tom Foley offered a prayer before the vote urging force in the Gulfin early January 1991. All sorts of people were incensed by the restrictions on American soldiers when it came to praying and otherwise displaying their religious beliefs in public in Saudi Arabia and yet American school children are prohibited from doing the same thing and apparently it is ok. Abraham first declared that every man is free and responsible only to God. Moses reduced the moral law to a code of Ten Commandments directed to the individual and protecting individual rights. This principle of god given rights was new. In societies where pagan gods were worshipped, the people believed gods and government were responsible for whatever happened to them. The idea that men are endowed with liberty by their Creator, just as they are endowed with life and reason, was a revolutionary idea. The United States Constitution acknowledges that liberty isn't given by permission of government or anyone else. Liberty is an unalienable God-given right and demands responsibility. Today in America too many of us shirk responsibility and no longer trust our neighbors; we no longer consider them to be men and women of goodwill. This frightens and distresses me more than anything else. Such a nation is not a place where I would wish my children or grandchildren to live. The attitude of distrust started from the top when those in power began distrusting ordinary citizens and slapped regulations and inspectors on everyone and everything. Today the distrust has permeated every facet of society. Wise parents know that children, if trusted and expected to do well, generally live up to expectations. Unfortunately too many of today's adults never

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grew up and mastered their emotions and accepted responsibility. Maybe nobody told them it was expected. Maybe nobody ever trusted them. Certainly their government doesn't. The government expects its citizens to lie and cheat and unwittingly encourages the behavior. For example, a community in northern California requires anyone who wishes to remodel property to first pay a school impact fee of $ 1.50 per square foot unless the remodel is to gain storage space— storage space is exempt from the fee. Do you see the temptation here? Unless the remodeling job is very small, no one is likely to believe someone is remodeling just to gain storage space. Such detailed regulation tempts people to cheat. Instead of appealing to the population's highest instincts, micromanagement by government tends to bring out the worst in citizens. In addition, when there are too many regulations people spend time and money trying to circumvent the system. This encourages dishonesty and subterfuge as well as wasting time and money in nonproductive pursuits. Laws that cannot be enforced are counterproductive. They weaken respect for enforceable necessary laws which boosts penalties and encourages the passage of additional laws; they de-emphasize personal responsibility and suggest that outside forces can substitute for self-control and individual morality and finally they increase red tape and government overhead which removes more and more people from productive work. Whenever we give government responsibilities that properly belong to individuals we undermine personal freedom. In 1990 Michael Moffatt, an anthropology professor at Rutgers University, surveyed 232 college students across the country and found that 45% cheated occasionally and an additional 33% cheated more regularly. Another study concluded that less cheating occurred at schools with well defined and publicized honor rules. Moral restraints are more efficient than outside legal restraints. I admit that an unregulated high-expectation America would have its share of crooks and con-men, but that is no reason to overreact. Instead of focusing on the few bad apples, indiscriminate regulations have been imposed on entire industries and professions. Now we have politicians and others telling us that the United States of America is no longer populated by men and women of goodwill, but that force is needed to make our business persons and industrialists accountable.

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Force, in the form of inspectors, lawyers, police and the myriad of forms which must be filled out when regulations are imposed on an industry from outside, were once recognized as being too expensive. Today we are feeling the cost in a lower standard of living for our youth as too much overhead saps the nation's energy; energy that might otherwise be directed to greater production and creativity. Once the successful American was the person who had cultivated virtues such as patience, modesty, hard work, faithfulness, moderation, honesty, humility, courage, justice, simplicity, kindness and an overall attitude of charity towards his fellow citizens. It is only in the last sixty or seventy years that success has become dependent on other values such as skills, technique, charm, behavior and image. I cannot improve on the following paragraph written by Bruce Evans, President of the Foundation for Economic Education, which I came across in that organization's Spring 1991 newsletter: Speaking of ancient Greece, ( R .C.)Sproul observed that with the rise of the sophists, 'the science of rhetoric turned away from questions of how to speak the truth, to questions of how to persuade people of something whether it was the truth or not.' I would suggest that liberty cannot survive in a society that equates personality with character, rhetoric with truth, social acceptance with morality, and majority rule with right. Pogo said, "We see the enemy and it us". Unfortunately many of our leaders either fail to see the enemy or else they see and fail to recognize. Philosopher Leonard Peikoff said at a speech at the Ford Hall Forum in Boston: There are two opposite approaches to moral questions: the principled approach vs. the pragmatist approach. The one tries to integrate, the other to disintegrate. The one tries to broaden the data an individual works with, to draw on all the relevant knowledge man has accumulated, to gain a larger vision and context for the answer to the question—which can be achieved only by invoking man's means of condensing

