Business, Ballots and Bureaus

Business, Ballots and Bureaus is one variation of 'The Speech' given by Ronald Reagan during his time at General Electric and after. According to The Education of Ronald Reagan, he sent a copy to then Vice President Richard Nixon.

Nixon replied:

"You have done an excellent job of analyzing our present tax situation and the attitudes that have contributed it....Speeches such as yours should do much to cause solid thinking about the inherent dangers in this philosophy with the final result being a nationwide demand for reform."

The speech (most likely the Press Release edition) is available in Actor, Ideologue, Politician.


In view of the many misconceptions the public has about people in my profession, it probably seems presumptuous to some of you that I should address you on such a serious subject. We in Hollywood are well aware of the highly— colored views that our fellow citizens have about us.

Of course, we are largely responsible for this false picture of our industry and its people. Our stock-in-trade was "tinsel and make believe" and our public relations and business attitudes took on the same hues.

A few years ago we received some stem lessons in the eventual price of ignoring the business climate. We stood virtually alone and certainly misunderstood in a fight to preserve our industry from becoming another Soviet satellite. On orders of the Kremlin we were picked for infiltration. We met hard-core party organizers who attempted to take over our industry in order to subvert our screens to disseminate Communist propaganda. We won that battle and many of us today try to remain aware that it was only a battle—the war still goes on. This effort by the Communists, with its violence and bloodshed, was easily dramatized. Not so exciting, but just as menacing, was another invasion of our freedoms.

When the smoke had cleared, we became increasingly aware of the extent to which we were being harassed by our own government. Because we had never corrected the misconceptions about our people, had never really practiced good public relations, and had never paid any attention to our business climate. we found our part of the communications industry in this land of free speech subjected to political censorship by law in a fourth of our states and in more than two hundred cities. No election year passes but what we are investigated for something. Sometimes we manage a laugh as they approach our best comedy efforts. A few years ago a western senator proposed the establishment of a Congressional Committee to screen actors on the basis of their morals. Actors would be granted licenses if they passed the test; no license—no acting in pictures. We thought that one was pretty funny because at the time there were two U.S. Senators in jail and no actors.

Much has been said and written about the economic distress of the motion picture industry but little mention has been made of the pan played by our own government in this trouble. In 1948 a decision was handed down in the anti-trust action that had been brought against the industry and action that was called by one anti-trust authority in Washington "the government's greatest experiment in the vertical disintegration of an industry in the history of the Sherman Act." The result of that "experiment" in this last decade has been employment 43% of its 1948 level and a wage scale reduced from one of the highest to one of the lowest.

Just as we in Hollywood learned that our problem was a double, or two- pronged attack, responsible citizens have become aware that on the larger scene of the cold war, our country also faces a two-pronged attack. The threat of the bomb is terrifying and recognized by all. But the dangers our country faces are not all external. It is our responsibility to see that our freedom is not sacrificed from within—lost by default. Communism's greatest asset is ignorance of their tactics. strategy and objectives. For men in high office to remain in ignorance is irresponsibility ordering on treason, for the Communists have spelled out their warnings over and over again. Lenin, the interpreter of Marx, has said, "The way to destroy capitalism is to debauch the currency. Through a continuing process of inflation a government can quietly and unobservedly confiscate the wealth of its citizens."

In 1923 he further said, "... first we will take Eastern Europe, then we will organize the masses of Asia and finally the United States, the last bastion of capitalism, will be surrounded and we will not have to take it. It will fall into our outstretched hands like over-ripe fruit." Those who talk of trade with the Communist countries should be reminded that Lenin said that trade for them would be for political purposes.

More recently, in answer to a direct question from an American reporter as to the 15-year future of the cold war, Mr. Khrushchev said, "In 15 years there won't be a cold war. Your country is becoming so socialistic that in 15 years the causes for conflict between our two countries will have disappeared."

Can we dismiss such statements as mere bombast? Most of us can remember back when our main contact with the Federal government was to go to the Post Office and buy a stamp. Today there is hardly a phase of our daily living that doesn't feel the stultifying hand of government regulation and interference. We are faced with a collection of internal powers and bureaucratic institutions against which the individual citizen is absolutely powerless. This power, under whatever name or ideology, is the very essence of totalitarianism.

When we question how this has come about, we are told that it is we who have asked for and received each of our services from the government. But how many of the current government programs have resulted from the demands of the people? Isn't it true that government itself has dangled many programs before us with no mention of the ultimate cost or the loss in personal freedoms? In many cases the people in government were well-meaning. but aren't we justified in suspecting that there are those who have fostered the growth of government by deliberate intent and design?

