Insuring America's Financial Future
March 17, 2001
By Maren L. Hickton

Every day millions of Americans buy insurance to protect themselves from assorted risks. This money is pooled together and contributed to a general fund hoping that there is enough money in the general fund to take care of all claims. The size of the insurance industry is proof that people are eager to pay to avoid risk. They pay and get nothing if they are fortunate enough not to have to file a claim, and they break even if misfortune strikes a blow.

In the same way, we pay taxes. Taxes are our insurance, providing the funds necessary to take care of a range of government programs as a means of protection from risk.

Risks include threats to our sovereignty -- protection from the destruction of war with the umbrella of our armed forces, our military: the best group of trained men and women in the world. Risks include ensuring that we educate our young people -- for they are our future -- and to be equipped with the fast pace of progress, to find their most optimum place in our society they must be educated to find jobs to meet all challenges.

Risks include having sufficiently pooled funds to care for and maintain our crumbling city infrastructures: buildings, highways and bridges -- so that we may live and move safely, without obstruction or fear. Risks include making sure that we have enough money to explore the earth for fuel resources to heat and cool our homes and operate our transportation systems, to perfect our technology so that we can partner with other nations to protect the earth from hurting itself with pollutants.

Risks include assisting many businesses when they need help in developing and competing in the world globally, so that they can continue to employ us, because without jobs we will have no tax money at all to pool together, with those unemployed or underemployed unable to purchase, reducing the GDP. Jobs are the number one reason we do have wealth.

Risks also include taking care of the health and well-being of all Americans, no matter what race, creed or sexual persuasion, providing funds to address unexpected illness or disability, as we surely know, when we say, "It only happens to them, not me," is false. We also need to take care of our aging parents and grandparents because without them, we wouldn't be here. These respected American matriarchs and patriarchs deserve our care and, often, do not have the security of financial resources or extended family assistance to care for themselves.

It's easy for our President to promote a tax cut; it requires no leadership, little thought, and has always been a popular choice in politics. It is easy for our President to dump responsibility on the states, states who ultimately will have to raise taxes to support established programs that the federal government does not want to steward any longer. Many Governors across this country interestingly welcome this feat with the promise of more "power," while they will have to contend with developing increased management systems, less federal support, more expense, and may, in the process, risk their own political futures.

The current President and his administration do not want the responsibility of moral hazard. That is to say, they do not trust our government representatives in the House and Senate to use our taxes wisely. They fear that the funds will be misused if they are left in the coffers, that they will be tempted to give the money away to special interest groups that lobby Washington -- groups that may clearly demonstrate business, social or other needs. They fear that if an individual, business or group is in distress and the government provides aid, that it will encourage more people to put themselves in distress to require more aid.

I believe the current administration is wrong. I believe they are selling Americans short. Welfare Reform with its WtW Grants Program is just one example of proof of this. Federal subsidies invested in this effort seem to be resolving many of the implementation challenges of this program, according to the Urban Institute, a nonprofit, nonpartisan organization in Washington, D.C. Americans are reaping billions of dollars that they invested in assisting people in getting back to work as a result of this effort.

What is harder for our President is to provide leadership. Real leadership involves hard work with a prospectus designed to positively influence the people of this country and not scare us, telling us that "the economy is sputtering." President Bush, instead, has an opportunity to truly be an "invisible hand" in contributing to this nation's wealth by vesting all of us with a right to participate in the correct use of our taxes and the surplus, an opportunity for us to participate in investment future, while at the same time taking care of those in need.

Rather than stumping to promote his own dated program, he could visit towns across America to conduct town meetings to find out what Americans really want, what is truly important to them. Our representatives can then develop realistic budgets to govern and manage economic development with consensus, a mandate from the people, encouraging positive contingent behavior while remaining cognizant of all unintended consequences with tax relief. Simply put, economics starts with individuals making choices based on self-interest and how these interests affect society as a whole.

What must be determined is, "will a tax cut lead to a harmonious result or a chaotic one?" In 1776, Adam Smith, often called, "the father of economics," published a book entitled "The Wealth of Nations." While is it clear that he was unfamiliar with the model of supply-side economics, a model that, in the 21st Century, is argued by some to be obsolete, he discussed unintended consequences: "Every individual is continually exerting himself to find out the most advantageous employment of whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view..."

That "view" is selfishness. Further, economists, including Alan Greenspan, never use controlled experiments to gather facts to test economic theories, despite what many might think. There are far too many variables that influence the economy which makes any statistical analysis misleading under the best conditions: If a system of many interdependent markets is in disequilibrium, will it return to an equilibrium? If it does return to an equilibrium, what factors determine the speed of adjustment? Can there be more than one equilibrium in such systems? Does it matter for the adjustment process if markets are not competitive? Can an equilibrium for the system exist if some markets do not clear, that is, can some markets have surpluses or shortages when the system as a whole is in equilibrium? Finally, what sorts of forces cause disequilibrium in the first place?

With all of these variables, economists operate on gut. They are charged with the responsibility of reacting to market conditions which include these variables with the goal of improving consumer confidence, by making necessary adjustments. The Federal Reserve Chairman cannot solve all of our problems, especially if we create new ones. Bush's tax proposal may be reduced to the following argument that economists have been bantering about for centuries: "Good results to not necessarily come from good intentions and good intentions do not necessarily lead to good results."

While the President's tax relief package may be well intended, there is absolutely no science to his theory that "giving Americans a refund," will do anything for our economy. There are far too many questions and far too many risks to established programs in the President's budget proposal its present form. All Americans must have assurance that promised programs will be fulfilled and insurance that existing investment programs will not be cut, jeopardizing our economy.

What is science is that the current market conditions do not agree with the President's short-term assumptions, let alone ten years out. Bush's calculations do not add up. If his theory does not fit the facts, one can easily conclude that the Bush theory for positive economic development, returning money to taxpayers, forcing them to speculate with respect to their own financial futures, is wrong. President Bush has an obligation to all Americans to tell the whole truth which must includes how he is going to pay for all of his promised federal programs and still provide tax relief.

Until then, we must say no to tax cuts.

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