A Transitional Presidency Jude Wanniski January 12, 1993

Executive Summary: From his performance since election day, in statements and appointments, President-elect Clinton has increased our confidence that the next four years may well be sufficiently satisfying to warrant his re-election. It is very unlikely, though, that the next four years will see the kind of fundamental reforms required to close the deficit that exists between the aspirations and potential of the people and the country's performance – a chord that Ross Perot, at least initially, seemed to strike. Lacking a plurality of the vote and carrying a mandate of limited objectives, Clinton does not have to act dramatically in his first hundred days. He should proceed as he has so far, methodically, to make sure what he does in small ways will succeed in expanding the economy, and at least begin to close the financial deficit. In this paper, we include observations on the connections between economic interests and cultural values that seem to be shaping the ongoing national political debate – tracing especially the role of religion at the toots of the American experience. Radical tax simplification is the only potential solution to the financial and cultural deficits, but it will have to await smaller steps during the next four years and a fresh mandate for Clinton or his successor in 1996.

A Transitional Presidency

As we contemplate the arrival of the first Democratic administration in twelve years, and the way Bill Clinton has been going about arranging it, it appears to us as fairly non-partisan observers that he will not be able to achieve in the next four years much that the nation requires for renewal. For all the talk of "change" in the presidential campaign, we are now seeing expectations broadly lowered to a government that will make "adjustments." This is not to say that the Clinton Administration will be unsuccessful or that we can dismiss a second term. Quite the contrary. The steady drift of the President-elect toward a modest growth agenda since his election, both in his appointments and in his casual policy statements, indicates that the next four years may well be sufficiently satisfying to the American people to warrant re-election for Mr. Clinton. He then may be in a position to seek a broader mandate in 1996 than he did this year. This view of a transition presidency is based on the assumption, expressed in my essay of last spring, "A Perot Presidency," (June 11, 1992), that with the end of the Cold War, the American electorate desires sweeping, fundamental reforms of our government, not simply incremental adjustments. The incoming administration, elected without a plurality of the popular vote on behalf of an agenda of limited objectives, can only provide a transition toward those reforms.

Mr. Clinton can, of course, interpret his mandate any way he wishes, but he cannot realistically expect to get very far with ideas that were not sounded out in the campaign. The narrow mandate he sought, and was granted, was to get the economy moving in a way that would reduce the federal deficit. Within that framework, he also promised a health care reform that would, by making the current system more efficient, extend health care delivery to those who have only limited access to the system, at no extra cost to the taxpayer. If he were to set the economy on a growth track that would both chip away at the unemployment rate and the deficit in a meaningful way, he would be a long way toward a second term, even if his policy initiatives in other areas get tangled up in Congress. Anxiety about health insurance, for example, declines rapidly as the economy expands and employment rises. He must not interpret this mandate too narrowly, though; when the American people express concern about the "deficit," they are thinking not of the federal government's revenue shortfall, but of the widening gap between their aspirations and their presentiments about the future.

This kind of incremental governance, as welcome as it might be in its positive direction, merely amounts to successful tinkering around the edges of our national problems. It is an inescapable fact that while the Cold War is over, it has left the country and the world in a mess -- the kind of mess one expects to find at the end of long and difficult struggles. When the national imperative is victory in war, government is excused for performing poorly on objectives the people put first in peacetime. Through several wars, inflations and economic depressions, and the struggle against global communism, seventy-five years' worth of error has crept into the American system. It now requires 780,000 lawyers -- the fourth largest standing army in the world --to mediate the frictions within society that these cumulative errors represent.

A conventional wisdom has been promoted by the Establishment that the Perot phenomenon of last spring simply reflected a grass-roots desire to do something about the deficit. Elite opinion leaders who dominate the two political parties speak as if masses of ordinary Americans, a great many of them politically inactive for decades, spontaneously roused themselves to the Establishment's call for national sacrifice --by which elite opinion means, at the very least, a 50-cent per gallon gasoline tax. It would be more accurate to say that the electorate has become alarmed at the gap that has opened up between the country's performance and its potential. It is the ruling class that is to blame for this deficit, which should not be measured solely in dollars. Peter Steinfels, who writes on religion for The New York Times, put it extremely well in the issue of December 27:

In Washington and Little Rock, as on the campaign trail earlier, the talk has mainly been about economic recovery, productivity, the deficit, investment and international competition. But churning below the surface of these often technical discussions is a larger unease about social decline, and in particular an anxiety about the next generation of Americans.