In 1927 the Socialist Raushenbush, writing in the official socialist paper. the "New Leader," urged his fellow socialists to recognize they could not hope for a revolution in American. He therefore offered a new program for promoting socialism by increasing government control of business. He called his program "Encroaching Control." He urged socialists to place themselves in government positions and then promote government control of banks, railroads and other businesses and to start a program for government ownership of power. Eventually they were to work for political control and management of all key industries.

For an evaluation of Raushenbush's plan, perhaps we should heed the words, issued many years later of Norman Thomas, six-time candidate for President on the Socialist Party ticket.

Thomas said that the American people would never knowingly vote for socialism: but under the guise of liberalism. they would adopt every fragment of the socialist platform until one day America would be Socialist without knowing how it came about.

We must recognize that socialism through taxation may be slower, but it arrives at the same end as outright nationalization of industry.

No one, certainly, would dispute the paying of adequate compensation to our wounded veterans. We are all agreed they deserve the finest medical and hospital care we can provide. There was little objection in the depression years to a needy veteran suffering a non-service connected disability being given a bed in a V.A. hospital if the bed were not needed for a veteran with a service- connected disability. Today 3 out of 4 of the more than 160,000 beds in V.A. hospitals are occupied by veteran with injuries or diseases not originated by nor aggravated by military service. Indeed, there are only 40,000 hospitalized service-connected disabilities in the U.S. Congress is being urged to make all people collecting Social Security eligible for government paid medical and hospital care, a measure conservatively estimated to add billions to our yearly budget.

All of this is done in the name of real need and emergency, ignoring the fact that today 127,000,000 Americans have some form of medical and hospital private insurance.

Social Security was conceived to provide that destitution would not result from the death, or unemployment or old age of a worker. It was never intended to supplant private savings, pension plans or insurance, but was to provide a foundation upon which security could be achieved. The temptation to buy elections by urging people to vote themselves a raise was irresistible to many politicians. This year, many, many years before it was believed likely, Social Security payments will exceed Social Security income. In 1943 the actuarial experts (upon whose judgment the program policies are formed) predicted that Social Security "out-go" in 1957 would be $1.2 billion, but it actually came to $7 billion. It has been estimated that those citizens now collecting Social Security benefits will receive $65 billion more than they have paid in. Social Security officials now admit that Social Security dues are a tax for general government use and that the benefits are a welfare program.

The National Education Association has abandoned all pretense that the ultimate aim is not Federal control of the school system. Their program has naturally been labeled "emergency" and even bears a "defense" tag. Right now there are 500 colleges capable of taking 200,000 students without enlarging their facilities by so much as a chair. In the last decade, classroom space has been built for 15 million students while there has been only an increase of 10 million pupils. School spending at the traditional local level has increased 124 per cent to meet 135 percent increase in students.

Most of us agreed that a program of foreign aid was a good thing to strengthen our allies. An emergency 4-year $15 billion program was launched— but now it's 11 years later and more than $80 billion has been authorized. The original staff of 450 now numbers 12,000. The International Cooperation Administration, set up to handle the lending phase of the program, is now duplicated by seven other agencies and two more are awaiting approval by Congress.

We adopt a program to reduce farm surpluses and then make it so financially attractive to produce a surplus that we have $9 billion worth in storage. The government owns 17 1/2 million pounds of butter but can't use it and has to go into the market place to buy 500,000 pounds to feed our armed forces. The government has enough wheat to make 25 loaves of bread for every person in the world.

In New Mexico, citizens have rented land from the state for twenty-five cents an acre and then applied for and received nine-dollars an acre in soil bank payments for not planting anything on this land. When this was pointed out to the Department of Agriculture, they replied that it was perfectly legal.

None of the foregoing is to say that there is not a very real problem. However, it would seem that under the guise of solving the problem some people are more in furthering their own ideas that government should became the "big brother" to us all. No one openly says "Socialized Medicine," but counting the 23 million veterans, one out of four citizens today is entitled to government-paid medical care. Senator Byrd estimates that some 40 million Americans now received some form of cash payment from government.

The government owns and operates some 19,000 businesses (including 150 ice cream plants) at an annual cost of billions of dollars, according to a New York congressman. These businesses enjoy a tax-free status while they compete with privately-owned businesses in 47 different lines ranging from the manufacture of surgical equipment to rum distilleries, and from paint to fertilizer. The book value of 700 government corporations has been estimated at $262 billion. government-owned business accounts for 20 per cent of our total industrial capacity.

