About the Speech
Topic: The Clinton Administration & The National Economy: A Mid-term Assessment
On Thursday, November 10, Nobel Laureate Dr. James Buchanan addressed a standing room only audience of UTC students and faculty as part of the Burkett Miller Lecture Series. He assessed the Clinton Administration’s economic policy and answered audience questions demonstrating a vast understanding of political economy and, yes, humor.
Buchanan stated that, at the time of Clinton’s successful campaign, the nation had gone through a recession. Instead of a speedy recovery from that recession, as might have been predicted, the recovery was sluggish. The Federal Reserve Board had not supplied sufficient liquidity to allow the economy to grow. The Federal Reserve did not understand that the massive bailout of the failed federal savings and loan associations had put a dampening, downward pressure on the supply of money and credit.
Buchanan feels that the Clinton Administration does deserve some credit for undertaking legislation that reduced the rate of increase in the deficit. Still, it imposed in the process punitive taxes on higher income groups in rhetoric of class warfare. In the process it destroyed the 1986 tax reform legislation. Buchanan feels the 1986 Tax Act was miraculous because it was a movement toward much more generality and much more fairness in the tax structure. In that sense, the 1986 tax legislation has been torn to shreds by politicians trying to increase tax rates and trying to sell the loopholes again for personal and political gain.
Buchanan also questioned why the economy mattered in 1992, yet did not matter in 1994. He suggested that Bill Clinton did not realize when his own campaign was over and that the president had absolutely no interest in anything public then recognized this as an attempt to shift the country considerably to the left. The public response to this was perhaps best exemplified with regard to health care legislation when the people reacted very negatively.
Another aspect of the Clinton Policy which bothered Buchanan was Japan bashing with the notion that somehow we ought to balance trade with every particular country. He feels this attitude shows a total failure to understand straight forward gains from free trade arguments. Buchanan indicated his support for a balanced budget amendment and stated that he believes one might be passed in the forthcoming Congress. It was once considered a sin for politicians to create deficits in periods other than war or grave emergency. Then came Keynesian economics saying that it is perfectly all right to create budget deficits. The natural response to this was for politicians to increase spending but not to increase taxes. Buchanan feels that passing a balanced budget amendment would have a very important effect in building confidence in our political economy.
Dr. Buchanan also lamented that we have destroyed the 1986 legislation which generalized the tax code. He believes that if any individual is removed from an obligation to pay taxes, and yet that person gets benefits from a government program, that person is always going to support an expansion of the government. A far superior situation would be to have everybody paying some tax and recognizing that there is some burden that comes back to the individual for any program. Taxes should be made more general on the spending side as well. This is, if you are going to spend for a program then everybody ought to benefit as generally as possible from it.
In concluding, Buchanan commented that he thinks voters want a genuine regime change. In many cases this takes the form of privatization. Also, we need to try to restore a genuine federalist structure. We need to make Tennessee, Tennessee. The voters want it. But he questions, do we have too much hardening of the arteries in our political institutions that these things may not be able to be accomplished?