by Jacquelyn Horkan, Editor
April 2002

Abraham Who?

Arecent survey of college seniors, sponsored by the American Council of Trustees and Alumni (ACTA), revealed that a mere 22 percent connected the phrase “government of the people, by the people, and for the people” with the Gettysburg Address.

How can it be possible that 16 years of instruction has left them unable to answer such a no-brainer of a question? Perhaps the answer can be found in the benighted beliefs of their professors, the “impresarios of the tenured left” as they are so deliciously dubbed in a Wall Street Journal editorial.

The survey was undertaken as part of a study entitled Losing America’s Memory, which found that only three of the nation’s top 55 schools required students to take a course in Western civilization; none required a course in American history. Other schools play at the idea of a history requirement, a standard rendered bogus by its application. At some of the schools, for example, a grade of C or better in a high-school history class is enough to meet the requirement. At others, such courses as “Environmental Policy and Politics” (MIT) or “No Body’s Perfect” ( University of California at Berkeley ) satisfy the requirement.

Why should this historical illiteracy trouble us? At the very least, a study of our history and civilization helps us understand just what we’re so willing to defend that we’re putting the lives of our soldiers, sailors, airmen, and Marines at risk in Afghanistan. At the very least, students at the nation’s elite universities, who expect to assume the mantel of national leadership, should understand why we do things the way we do.

There is good news, however. College students may be uneducated, but at least they’re endowed with more common sense than their professors, who drift through an academic miasma in which America is a repressive bully and Western civilization plays meanie to those struggling in the Third World . While the professors urge us to feel sympathy for the terrorists, the students have, in large part, given a ringing endorsement to the War on Terror.

ACTA is a Washington, D.C.-based nonprofit organization created to promote the ideals of academic freedom, quality, and accountability. To the good fortune of future students at Florida ’s public colleges, the group was chosen by Gov. Jeb Bush to train the 145 new college and university trustees appointed under Florida ’s groundbreaking reorganization of the state’s education system.

Guided by ACTA’s principles, perhaps Florida colleges will manage to produce graduates capable not only of recognizing the name Thomas Jefferson, but of understanding the wisdom of his words: “If a nation expects to be ignorant and free, it expects what never was and never will be.”

 

Bursting The Bubble of the Bubble Theory

Conventional economic wisdom has settled on overvaluation of technology stocks as the explanation for the current woes of the stock market.

A recent study by Jonathan Walker, an economist with the Federal Reserve Bank of New York , pokes a series of holes in that theory.

Capital investments by businesses accounted for only a small portion of U.S. GDP, but it was the engine driving the growth in our national income during the last half of the 1990s. Walker effectively refutes the idea that speculation in the high-tech stocks drove their prices to unsustainable levels, creating a bubble that had no choice but to burst.

Instead, the Federal Reserve economist discovered that virtually all segments of capital spending -- from computers to aircraft to industrial and construction equipment -- have dropped precipitously since the middle of 2000. The boom was concentrated in high-tech but the slowdown has been broad-based; thus, our current troubles cannot exclusively be blamed on irrationally exuberant high-tech investors and CEOs.

But if not them, who? While Walker fails to identify an alternative culprit, Larry Kudlow, economics editor of National Review Online Financial (http://www.nationalreview.com/welcome-financial.asp) is not so reticent.

Kudlow blames the Federal Reserve, Walker ’s employer, for the economic downturn. The Fed misread the economy and applied a remedy suitable for inflationary times (i.e., raising interest rates and squeezing money supply) to a market that was more threatened by deflation. Recently the Fed has begun pumping more money into the system while lowering the interest-rate target, finally dosing the economy with the medicine it needed last year.

The rest of the heavy lifting needs to be done by Congress and the president, according to Kudlow, in the form of tax-code revisions that will help boost business investment.

 

Still Right After All These Years

Someone once said that every form of government has one characteristic peculiar to it and if that characteristic is lost the government will fall. In a monarchy, it is affection and respect for the royal family. If that is lost, the monarch is lost. In a dictatorship, it is fear. If the people stop fearing the dictator he’ll lose power. In a representative government such as ours, it is virtue. If virtue goes the government is lost.” Ronald Reagan in a 1979 radio broadcast, reprinted in Reagan in His Own Hand, edited by Kiron K. Skinner, Annelise Anderson, and Martin Anderson.