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data, concepts. The other tries to narrow the data base, to shrink the subject to the animal level, to reduce the units by staring only at some isolated percepts. Government has no resources of its own. The only way it can give one American a dollar or an advantage is to take it from another. That's the limited ability of government to do good. Government epitomizes the zero-sum philosophy. Leaders succumb to the temptation to buy votes with the promise of a free lunch which means increased government spending. This throws supply and demand out of whack; the overhead goes up and the effective use of human energy goes down and so does the nation's standard of living. Money cannot buy wealth that is not produced. People cannot be supported by their government; government must derive its support from the people. Too many Americans want that notorious free lunch and they want it now and they want someone else to give it to them. Like spoiled children with a destructive attitude, they want to act without consequence. But there is no free lunch. Ask the bay area Boy Scouts who recently discovered that the price for support by United Way is a change in their charter. Government is no different. There is a correlation between taking funds from government and loss of freedom. Society would have little interest in restricting the freedom of individuals if it did not collectively assume the responsibility for their misfortunes. If government provides ambulance and health care services it then has the right to make certain demands on the potential beneficiaries in order to contain costs. Now there are seat belt and helmet laws for some motorized vehicles and others are outlawed altogether. There are laws against abusing a pregnant woman's body by ingesting alcohol and other drugs and maybe soon for failing to eat fruits and vegetables and take vitamins. It may sound farfetched but it is only logical to expect that mandates to exercise and refrain from eating sweets and fats could be next. Planned parenthood clinics that take government dollars must now restrain workers from counseling patients about the many uses of abortion. No doubt you and I could do better economically if we were allowed to invest our own money. Unfortunately most policy makers don't have faith in the abilities of average citizens. They focus on the

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few in society who would squander their resources. In an attempt to protect them and to alleviate the necessity for the rest of us to provide for them in the future when their resources have been dissipated, laws are enacted that restrict the entire society. It is far easier to assume that everyone would fail rather than determine who will and will not succeed in investing his own earnings wisely. And who would want bureaucrats to make those choices? Free people should be willing and permitted to live their lives with the inevitable ups and downs, successes and failures without interference; especially when the motive for that interference is to avoid the burden of caring for potential failures later. It would be a far better place to live if government ignored individual needs and left those needs to voluntary organizations, religious groups, philanthropic foundations, service clubs, caring neighbors, loving relatives and responsible individuals. Nurturing is not the proper role of government. I do not for a moment believe that "provide for the general welfare" means providing for the needs and healing the wounds of individual members of society. Life should be lived by citizens and bureaucrats should not second guess that living with their regulations for cushioning and legislation aimed at providing safety nets. Free men are capable of taking care of themselves and their neighbors and the government of the United States of America was designed for free men. As Bruce Evans has said, "Constructive freedom cannot exist without the context of principle and accountability." We are exchanging the freedom our ancestors fought so hard to preserve for social indulgence and the abdication of personal responsibility, morality and accountability. We are not only agreeing to the intervention of government in our lives, we are embracing it. A moral principle has been defined as a basic conceptual statement enabling us to choose the right course of action. If we have no moral principles telling us which acts are right and which are wrong, or what is essential and what is irrelevant in judging a particular situation, how do we know what to do and what not to do? Without principle there is no way to decide concrete cases except by emotion. History has shown that a nation's productivity depends to a large extent on the degree its citizens exhibit soft-power traits such as