Some defend this practice on the grounds that central government can be more efficient and economical than either private business of local government. Taking the government-run insurance business (our government is the biggest insurer in the world) as an example, we find that in the claims department of the Veterans Administration insurance program that it takes three employees twice the time to perform the duties of one employee in a privately owned insurance company.

All of this has led to a permanent structure of government so complicated that some Congressmen admit Congress can no longer police governmental activities. They must accept the word of a department or bureau head as to his component's functions and budget needs.

A committee appointed by two administrations, both Democrat and Republican, under the chairmanship of Herbert Hoover, attempted to recommend some programs of fiscal sanity. They described their jobs as "a fantastic nightmare of working in regimented chaos." Their findings ranged from the absurdity of a government office setting out to buy 40 needed chairs and winding up with 1,055, to a government agency declaring as obsolete and selling $20 million worth of machinery while the same agency had orders in for the same amount of new equipment.

A subcommittee on Federal employment has reported back to Congress that there are almost 2-1/2 million employees. In 1942 there was one top salaried executive for every 89 government employees—today there is one for every 17. The committee further stated it found little evidence that any bureau or agency organized in answer to an emergency ever went out of existence, even alter the emergency disappeared.

About a year ago the President asked Congress to review 18 government agencies with a view toward eliminating them entirely or reducing their budgets. since they were no longer needed. Congress acted on only three, and the sum of their effort was to increase the budgets of all three.

A century ago the French philosopher De Tocqueville said: "Our democracy would last only until those in power learned they could perpetuate themselves through taxation." We have ignored the prophecy because obviously neither of our major parties has managed to hold uninterrupted sway. But perhaps we have been looking in the wrong direction. It's possible his prophecy refers to the staff of that permanent structure of government, the bureaus and agencies that go on, unchanged by elections.

Many agencies employ publicity men—at the taxpayers expense—to exert pressure on Congress in order to insure their own perpetuation. In this way they often have a greater effect on government policy than do the citizens for whom they work or for whom the program was intended.

The bulwark of our Democracy is the two party system, but it is meaningless if the policy is determined by bureaus rather than those chosen by ballot. Bureaus frozen into permanency by civil service regulation—bureaus beyond the reach of any ballot.

This has led to and is supported by an equally complex tax structure. Indirect and hidden taxes are levied on luxuries, and we are told that a citizen can thus choose to pay or not to pay. But once started, the pattern is of the "foot in the door" variety. Now we find more than 100 taxes on a simple loaf of bread. Taxes account for more than one-fourth of the cost of your automobile, one-third of our telephone bill and about half of your gas and oil. If sometimes your hotel bill seems a bit too high, consider the findings of a Western hotel association. They prorated their tax burden and found it amounted to $1.93 per day per room, whether the room was occupied or not. The government collects taxes on safety deposit boxes, billiard tables and bowling alleys, among other things, which actually cost more to collect than the government grosses in revenue. It is then explained that these are not for revenue but for regulatory purposes.

We have seen the income tax laws in our lifetime go from thirty-one words to more than four hundred and forty thousand words. These laws have become a gigantic hodgepodge of contradictions so complex that even the ordinary man in the street must get legal advice to help him compute his tax. In the higher brackets it represents a discrimination against individual effort and ability such as has never existed for any long period of time in any large scale civilized community. Nor is there any ratio between the penalty imposed on the individual and the government need for revenue. The total revenue from personal surtaxes is around $5-1/2 billion, and above the 50% bracket, from there through the confiscatory 91% ceiling, the government grosses less than 3/4 of 1 billion dollars.

This entire theory of progressive tax was spawned Karl Marx more than 100 years ago. He gave it as the necessary basis for a socialist state.

Karl Marx said that the way to impose statism on a people, socialism on a country, was to tax the middle class out of existence. Let me call to your attention that the steepest increase of surtax rates occurs through the middle income brackets where are to be found the bulk of our small businessmen, our professional men, our key executives, our skilled workers and many of our farmers. Thirty-four per cent at $8,000 of income, forty-three per cent at $12,000, and it reaches the fifty per cent mark at $16,000 of income.

We have subscribed to this philosophy on the basis that those best able to pay should relieve the modest wage earner of an unjust burden. But does it work entirely this way, or isn't it true that everyone pays taxes.

The average family income of America is around $6,000. Don't stop there. Go down to the man making $3,500 a year gross with a wife and two children. Compiling his direct and indirect taxes, out of the $3,500 gross income, $1,059 will be paid in total taxes in this country.