 

George Harrison, R.I.P.

Okay, maybe he was a just a singer, the fabulous axman for the Fab Four, and not particularly recognized as a passionate fan of the free market. But then again, the Quiet Beatle deserves honorable mention in the Capitalist Hall of Fame for his little ditty, “The Taxman,” the first cut on the band’s 1966 album “Revolver.”

If you drive a car, I’ll tax the street
If you try to sit, I’ll tax your seat
If you get too cold, I’ll tax the heat
If you take a walk, I’ll tax your feet
Don’t ask me what I want it for
If you don’t want to pay some more
ÔCause I’m the taxman, yeah,
I’m the taxman

 

What’s on Tap

Here’s a preview of some of the debates important to business people that are likely to crop up during the 2002 session.

Taxation

Plummeting tax revenues have put lawmakers in a bind. Cuts in spending set off howls from social-service and education activists. Increases in taxes raise the ire of everyone else. In the midst of this quandary sits Senate President John MacKay (R-Bradenton), who wants to reform the state’s tax system, a goal that is limited in possibilities by the Florida Constitution’s multiple prohibitions against certain forms of taxation. With taxes on personal income and ad valorem taxes on real property off limits, the only potential for significant reform rests with the state sales tax.

There are some oddities in our sales tax -- exemptions that seem unjustifiable -- but they will yield only small amounts of new revenue. The biggest pot of untapped money sits in exemptions on services that, if removed, could have a profound impact on the state’s business community.

The recessionary pressures now facing lawmakers will infect any debate over tax reform with an exaggerated sense of crisis, which will hardly contribute to the rational and dispassionate discussion of proposals.

“The last time lawmakers took a stab at raising revenue during a recession,” says Randy Miller, senior executive vice president of Associated Industries of Florida (AIF), “we were left with a bunch of taxes that we’re still trying to figure out. Some of the measures they called Ôtemporary’ are still on the books 10 years later.”

Miller, a former executive director of the Florida Department of Revenue, is counseling lawmakers to wait on tax reform until the situation appears less dire.

Workers’ Compensation

Mary Ann Stiles, founding partner of the law firm of Stiles, Taylor & Grace, and general counsel for AIF, has developed a series of interlocking reforms that will reduce the pressures on the workers’ compensation system that are driving premiums skyward. Stiles, whose long-time experience in the system has earned her the nickname “Queen of Comp,” wants lawmakers to eliminate some of the worst of the defects engineered by the lawyers while reducing their ability create more blemishes.

A portion of the savings engendered by the legal re-forms would be used to boost benefits to some injured workers, reducing their motivation to rely on lawyers. The reforms would also stabilize premiums paid by employers.

Cabinet Reorganization

After the 2002 elections, the Cabinet offices of comptroller and treasurer will be combined into one, which will fall under the title chief financial officer. In addition to their constitutional responsibilities, both existing officers also have duties assigned to them by statutes. In 2002, lawmakers must decide how to divvy up these wide-ranging regulatory powers. One proposal under consideration would assign all of them to the new chief financial officer. The other, favored by AIF, would split them between two new commissions, one for financial services and one for insurance. Both commissioners would report to the governor and Cabinet.

This latter structure provides for a fair and equitable regulatory environment for the insurance and banking industries while in no way diminishing the historic oversight and enforcement authority practiced by the current treasurer and comptroller. 

Mandatory Medical Malpractice Insurance

Current Florida law does not require licensed physicians to carry medical malpractice insurance. At one time our state’s doctors reeled under a burden of frivolous malpractice litigation, but the abuses have now been fixed. Today doctors can forgo malpractice insurance while shielding their assets from seizure in a malpractice lawsuit. Even if a doctor has not shielded his assets, they may not be of an amount sufficient to provide full compensation to a victim of his negligence. If all licensed physicians are required to carry medical malpractice insurance, they will be spreading the risk among a large pool, thus lowering the cost for all and providing necessary protection for all patients who are the victims of doctors’ mistakes or negligence.

Jacquelyn Horkan is editor of Florida Business Insight, Associated Industries of Florida’s on-line magazine (e-mail: jhorkan@aif.com).