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ambition, determination, perseverance, aggressiveness—all part and parcel of the ability and willingness to work hard and drive ahead. Those were the attributes of previous generations of poor immigrants—the qualities that launched them into the middle class and made this young nation the most productive in the world. We will continue to decline if we fail to revive and nurture these and other soft-power attributes. In Mainspring of Human Progress, Henry Weaver analogizes to bees. Bees have no self determination or individual initiative, the will of the swarm controls. A bee's life is exhausted in selfless, changeless toil for the common good; the swarm itself is the living creature. Human society is based on trade and self-development. Human energies do not function in the manner of the bee swarm and any attempts to govern the actions of multitudes of men always results in oppressive power being placed in the hands of the few. When a small or strong group of persons sits in the administrative saddle, human energy and individual initiative are put in a straight jacket and the inevitable result is poverty, distress and even war. To do anything out of line, a deviation from the master plan, calls for asking permission. These master plans see individuals as cells of a larger organism—society as a whole, the common good and so forth. During the 1970s forty-four major welfare programs grew two and a half times as fast as GNP and three times as fast as wages. And if you want to talk about disincentives, consider that in 1976 the American median income was $14,500 and in 1979 $16,500 yet the average welfare family of four received $ 15,000 worth of subsidies in 1976 or $500 more than if working, and $ 18,000 in 1979 or $ 1,500 more than a working family. The welfare family had seventeen programs to choose from including AFDC, Medicaid, food stamps, supplemental foods like dairy and other surplus giveaways—all tax free. Benefits were available to bring poor families 30% above the arbitrary poverty lines—otherwise achievable by two full-time workers at the minimum wage. All this was paid for by working families. Before 1935 half of all welfare came from private charities; in 1980 that figure was one percent. The welfare state has been displacing private savings, private insurance and perhaps most dam-aging—intergenerational relationships within families. Unfortu

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nately Americans are fast becoming slaves to the welfare state and its bureaucratic system of protections. A small percentage of individuals in any society will never be capable of taking care of themselves adequately without assistance, but that is no excuse for a nation to stunt the development of the majority of its citizens. Milton Friedman spoke before the Commonwealth Club on June 21,1991. He expressed fear that Oswald Spengler, author fifty years ago of The Decline of the West may have been right—that the United States is going the way of great civilizations like the Chinese, Egyptian, Greek and Roman. Professor Friedman had optimistically disagreed, especially after Ronald Reagan's election to the presidency. Now the Bush administration has reversed all that Reagan set out to do. Taxes have gone up not down, government spending has increased at a faster rate than ever and regulation is choking the nation. The road to decline is through expansion of government power and control over citizens. Professor Friedman believes Americans are opposed to the expansion of government and went on to say something that made me very sad—sad because in most things I believe Milton Friedman is correct. I will, however, do everything in my power to prove him wrong when he says: "We have developed a governmental apparatus under which the public has no voice. We deceive ourselves if we believe 'We the people' rule—we don't" It's "we the subjects." He says Lincoln's "Government of the people, by the people and for the people" has become "Government over the people, by the bureaucrats, for the bureaucrats." I hope the nation is finally fed up with bureaucratic welfare-state solutions to social ills and is looking for alternatives. Alternatives which give both the rich and the poor more freedom; alternatives such as choice in education, welfare reform and tax cuts. Problems arises when society attempts to use government and its taxing power as a social safety net. People act differently when they know they are going to be safely caught and pampered if they fall. Think of the trapeze artists—of course they take more risks and act less cautiously when there is a net. Why would you and I act differently? Why wouldn't we be less responsible if we have the assurance that ultimately society will care for us if anything goes wrong? We will