For many people, the country's economic difficulties are a sign that its seedbed institutions, the families, schools and religious bodies that nurture character, competence, trust and civic responsibility, are coming unraveled....

Is the nation bequeathing that next generation a formidable accumulation of problems while denying the young the capacity to shoulder the burden? Has a society that always prided itself on youth and the future in fact slighted or stunted the upbringing of its children?....

In crime-ridden neighborhoods no less than in war-torn or famine-struck lands, children are the most haunting victims. But increasingly, children and teen-agers also provide images of brutal behavior, wasted lives and social disarray: drug dealers, crack babies, drive-by shootings, dropouts, predatory sex. Adolescent music is as likely to be about rioting and racial clashes as about romance, and not even sophisticated newspapers would print many of the sexual lyrics.

What is it going to take to close this cultural deficit in American society? Certainly not anything now being discussed insofar as economic policy is concerned. Certainly not a big gasoline tax, more deficit spending on infrastructure, investment tax credits, or free-trade agreements. These marginal policy adjustments could at best slow the sense of national decline that has preoccupied us for the last thirty years, with the presidency of Ronald Reagan the only one of seven during that stretch that could be counted a popular success, the only one that spanned the traditional two terms. At the moment, the posture of the Republican Party can best be described as supine. Bitter in defeat, the party leadership and much of its intellectual cadre seem to have retreated to the defensive, self-pitying position that the voters chose incorrectly. In Congress, they are arranging to confront at the margin, pushing incremental conservative alternatives in the tinkering process that is underway --on taxes, spending, health care, defense and the environment. At this pace, both the financial and cultural deficits will still be with us at the dawn of the 22nd century. Almost daily, we are greeted with fresh press reports of the "same old, same-old-inertia." The lead story of The New York Times of January 3 advised: "Growing U.S. Debt Is Limiting Options Open for Clinton." On January 5, the paper's lead story offered "Health Care Costs Up Sharply Again, Posing New Threat." We can almost hear the gears grinding as the governing elites lower expectations.

When there is gridlock on economics, the debate inevitably shifts to social policy, where the gulf between the religious right and the secular humanists on the left widens with the national economic decline. "All social problems arise out of conflicts of interest," the great Chicago economist Frank Knight wrote in the preface to the 1957 reprint of his pathbreaking 1921 book on entrepreneurial economics, Risk, Uncertainty and Profit: The task of the practical political economist, of government itself, is to weigh the cost of intervention in attempting to resolve those conflicts, hoping the general good will exceed the loss of freedom of the interests involved. As Knight put it:

There must be agreement on policies in detail, hence compulsion in so far as unanimity is not reached "freely" through discussion with equal participation. An intelligent believer in freedom will carefully compare the inevitable sacrifice of that good with any gain from group action -- after making reasonably sure the gain will result.

Within this limitation, social policy is clearly inadequate in the current circumstance. It may be possible to find a general net gain that offsets the loss in what is inherently a zero-sum struggle, which is what a conflict of interest is all about. But in a declining economy, conflicts multiply faster than they can be resolved through judicious weighing of costs and benefits by intelligent believers in freedom. The ethnic, religious and racial tensions that are now straining the national fabric are not going to be improved at the political level by either bully-pulpit exhortation or by social legislation. Private mediation, which has traditionally turned to the churches in this process, is itself limited by the assaults against the church --by those who do not wish independent "moral guidelines" to be used by the state in resolving conflicts between competing interests.

In a remarkable Christmas Eve column, Editor Robert L. Hartley of The Wall Street Journal commented on the weakness of religion as an aspect of the national decline. The column is especially remarkable in that Hartley is not a religious man, but rather a self-confessed member, "for better or worse," of the intellectual elite:

As we gather in the year of our Lord 1992 to celebrate the most famous holiday of our long-dominant religious faith, the very idea of religion finds itself under siege.

The word of God, by decree of nine old men, dare not be heard in the nation's schools. The creche cannot be erected on public property; for the first time since the conversion of Constantine, the state has outlawed the display of Christian symbols. Meanwhile, schools distribute condoms, even over the objections of parents. And enlightened opinion cries "freedom of speech" when anyone objects to public subsidies for a display of lustrous photographs of homosexual sadomasochism.

