Ethics & Public Policy Center

Principles of Economic Sanity Redux



John D. Mueller, Lehrman Institute Fellow in Economics at the Ethics and Public Policy Center, delivered these remarks at a panel on “Family — The First Economy” sponsored by Patriot Voices and the Clapham Group on December 10, 2012, in Washington, D.C.

Let me thank Senator Rick Santorum’s Patriot Voices, Mark Rodgers and the Clapham Group for organizing this timely panel on “Family — The First Economy.”

We’ve all read gloating articles like Maureen Dowd’s in yesterday’s New York Times, calling the Republican Party “just another vanishing tribe that fought the cultural and demographic tides of history.” And: “Yet strangely, Republicans are still gob-smacked by their loss, grasping at straws like [hurricane] Sandy as their excuse.”[1]

Actually, this gob was unsmacked. In 25 years of forecasting I’ve learned to separate what I desire from what I predict. When EPPC’s president, Ed Whelan, put a gun to our heads last January, I predicted that Mitt Romney would lose to President Barack Obama, and by an Electoral College total not far from the November result.

Since we have five minutes, or about 500 words, I will make only two points.

First, economic theory is in flux. The subtitle of my book, Redeeming Economics, is Rediscovering the Missing Element.[2] To focus on production and exchange, Adam Smith’s Wealth of Nations oversimplified by assuming that “every individual . . . intends only his own gain.”[3] Classical and today’s neoclassical economic theory reduce all human relations to exchanges. “Neoscholastic” economics is restoring Augustine’s theory of gifts (and their opposite, crimes) and Aristotle’s theory of distributive justice, which are essential to describing marriage and family.

Second, a handout contains my Family in America article, “Dollars and Sense: Proven Principles of Fiscal Sanity.”[4] It explains how both parties abandoned the principles of all successful American political economy, and argues that the following agenda is necessary to update and re-implement them:

  • 1. Instead of taxing income when received by workers and investors, all labor and property income will be taxed equally, when first paid by businesses, governments or non-profit foundations, at a single flat rate, with no exclusions or credits (including capital gains and capital consumption allowances). A single credit for ‘human maintenance,’ based solely on family size, will rebate income and payroll taxes up to the poverty level.
  • 2. Current Social Security, Medicare and Medicaid benefits will be balanced by current payroll taxes and premiums. But legal abortion caused the entire prospective Social Security deficits, by cutting the U.S. total fertility rate[5] and work force.[6] If abortion continues, benefits must be made proportional not only to past contributions but also the number of children each worker has raised.
  • 3. Unemployment insurance added more than 3 percentage points to the unemployment rate when Congress extended it to as many as 99 weeks. This will be reversed only by restoring the original 26-week limit.
  • 4. To restore price stability, international competitiveness and Federal budget discipline, open-ended financing of Federal deficits by the Federal Reserve and foreign central banks must end, by defining the dollar again as a weight of gold, while refunding existing official dollar and other official foreign currency reserves, much as Alexander Hamilton refunded the massive Revolutionary War debt.

I’ll close with this prediction: President Obama and any 2016 presidential candidates will succeed or fail precisely in proportion to their adherence to these four principles of economic sanity.

John D. Mueller is the Lehrman Institute Fellow in Economics at the Ethics and Public Policy Center and president of the forecasting firm LBMC LLC, both in Washington, D.C. In 1979-1988 he was staff economist to then-Congressman Jack Kemp during both Reagan administrations.

____________________________________________________

 

[1] Maureen Dowd, “A Lost Civilization,” New York Times, 9 December 2012, page 11.

[2] John D. Mueller, Redeeming Economics: Rediscovering the Missing Element, ISI Books (2010), http://www.eppc.org/publications/bookID.67/book_detail.asp

[3] Smith, A. (1966 [1776], Smith, Wealth of Nations, IV.ii.9, http://www.econlib.org/library/Smith/smWN13.html#IV.2.9.

[4] John D. Mueller, “Dollars and Sense: Proven Principles of Fiscal Sanity,” The Family in America, Vol. 25 No. 1, 21-44 (Winter 2011); http://www.familyinamerica.org/index.php?doc_id=28&cat_id=13 and http://www.familyinamerica.org/files/FIA_Winter2011_Mueller.pdf

[5] Currently from about 2.4 to 1.9 children per couple.

[6] John D. Mueller, “How Abortion Has Weakened Social Security,” Family Policy, March-April 2000, http://www.eppc.org/docLib/20050216_Mueller5.pdf and http://www.eppc.org/publications/pubID.2267/pub_detail.asp

Comments are closed.



RELATED PUBLICATIONS