There are those who say the answer to this man's problem is to "soak the rich" even more. Well, let's see how much leeway we have in that direction. lf the Federal Government should confiscate all income over $6,000, the increased revenue wouldn't pay the interest on the national debt.

History tells us that no nation has ever survived a tax burden of one- third of its national income. Today, 31 cents out of every dollar earned in the United States goes to the tax collector. And of this, 23 cents goes to the Federal Government, leaving only eight cents for the state and local governments.

Some time ago I represented the Motion Picture Industry before the Ways and Means Committee, urging the adoption of a tax reform measure known as the Sadlak-Herlong Bill. This was an experience akin to going over Niagara Falls in a barrel, the hard way—upstream. In a month of hearings a virtual cross section of our citizenry appeared—small businessmen's associations, chambers of commerce, local, state and national manufacturers groups, teachers, farmers and labor unions—85% urged the passage of the Sadlak-Herlong Bill— l00% requested some kind of tax reform. Nothing happened! One Congressman told us the bill would never get out of committee because "it made too much sense—it cut across so many lines and benefited people so generally that Congress wasn't feeling any pressure from any particular groups."

Last November the Committee held new hearings. This time there were no volunteers. Witnesses were invited and a number of self-styled economists talked of tax reform which should close many loopholes. According to these "experts," the rich and people of high income were taking advantage of these "loopholes" to avoid paying their fair share of the tax.

You will hear a great deal more about these specific "loopholes" as the propaganda mills start grinding. Some of the loopholes tum out to be deductions of interest on mortgages and business loans, property tax, mineral and oil depletion allowances, and even state income taxes. Husbands and wives, it is recommended should no longer be allowed to split incomes for tax purposes, and charitable contributions should not be allowed at 100 per cent. It was also suggested that capital gains be taxed as straight income. The truth is that these "loopholes" are legitimate deductions without which the tax program would long since have proven unworkable.

It seems that the main idea, according to the Ways and Means Committee, is that any tax reform must not result in the government's losing one penny of its present income. This ignores the real reason for tax reform, namely, the part played by government spending and the tax bite in the inflationary spiral. It is no coincidence that in 1956 and 1957 we saw a sudden upsurge in the rate of inflation and that in the same period we saw a $10—l/2 billion increase in cash outlay to the people by the government.

The dollar today is worth roughly half of what it was in 1939. Thus we only have to earn 2 for l to maintain our 1939 purchasing power. But this ignores the extra dollars we must earn because we have moved through several different surtax brackets.

If a single man earned $5,000 a year in 1939, today he must earn $l4,000 to stay even and pay his increased surtax. A $10,000 a year man them must today be a $31,000 a year man and $12,000 of that will represent his increased income tax.

That individual who in 1939 had reached the $50,000 plateau, must earn $335,000 to have the same purchasing power, and of that amount $240,000 will be the increase in the government share.

Does anyone are to project this same rate of inflation and our tax rates a few years ahead and even pretend to believe that private enterprise can continue? By 1957 the $5:000 man in our first example will have to earn $33,000 and the $50,000 man will have to earn $835,000.

We've talked about our $265 billion debt so long we no longer really comprehend its staggering size. Perhaps we should turn back to primary arithmetic: "2 apples and 2 oranges" and get a visual picture of is. If I had a stack of $1,000 bills here 4 inches high, I'd be a millionaire. The National Debt would form a stack of $1,000 bills more than 18 miles high. Maurice Stans, Director of the Budget, says that this is only the visible part of the "iceberg." Including the pension and welfare payments the government is now obligated to pay, the National Debt IS actually $750 billion.

Those who sup at the public trough have always fared better in an atmosphere of crisis and emergency. In such times they can excuse extravagance on the grounds of defense needs. Is there sincerity beyond question? Since 1954 defense spending has decreased more than a billion dollars. While non-defense government expenditures have increased more than $10 billion.

To those who say that we are sacrificing a strong defense on the altar of a balanced budget, our answer should be, "Individual liberty, freedom and our free enterprise system are the prime sources of our strength." There can be little security any place in the free world if there is not economic stability within the United States.

Our free enterprise democracy is the greatest system ever evolved by man, but it is dependent on one controlling factor—the solvency of our government and the stability of our currency.

What to do? Edmund Burke once said, "For evil to triumph, it is only necessary for good men to do nothing."