In politics, the religious right, far from taking over the Republic, is being anathematized....[It] has been disruptive, as all rising political forces are. Yet we should remember that the first impulse of evangelicals is to live not for this world but for the next. Politics was forced upon them by the Supreme Court's judicial pre-emption on abortion and prayer, and in reaction to the constant bombardments of the entertainment media.

The point Bartley is clearly making to the intellectual elites to his left, who are immune to arguments that rest on faith, is that whether or not they believe in God, it's useful for them to have religious institutions around to instruct the propertyless class on the sanctity of private property. It is, we recognize, a dressy version of Karl Marx's argument that religion is the opiate of the masses. Bartley concludes his column thusly:

Christianity has instructed us on moral issues for two millenniums, and Judaism longer still. With or without personal faith, we have been living off this capital; our social pathologies mean it is being rapidly depleted. Rather than denigrating Christianity and religion in general, socially conscious elites ought to be asking what the religious impulse can teach us, and how amid the winds of modernity we might start to replenish the stock of moral guidance it bequeathed us.

The appeal is eloquent, but ultimately fruitless, I think. The socially conscious elites, at least as far back as the Enlightenment, have viewed organized religion as just another special interest, out of which conflicts and social problems arise. A state that must use coercion to enforce a social policy that benefits the elites at the expense of the masses cannot have churches getting in the way. In Europe, the answer was to weld church and state together, with one or two approved churches appended to the Establishment. In political revolutions led by intellectual elites, as in Moscow in October 1917 and in Mexico, church and state were pitched out together. The Utopian state, designed by men of reason and logic and selflessness, would have a monopoly on moral guidance.

In his Christmas Eve column, Bartley does mention in passing that "America remains a remarkably God­fearing nation," despite the fact that our Constitution was designed by Founding Fathers whose outlook on religion was similar to his. They are "perhaps best described not as Christian but as Deist," believing in a Supreme Being who jump-started Creation, but now leaves it alone to fend for itself. In a recent poll, 24% of Britons and 27% of Germans picked this statement as the one best describing their belief: "I know God exists and I have no doubt about it." In the U.S., 63% chose the statement.

We get the explanation in an equally remarkable interview that also appeared over the holidays, in the January issue of American Heritage. The interview is with historian Gordon Wood, whose new book, The Radicalism of the American Revolution, argues that ours was the most radical of all the revolutions of past centuries because it did not replace one elite with another. For the first time ever, ordinary people where elevated into political dominance, and they brought their religiosity with them. The faith of common people is not an index of their mental backwardness, contrary to the smug assumption of the Enlightenment. On the contrary, the notion of the republic (from St. Augustine's res publica) derives from Christianity in the first place, from the notion that the divine qualities of every human individual make possible a public entity greater than the whims of autocrats. What Bartley calls the "religious impulse" teaches us humility before anything else: The Einsteins and Edisons are chosen by God, and no human agency can predetermine which family will give life to the next great genius. Elites are comfortable with their social position and confident of the exercise of their own powers, and prone to "play God" by way of social engineering. To the extent that members of the elite confess a personal faith, it is attenuated by pride. Common people, on the contrary, live on their aspirations, and it is Judeo-Christian doctrine which teaches them that they have as much right to hope for the future of their children as do the privileged. We might rather consider that religion is the consolation of the masses, not because it stupefies them, but because it offers the most profound vindication of social mobility.

The predominantly Deist Founding Fathers [let us say Hamilton, Madison and Jay] did not intend this rise to dominance of the common man, Wood argues. Jefferson was typical in believing that the kind of democracy he helped arrange would keep an intellectual, propertied aristocracy in control, that secularism would remain in ascendance, and that, eventually, every person alive would die a Unitarian, like him. Yet the authors of the Constitution nevertheless invented a more hospitable environment for religion than had any previous group of political thinkers in all of history. In societies that embrace a state religion, it is difficult to oppose political oppression without rejecting the religion used to mask it. European nationalists during the 19th and 20th centuries were anti-clerical virtually without exception. Rather than paraphrase Wood, I think it important to present his insights in his own words:

Q. And we're still the most religious of the industrial societies.
Wood: I think that's because we are a society in which ordinary people continue to dominate the culture to a greater extent than in the societies of Western Europe. Our religiosity is a function of the democratic cast of our culture, which is, of course, the source of our vulgarity, our materialism, and all the other things that lots of people don't like about America....
Q. You talk about America as the first commercial society, a political order sustained by the new idea that men's calculations of their own economic interest constitute the sole social bond.
Wood: That's why I think our revolution was so radical. Obviously commerce had existed from the beginning of history, and so one gets into all kinds of arguments with people who will say, "Well, look, there was commerce already." But a commercial society doesn't mean merely one in which commerce occurs. In the North -- the South remained closer to the eighteenth century, and I think this helps explain the sectional split ™ you have a society that increasingly comes to regard the business of America as business, buying and selling, with exchange for monetary gain as the basic adhesive of society.

