Forgetting Reagan's lessons

By David Hogberg
web posted April 1998

Ronald Reagan once quipped that the government's approach to the economy was: "If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." Under Reagan, the country learned the value of low tax rates and deregulation, policies which, despite Clinton's attempts to raise taxes, are still with us and have contributed much to our present economic prosperity. Much of the United States, it seemed, had taken to heart the idea of limited government interference in the economy.

Until the first week in March.

The Washington intelligentsia signaled that excessive government meddling is back. First, Senate Majority Leader Trent Lott (R-Miss.) bolstered the nation's governors in their attempt to shove their revenue buckets under the Internet to milk that cash cow for all it's worth. The governors, you understand, have found in the Internet a way to vastly expand their tax bases. By century's end, sales conducted over the Internet may total $1 billion. Tax those transactions, and state coffers will overflow.

By giving nominal support to new taxes, Lott, along with the majority of governors, appears to have forgotten why his party, the Republicans, oppose taxes. Tax the Internet, and people will be less inclined to use it. They'll go back to the old way of ordering goods over long distances, like mail-order or telephone. People will have less use for the Internet and, as a consequence, will buy less Internet software, which won't do the software business any good. The only person who seems to remember that taxes are counterproductive is President Clinton, who remarked that, "There should be no special breaks for the Internet, but we can't allow unfair taxation to weigh it down and stunt development." (Thank you, Clinton, for finally acknowledging that taxes do stymie economic growth.)

While Lott was busy forgetting the benefits of lower taxes, others were busy forgetting the lessons of deregulation. The focus of their ignorance was Microsoft boss Bill Gates. In the last year, ferocious amounts of criticism have been heaped on Gates, making him the modern-day equivalent of a 19th century robber-baron. Gates has $40 billion, which is somehow unfair, and his corporation Microsoft is, supposedly, a monopoly -- a charge which has been given more credibility by the Justice Department's dubious anti-trust lawsuit against Microsoft. But just like the original robber-barons, the criticism isn't coming from consumers of Gates' software, but from his competitors, like Sun Microsystems and Netscape Communications.

So, to the applause of many liberals, the wise men and women of the Senate Judiciary Committee, Herb Kohl, Diane Feinstein, Pat Leahy and, of course, Ted Kennedy, hauled Gates before up to Capitol Hill for his requisite thrashing. Kohl decreed that it was "Un-American" for Gates to make a 24-percent profit on some of his products. Feinstein declared that Microsoft has "some calluses that have to be removed." Finally, Leahy hinted what this was really all about when he asked if software regulation might soon be needed.

No doubt liberals like Kennedy will team up with a self-styled "consumer advocate" like Ralph Nader -- neither of whom ever met a regulation he didn't like -- to propose more government intervention in the software industry. They will complain about Microsoft's practice of rushing software to market that is not completely free of bugs, which Microsoft remedies by offering free corrective programs via the Internet. Software consumers don't seem to be complaining much about this, but never mind. The liberal do-gooders know better than you what products you should buy. Soon we'll have all sorts of costly regulations on what types of software products can be brought to market.

Perhaps Kennedy and his ilk need a refresher course on what excessive regulation can do to an industry. They would do well to remember what the airline industry was like before Reagan came to office. It was heavily regulated, with bureaucrats even putting price controls on what the industry could charge for plane tickets. This stifled competition among the various companies, keeping prices artificially high. After the industry was deregulated, competition between airline companies ensued. The result was lower ticket prices, and improved services and safety.

Politicians would do best to leave the Internet and the software industry alone. Taxes and regulations only bring inefficiency to competitive, highly productive enterprises. But too many in Washington seem to have forgotten that lesson.

David Hogberg writes a weekly column for the Daily Iowan.

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