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never grow up, we will never be truly free unless we are willing to take responsibility. Freedom means being able to reap the full reward of our successes as well as being responsible for our failures. Europeans in general scoffed at the new government on the other side of the Atlantic as too anarchistic. But the founding fathers never intended for the United States of America to be an anarchy; they realized no government could exist without the power to tax. The new Constitution attempted to resolve the inadequate taxing power in the ill-fated Articles of Confederation, while at the same time seeing that the individual was not sacrificed to the state by severely and specifically limiting the State's taxing power. Article I Section 9 Clause 4 specifically states that no direct tax shall be laid unless in proportion to the census. A direct tax is a tax attaching directly to the individual or his private property as opposed to a tariff or excise tax on goods as purchased or services as hired. "In proportion to the census" means the levy of a million dollar tax would be divided equally among the population without regards to the relative wealth of individuals— each would be expected to carry his share. Share did not mean according to the individual's ability to pay or percentage of wealth acquired; it meant share as a citizen counted in the census and accountable for a portion of the State's need. That safeguard to the rights of individuals went by the wayside in 1913 when, after taking three and a half years to ratify, the 16th Amendment allowing for an income tax based on a percentage of wealth, was passed. The individual was sacrificed to the state. Taxes by all levels of government and in all forms account for approximately 44% of the national income but add to that the mandates upon individuals that further takes away from the productivity of the nation and makes it responsible for consuming over half the nation's resources. Government functions add roughly 5% to 10% to our living standard. Still, with less than half the remaining resources private enterprise is able to produce 90% to 95% of our standard of living. The headlines in our local paper in early 1991 read "County may face $10 million shortfall" and a few days later another headline proclaimed "Cultural grants in county to total $112,000". According to the first article, things were so tough the powers-that-be were

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considering new business license fees and a utility users' tax. Who uses utilities? As for the second article, the Monterey County Board of Supervisors gave the grants to thirty-three groups which included symphony, opera, choral music and poetry readings. Who primarily uses these programs? If you're in the first group you're assessed more taxes and if you're in the second you benefit from grants. Fifty-six of the riches communities in the nation, including Palm Springs, Newport Beach and Palo Alto, California receive Community Development Block Grants (CBDGs) from congress in the $300,000 to $500,000 range. This obviously leaves less for the depressed inner city areas. Who's deciding these things anyway? Author George Gilder notes that capitalism depends on combining two universal traits; mankind's search for safety, which generally leads to saving, and his sense of creativity and boldness which almost always requires investment and risk. The trick is to replace fear with faith and faith is easier to achieve with insurance. He points out that acts of thrift in primitive life, as in modern society, are more often motivated by the need to survive trouble than by the desire to invest— the stick rather than the carrot. He says that in its infancy the United States chartered more insurance companies than any other kind of firm outside the field of transportation. Capital needs cooperation and security to flourish just as it needs the incentive of risk and competition. In his highly recommended book, Wealth and Poverty, George Gilder discusses insurance at great length. Unfortunately insurance has a significant and insidious influence on the behavior of citizens. Moral hazard is the danger that a policy will encourage the behavior— or promote the disasters—that it insures against. There's no denying that fire insurance is an inducement to arsonists, or that medical malpractice suits have raised costs to consumers and entangled physicians in red tape; that theft insurance encourages thieves, retirement pensions encourage early retirement and no doubt life insurance has motivated murderers and enticed suicides. People with good health habits end up paying for the smokers, drinkers, drug abusers, overeaters, undersleepers, and otherwise improvident. People who protect their property pay for those who don't, career policemen

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pay for the opportunists who retire after 20 years when they are most productive. But as Gilder says, People are experiencing a steady erosion of the link between conduct and its consequences, effort and reward, merit and remuneration. The moral hazards of private insurance thus may contribute to the declining productivity of the American economy. Most of these unintended results are less likely under the informal, familial, church, fraternal and tribal kinds of mutual aid that preceded the emergence of mass insurance. The charities of churches, benevolent associations, extended families, and tribal groups exerted strong moral pressures in favor of preferred behavior. I n most cases the providers of aid knew well the recipients of it. When the risk is borne by individuals rather than impersonal bureaucrats there is closer monitoring of programs and recipients and the system is likely to be more effective and more stable. However the New Deal transferred the risk to government; the risk of unemployment, illness and accident, destitute old age, and poverty in general. Government forced employers both to provide and collect premiums; premiums used to insulate employees from the highs and lows of living. Through collectivizing risks and premiums everyone became less sensitive to market signals. Opportunities were overlooked because scarcity had lost its impact, and Thus the welfare state itself became a moral hazard. Unemployment compensation made it easier to stay away from work and wait for a more opportune job; AFDC made it possible to remain single and have the state support your baby; infirmities that might have been overlooked without sick leave and disability insurance became disabling and instead of investing for old age, folks put dollars into fancier cars, cruises and motorhomes. Families became less dependent on one another and more dependent on government; a trend that has accelerated as government continues to subsidize more and more services for both the elderly and the young. There is less concern for families and neighbors for whom we expect the state to provide. The examples of unintended consequences— of the moral hazards brought into play by the expansion of government—are endless. By means-testing many programs, gov