Blood, kinship, and patronage meant little. Cash was the nexus in what soon became a materialistic capitalist society. "That can be seen pejoratively, or it can be seen in another way, as a sign of equality," says Wood. "In the context of the old order the cash nexus was regarded as an egalitarian achievement, as a better way to connect people than through blood or patronage, who your father was or whom you married."

Q. Didn't the successive waves of American populism have a strong and recurring hostility to concentrations of wealth -- take the New Deal term economic royalists , for instance?
Wood: Sure. But what's extraordinary is the extent to which Americans have put up with and continue to put up with great disparities of wealth as long as they see the wealth as achieved. There's very little resentment of rich ballplayers and rock stars.... [In the 1820s and 1830s] Americans then clearly accepted -- at least for a while — unprecedented disparities of wealth, disparities far greater than those of the 18th century, and nonetheless called their era the age of equality. This has led some historians to think that the first post-revolutionary generations misunderstood their own culture, that theirs was the age of the uncommon man, not the common man. I think the historians are wrong and the contemporaries were right when they called it the age of the common man, because differences of wealth are the least mortifying and least humiliating of the various ways in which people on top have made those on the bottom feel their inferiority. If you think about it a bit, that's true even today; if you're told that the reason you're inferior is your race or your bloodline or your father's ethnicity, that's not something you can do anything about. But if you're told that you're inferior because you haven't got as much money as someone else, that's something that you can theoretically do something about. To have wealth become the only source of distinction is to place only a weak social barrier between classes. That gave a lot of encouragement to a lot of ambitious people.

*****

It sounds pretty good, doesn't it? A fluid, open society where people at the bottom can get to the top rapidly, depending upon their ambition and performance, and vice versa. The people would be indifferent to disparities in incomes because they would clearly be related to ambition and performance. It strikes me that this is exactly what the ordinary people of the United States would like to see from their government. It is, I think, what they saw that attracted them to Ross Perot at the very beginning of his awkward romance with the electorate. Perot was in fact embraced by the ordinary people and propelled into the presidential race because they saw there was no chance otherwise of getting the reforms that are necessary to close the deficit between the country's performance and its potential. Perot's message, before it became garbled by the professionals he hired, was clearly a populist one, promising a dramatic increase in the political influence of the common man. It promised to short-circuit the established elites who have carved the pie of governance to suit their own interests. Perot's idea of "electronic town halls" by which ordinary people would regain control of the national legislative process was the most frightening to the established elites. It foreshadowed a national initiative and referendum mechanism that would forever inhibit the ability of both the liberal and conservative elite to limit the fluidity of American society, to keep ordinary people in their place as much as possible.

The Ruling Class that dominates both political parties assures us, of course, that it is not possible to return to these good old days of laissez faire entrepreneurial capitalism. This is a modern world, we are told, unsuited to the social mobility and religiosity that characterized 19th century American life. This modern world is more suited to "managed competition," anathematized religion, crack babies, free condoms, "structural unemployment," a "floating currency," 14,000 pages of tax codes, and 780,000 lawyers.

The electorate, I think, knows this is not the way it should be or the way it has to be. The Cold War is over and now the mess at home has to be cleaned up. The ordinary people know they have the power to produce the kind of change that will in fact restore the kind of arrangements and values that characterized the 19th century. We still have the Constitution the Founding Fathers devised, which provides sufficient democracy to empower the common man. Ordinary Americans felt their power in electing Ronald Reagan, one of their own, a subject of ridicule to the intellectual and commercial elites. They felt their power in pitching out George Bush for having been so casual about his mandate. They especially felt their power in scaring the daylights out of the Establishment with Ross Perot. The voters know they are not that far away from pay dirt in the muck of Establishment politics. It will not be today, but perhaps four years from now, or eight. The Ruling Class now knows this is true. It will do what it can to forestall it. But 1992 demonstrated the energy and insistence of the people in a way that will hang like a sword over the White House and Capitol Hill. If President Clinton is shrewd enough to understand the direction the electorate has in mind, he will be able to use the threat of this sword to make this transitional term a successful one.