Perhaps what we need is a new Declaration of independence. If this is the case, we will do well to keep the spirit and intent of one of the grievances of the original Declaration: "He (George III) has erected a multitude of new officers and has sent hither swarms of officers to harass our people and eat out their substance."

It is ironic that we must wage the fight against excessive spending by defending a staggering budget of $78 billion. Senator Byrd has said that this budget could be reduced to $65 billion without impairing a single government program. The big spenders are so entrenched, however, that we hear talk of a budget in excess of $80 billion and some have called for a $100 billion budget within five years!

When you are challenged that any budget cuts would mean the elimination of some government programs, don't be tempted into the trap of which programs should be kept and which ones should be dropped. Senator Byrd's $65 billion estimate was based on keeping all our present programs, but eliminating waste in their administration. When the budget for fiscal 1959 was discussed, we were in a recession, and it was apparent that the government's revenue would, as a result, be decreased. Some "old-fashioned" representatives on both sides of the aisle felt that government spending should stay within government income. To this end they proposed budget cuts, totaling $5-1/2 billion.

The Chairman of the Appropriations Committee said: "All of these cuts were in the area of useless fat and hadn't scratched a single muscle fiber of the government's programs." But deficit spending was more attractive to Congress politically than the obvious upsurge which would have followed tax reform and economy. So Congress indulged in what some of its own members call the "most profligate spending orgy in the history of our nation." They spent $13 billion more than the government received.

We must end deficit spending and reduce the fodder upon which government has fed and grown beyond the consent of the governed. Short-term negotiable bonds are as inflationary as greenbacks ground out on government printing presses. There are specific measures such as a tax reform measure now before the House Ways and Means Committee. Similar to the Sadlak-Herlong Bill, it is co-authored by Herlong, a Democrat, and Congressman Baker, a Republican. Their identical bills are House Resolutions 3000 and 3001.

This well thought-out reform measure would, in five years, bring income taxes down to a 15% base and a 47% ceiling on surtax in place of the present 91% ceiling. It is one of the most carefully worked out tax reform measures to appear in more than fifty years.

In this election year, perhaps we would be most effective, regardless of the party of our choice, in simply demanding an end to deficit spending. Is it wrong to ask our government to live within its income? If we can close this back door to the Treasury, we should then demand tax reform leading to a reduction in the government's revenue. If your son is too extravagant, you can lecture him all you please—but the most effective measure is to reduce his allowance.

We will be told we can't reduce taxes until we reduce government expenditures—this is dishonest! No government in history has ever voluntarily reduced itself in size. government doesn't tax to get the money it needs— government will always need the money it gets.

In this election year, we should demand to know where each candidate stands with regard to government economy and tax reform. Write to your Congressmen and Senators. Don't belittle the device of writing—40,000 letters, less than 100 to each Congressman, are considered evidence of a trend in Washington.

In the closing days of a recent session of Congress, 40 bills were proposed with a total cost over a five-year period of $365 billion. Three newspapers, one in the East, The Chicago Tribune and The Los Angeles Times printed asking readers to cut them out and mail them to their representatives urging government economy. None of the 40 bills were passed, and many Washington authorities give sole credit to the flood of mail received in behalf of economy.

Mankind has known but a few moments of freedom in its entire history. Most of these moments have been ours. But, this freedom is never more than one generation away from extinction. Can we honestly say ours is still unimpaired?

In Ohio, people of Amish faith, who have as a tenet of their religion that they cannot accept any pension or payment from government, had their possessions seized and their cattle sold at auction to force their payments of Social Security dues—even though they cannot accept Social Security pensions when they come due.

A Michigan farmer named Yankus has the dubious distinction of being the first American to leave these shores in search of freedom. Evetts Haley Jr., a former Texas University professor is fined $4,000 for raising wheat and feeding it to his own cattle. Upheld by a judge, the government appeals and the Supreme Court reverses the lower court's decision, ruling that an agency of the government has the right to tell an American farmer what he can raise on his own land and for his own use.

We are close to the point of no return! Close to the goal of socialism where we find ourselves so deeply committed to socialistic practices that we dare not face the upheaval of reversing our course. Close to the point where we unhappily and resignedly slide all the way into socialism rather than brave the storm.

In this land of ours occurred the only true revolution in man's history— the only revolution that did not just exchange one set of rulers for another. Ours was the only revolution that recognized man had the dignity and sacred right to determine his own destiny as an individual—with the least interference from government.

Ours has been called a generation having a rendezvous with destiny. We must meet the challenge now, or spend our later years telling our children and our children's children what it once was like when men were free.