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ernment has enhanced the value of being poor and discouraged mobility between economic groups. We are familiar with the young men who inhabit pool halls and park benches, and in their spare time father five or six illegitimate babies. What do you think they would do if no agency reached out to care for their families? Do you think they would let them starve? Government policy makes young men ashamed and robs them of motivation because they fear government may prove to be a better provider. Take away government and some might cry "How cruel!"—take away government and I would point out that the shiftless young men suddenly become persons of substance who are very much needed. Dignity and incentive filter through, and all those who truly believe in the equality of men will not be surprised that new potential is unleashed without special educational programs, without job training, without subsidized housing or food stamps. Leave them alone. I realize this is too simple for those who are addicted to controlling others and looking down on them under the cover of compassion, but believe me, it is the solution. The voices we most often hear are not the voices of what I call the backbone of America—the entrepreneurs, the working people who have no time to make speeches, write books, appear on talk shows— and most revealing of all—they are not the ones who run for political office. These folks are pursuing the American dream, not talking about it or promising to get it for voters. They aren't busy asking what you can do for them but simply ask you to either join in their endeavor to produce or step aside and see what their ingenuity and hard work can yield. As I said earlier, in a collectivist economy public needs enjoy the same sort of built-in priorities that are reserved for private consumption in a capitalist economy. In a collectivist society all resources are available for public needs and private consumption is restricted. Witness the long lines and empty shelves in such countries. In a capitalist society it is public needs that are restricted to the claims the society is willing to make against the private sector. We get a deficit only when the needs are filled and the claims not made. Who dares make more claims? Who dares raise taxes further? Today in the United States of America the private sector is working into the first

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week of May to fill those public needs. Taken together all taxes add up to a whopping 44 percent of this capitalist nation's GNP—too much to extract from citizens during peacetime, especially when real wages have stagnated for the past 15 years! I'm convinced that America in 1991 is a better place than America in 1791 but now is the time to move forward. The Reagan Revolution has gotten a bum wrap from the press. Ronald Reagan was trying to put this country back on the right track and the people approved. We can still get there but the process is slow and those that are not dedicated enough to take the heat have been backtracking. Government is the problem, but it can't be dismantled all at once. Like a tree that was planted in an enclosure for support, many citizens may not be able to survive if those supports are withdrawn so they must remain. Government policies over the past sixty years made them dependent. But that is no reason to plant more trees in enclosures nor to keep those dependent who would like to opt out of some of the programs established for their own good and test their own wings. Many people of course, will prefer to remain in the relatively secure surroundings of the built in government safety nets . In the Soviet Union the problem is understandably worse. Formerly repressed and oppressed people are afraid to try things on their own and give up the cocoon of government security even though they realize it is an illusion. At least everyone had a job, a place to live and some food under the old regime—to start one's own enterprise, to work one's own plot of land is a scary prospect that many Soviets are turning down. It is said that Americans absorb about four hours of secular sermonizing a day from their TV screens. Those largely responsible for what is viewed answered a survey which revealed that 93% seldom or never attend religious services; 75% identified themselves as politically left of center, , 97% are prochoice when it comes to abortion, 51% see nothing wrong with adultery, 66% believe TV entertainment should "play a major role in promoting social reform", 43% endorse restructuring of America's basic institutions. The 1986 book The Media Elite documented the liberal leanings of news professionals and its conclusions have never been successfully challenged. The news media is alarmed by such critiques but Hollywood