I quote again from Frank Knight, who explicitly presented his 1921 book as "a fuller and more careful examination of the role of the entrepreneur or enterpriser, the recognized 'central figure' of the system, and of the forces which fix the remuneration of his special function." He later wrote, in assessing the role of government in the political economy: "The beginning is in taxation, to support the minimum activities of government, whatever they are held to be."

If the Clinton Administration is to be successful even in transition, it will have to deal with this very question: the remuneration of the central figure in the economic system, the entrepreneur, insofar as it is affected by taxation. This, of course, brings us to the capital gains tax. The Clinton Administration can only be successful if it increases the remuneration of the entrepreneur by reducing the tax on capital gains, either by the rate itself, or by protecting entrepreneurial capital from the tax of inflation through indexation. As Knight demonstrated in his classic text, the entrepreneur's remuneration --as opposed to the banker's or rentier's -- results from the fact that he takes uninsurable risks. Our modern "enlightened" macroeconomists have devised models which assume that individuals avoid risks and that all risks are insurable. In its extreme form, this mathematical arrogance takes the form of "scientific socialism," and in a less extreme form, mere "industrial policy."

It is because human knowledge is uncertain, unable to predict which long-haired kid in blue jeans will invent a better microchip, that we should give maximum latitude to those who assume uninsurable risks. That is why we argue there should be no tax on capital gains at all. I am confident that President-elect Clinton will alleviate this egregious mistake in the tax code, to one degree or another. Clinton supports the idea of indexing capital gains tax in principle because his key economic advisors do as well, there is no theoretical opposition to indexation among his academic advisors, and he has no other realistic options.

This change will only get us a step or two, though, in the direction the American people have in mind. Ross Perot, before he became entangled in the budget- balancing act that his advisors told him that he had to produce, had introduced the idea of designing a new tax system from scratch. This is precisely the kind of fundamental reform the country must have, to produce the economic growth required to close the financial deficits, and to produce the fluid society required to close the cultural deficit. California's Jerry Brown, in his campaign for the Democratic nomination last year, advanced the idea of a simple "flat tax," an idea which carried him to a primary victory over Clinton in Connecticut, but was dropped from discussion thereafter when Brown lost in New York. This kind of radical tax reform will be back in 1996, we can be absolutely sure, as the growth wing of the GOP will try to reclaim the tax/growth issue fumbled away by President Bush. The Clinton people and the Democrats in Congress know in advance that they will have to decide whether they will co-opt the issue or contest it. The New York Times, which has editorially embraced the flat-tax concept, will push in that direction, while arguing against a differential on capital gains.

Tax simplification is also the only real answer to the crisis in health care, as organized labor will soon begin to realize. As with so much else that is wrong with the country, the costly and cumbersome health-care delivery system is the victim of the last quarter century of failed macroeconomic policy -- which produced an income tax swollen by inflation. The dollar inflation was not all bad, in that it hastened the collapse of the Soviet economy, which brought an end to the Cold War. One of its many bad consequences at home, though, was to force management and labor to economize on taxes by shifting the purchase of health care from the individual to the corporation. This is because individuals have to purchase health care with after-tax income and corporations can purchase it with pre-tax income. Prior to the inflation, almost all working Americans were in tax brackets so low that they preferred to take the cash from their employers and shop for their own doctors and medical insurance. With the bracket creep that accelerated when the dollar was unhinged from gold and floated in 1971, individuals essentially abandoned the marketplace for health care, and were replaced by their employers. The crucial market connection between buyer and seller was broken with this intermediation. Health costs climbed above the inflation rate as individuals were no longer shopping and economizing, but demanding as much health care as their employment plans permitted. The retired elderly, unable to shift health purchases to employers, were forced to pay rising costs with savings already taxed and now depleted by inflation. They demanded relief from government and got it through Medicare, thus removing themselves from the marketplace as well. The unemployed, which had previously met health costs through savings and borrowing from family and friends, also showed up at the government's doorstep, and got Medicaid.

Having driven virtually all individual buyers of health care out of the market, government is now poised to take their employers out of the market, with the argument that even fewer shoppers for health care will result in lower prices. This is the "managed competition" plan which Governor Clinton promised during the campaign, whereby individuals, businesses and governments pool their health care purchasing power in new entities that will do the buying for all, shopping for "highest quality and lowest cost." The business elites can't wait to unload their health care burdens in this fashion and are chiefly responsible for pushing government in this direction. The net result, of course, will be that employees will no longer have to worry about burdening their employers with health-care demands, adding that much more pressure to supply and cost. Anticipating this addition to the price spiral, President-elect Clinton has now agreed it may be necessary to limit the tax deductibility of business health insurance costs.

What goes around comes around, as they say. Organized labor is now suddenly horrified to read of this new twist. Having shifted health care costs to their employers because their employers can pay with pre-tax dollars, they now learn the employers will have this exemption limited. Labor is quick to understand that employers will now shift back these costs to their employees, as someone has to pay them with after-tax dollars. The situation will be untenable. The next and final stage would see the intellectual elites argue that the only thing that will contain spiraling costs will be if there were only one purchaser of health care, the federal government. Of course, the government will only be able to contain its costs by rationing service.

Tax simplification is the only way to reverse this drift, by putting more shoppers in the market, not fewer. If workers were once again in a position where they could buy health care with lightly-taxed dollars, they would begin to take back the less efficient burden of purchase from their employers, preferring the cash and the ability to shop and economize themselves.

Even more importantly, a fundamental, sweeping tax reform is the key to rapid and real economic growth, not merely an expansion of GNP that is accomplished by adding higher costs of lawyers, accountants and health-care bureaucrats. In his Detroit Economic Club speech last fall, President Bush said the nation should aim at doubling the size of the economy by the early years of the new century. This is an idea that we, with Jack Kemp, had been urging because it would put into proper perspective the controversy over the federal deficit and domestic spending, such as in health care. With a $10 trillion economy, in 1992 dollars, there would be ample resources to finance the retirement of the baby boomers and provide quality health care, through a combination of public and private purchase. Despite the distortions which contribute to higher health-care costs -- lack of competition, excessive paperwork, excessive malpractice awards --we should expect that they would rise faster than other items. In a wealthy society, on what will people spend money? A generation ago, elderly kidney patients, premature babies, the majority of cancer patients, and many others were written off by the medical profession which had no means to treat them. The fact that we put old people on dialysis, save premature infants, and often beat cancer shows how much we value individual human life. Medical care at the margin, though, is far more expensive than "average" treatment, just as ordering a la carte at a restaurant costs more than ordering prix fixe.

At the moment, though, a fundamental cleaning up of the mess is far from the center of discussion among the key members of the Clinton economic team. As the team studies pieces of the problems of government finance, solutions that seemed pat during the campaign now confront the realities of practical application. As the team assembles to "narrow the options," throwing out policy initiatives that now seem unrealistic, they are already finding themselves drifting back into the gridlock that immobilized the Bush Administration. The fact that the Democrats control both the White House and Congress does not at all mean that Clinton initiatives can be swiftly enacted. The permanent government of bureaucratic professionals in every department and agency stands as a barrier to half-baked ideas. The regional and ideological differences that divide congressional Democrats into several parts are also limitations to the usual dizzy ideas the liberal ideologues have been collecting for a dozen years, waiting for this moment. The coalition of the GOP and conservative Democrats that thrived in the Carter years, we should recall, actually pushed through a halving of the capital gains tax over the objections of the White House! Finally, we have also been encouraged by Bill Clinton's tendency to employ logic in exploring policy problems and the myriad "solutions" being urged upon him from all directions.

The strength on Wall Street, especially in the broad market of smaller capitalization equities, indicates investors are heartened as well, seeing opportunities in this fresh approach to gridlock. This does not now look as if it is going to be a Robin Hood administration, but rather one that is determined to bring about change -- but also one determined not to make any big mistakes. The Democrats know that the electorate is giving them one more chance to govern, and if they screw it up, it could be a long time before they are trusted again. They would do well to follow Frank Knight's dictum as they reduce the freedoms of some of us in a search for a greater good: "An intelligent believer in freedom will carefully compare the inevitable sacrifice of that good with any gain from group action -- after making reasonably sure the gain will result."

It is usually the case throughout American history that a two-term President achieves the greater success in his first, and the second is a disappointment. If Bill Clinton is careful and methodical, going slowly, but getting the direction right after making reasonably sure the gains he's promised will result, the country would rally with enthusiasm behind him for greater efforts later on. If there are reasonable achievements in the next two years, he would of course be able to expand his mandate in the congressional elections of 1994. Someone is going to do the big things the American people crave to close the deficit in their dream. It might as well be our 42nd President, not the next.