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is proud of its high profile political and social activism. According to Watching America prime time TV viewers see sexual infidelity as the norm, citizens are murdered at a rate 1,400 times actuality, the rich commit most of the crimes, businessmen are bad guys, liberal politicians operate in the public interest and religion is considered a lamebrain superstition. In such an environment is it any wonder that soft-power has all but disappeared in this country? But the ideals on which this nation was founded continue to thrive outside the country. Immigrants are an affirmation of American values and their global attraction. If we are to regain a shared sense of the past and a vision for our future then American children must be taught this nation's history even though it is assuredly derived almost exclusively from western thought. It was after all, western thought upon which this nation was founded and which still stands as a beacon for all mankind. The aspirations contained in the founding documents of the United States of America still represent the highest evolution of mankind. Now that the ideals of the American Revolution have spread to every corner of the world, maybe it's time to bring them home. What do you say?

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Wellington Publications P.O. Box 223159 Carmel, CA 93922 Telephone 408-624-7871 Fax 408-624-7994 Please send the following soft cover books @ $8.50 each we will pay applicable taxes, shipping and handling costs. (USPS book rate) _________ Social Security: An Idea Whose Time Has Passed ISBN 0-915915-04-9 __________Taking A Stand On Health Care ISBNO-915915-08-1 __________Taking A Stand On Housing ISBN 0-915915-16-4 _________ Taking A Stand On Poverty ISBN0-915915-17-0 __________Taking A Stand On Civil Rights ISBN 0-915915-19-7 __________Taking A Stand On Banking ISBN 0-915915-18-9 _________ Taking A Stand On Education ISBN0-915915-11-1 _________ Taking A Stand On Taxes ISBN 0-915915-16-2 __________Taking A Stand On the National Debt ISBN0-915915-10-3 __________Taking A Stand On U.S. Competitiveness ISBN0-915915-14-6 _________ Taking A Stand On Environment ISBN0-915915-12-X _________ Taking A Stand On Regulation ISBN0-915915-13-8 ________ What If Any Should Government's Role Be In Health Care? (Selected essays from high school students nationwide) ISBN 0-915915-22-7 ________ What If Any Should Government's Role Be In Child Care? (Excerpts from over 1,000 high school students nationwide) ISBN 0-915915-09-X Multiple copy discounts for soft cover books: Any two $15 Any three $20 Any four $25 Any five $30 Each additional book add $5 Super bargain discount all 12 for $50

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Please send the following hard cover books @ $20.00 each we will pay applicable taxes, shipping and handling costs. (USPS book rate) __________ Alternatives ISBN 0-915915-26-X __________ The American Deficit:Fulfillment of a Prophecy? ISBN 0-915915-02-2 __________ The Debt: 12 Steps to Ease the Crisis ISBN 0-915915-06-5 __________ The Election Process ISBN 0-915915-05-7 __________ Everyone's Guide to Financial Planning ISBN 0-915915-00-6 Multiple copy discounts for hard cover books: Alternatives plus one other book for $35 Alternatives plus two other books for $45 Alternatives plus three other books for $50 Please inquire about special discounts for orders of 20 or more books and about prices for audio tapes of interviews with the author and speeches. Many of the books are also available on audio tape. Your name _____________________________________________ Address

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Readers' Poll
On what three points are you most in agreement with the author?

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Do you think you should be trusted to provide for your own best welfare and that of your family? _______ Would you trust your neighbor to adequately provide for himself and his family? ______________ Do you think it's government's duty to remove as much risk from your life as possible?__________ How much freedom are you willing to exchange for security? As little as possible ___________________ A moderate amount __________________ Whatever it takes ____________________ Do you believe you must be forced via laws and regulations to do what is right? _____________ Do you believe the majority of your fellow citizens must be forced via laws and regulations to do what is right? _________ Is this the kind of America you want your children and grandchildren to inherit? _____________ Do you want to be part of bringing about a grassroots change in America? __________________

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