Ten years ago, in February 1996, Rush Limbaugh interviewed George Gilder, and learned an important lesson about the downside of calling for spending cuts and balanced budgets, instead of focusing on positive, pro-growth policies. I saved the whole thing back then, because I thought it might come in handy someday. I was right, and today is that day.
With the Republicans now tearing themselves apart over the issue of so-called fiscal responsibility—to the gleeful delight of Democratic political strategists—I thought a dose of déjà vu might be enlightening. So here it is, just short of it's tenth anniversary: Rush Limbaugh's interview with George Gilder on the subject of budget-balancing. (I'll post the key points here, "above the fold"; below that, if you're interested, is the whole thing.)
Rush Limbaugh and George Gilder: Together again
Interview, February 1996 [excerpt]
Limbaugh: You know, if I didn't have my mind, I would like to have yours. In fact, I'd probably rather have yours anyway. But you say the current Republican fervor to balance the budget is "Hooverian". . .
Gilder: When you [make] a balanced budget your goal, you play into the hands of the Democrats. You immediately put the focus on cutting government spending... So your whole campaign is perceived by the people—who get their information largely from the media megaphones—as negative... you end up terrorizing millions of people, but you don't achieve anything of value...
[The Republicans] end up essentially attempting to achieve something called a "balanced budget" by cutting various government programs. That is a completely negative formula, and it's political poison. Moreover, it doesn't achieve any good results...
The focus on the balanced budget is a mistake, and this mistake was imposed on the party by a pollster. Politicians who follow public-opinion polls earn the contempt of the public. And that is the big danger today, because Republicans on television most of the time are saying something about a balanced budget that isn't true.
Limbaugh: Such as?
Gilder: Such as, that it will greatly lower interest rates and produce all these marvelous benefits...
What follows is the entire portion of the interview I saved (...the portion related to budget-balancing).
Rush Limbaugh and George Gilder: Together again
Interview, February 1996
[entire portion of the interview related to budget-balancing]
Limbaugh: My friends, it would behoove you to study everything you can get your hands on by George Gilder, a true American genius. Here is the second interview he was kind enough to grant me for my newsletter. Learn it, love it, live it.
[Fast-forward to end of interview...]
Limbaugh: You know, if I didn't have my mind, I would like to have yours. In fact, I'd probably rather have yours anyway. But you say the current Republican fervor to balance the budget is "Hooverian." And that they've wasted a year on this premise.
Gilder: When you [make] a balanced budget your goal, you play into the hands of the Democrats. You immediately put the focus on cutting government spending. So your whole campaign is perceived by the people—who get their information largely from the media megaphones—as negative. The Republicans are somehow going to cut spending drastically, and this terrifies the 33% of Americans who are dependent one way or another on government jobs and subsidies.
So you end up terrorizing millions of people, but you don't achieve anything of value. Because Democrats succeed: As a result of this threat, they succeed in mobilizing sufficient political force to stop major cuts. Meanwhile, the things worth doing, the things people will really enjoy -- tax-rate reductions, privatization, deregulation, all these positive programs Republicans should push and you've been pushing for years -- get lost.
So we end up just talking about balanced budgets seven years from now. Who the hell cares? The last time we had a balanced budget was 1979. It was an all-governmental balanced budget, and we [also] had a trade surplus. Yet the whole private economy was in the red. With the Reagan years, America's assets have risen, since then, from about $17 trillion to $40 trillion. Yet we're speaking as if the Reagan Administration was some kind of orgy of debt.
Limbaugh: But is it an error of substance they've made? Or an error of strategy? Because obviously what they're trying to do is not just balance the budget. They're trying to end the welfare stare. They're trying to reduce the size of government so as to make more prosperous the individual. You would agree with that, wouldn't you?
Gilder: I agree with their visions. I don't agree with their tactics—and their tactics have now, in my judgment, largely subsumed their vision. So they end up essentially attempting to achieve something called "balanced budget" by cutting various government programs. That is a completely negative formula, and it's political poison. Moreover, it doesn't achieve any good results...
...The focus on the balanced budget is a mistake, and this mistake was imposed on the party by a pollster. Politicians who follow public-opinion polls earn the contempt of the public. And that is the big danger today, because Republicans on television most of the time are saying something about a balanced budget that isn't true.
Limbaugh: Such as?
Gilder: Such as, that it will greatly lower interest rates and produce all these marvelous benefits...
Limbaugh: What about the theories, as advanced by Pete Peterson and others, that if we don't get a handle on it now, the national tax rate is going to be 84% for a child born in 1990? That Social Security and all of these things that actually should be calculated as part of the deficit but aren't [will] bleed the economy dry, with taxation on fewer numbers of productive people? They say balancing the budget and paying for what you spend is crucial to keeping solvent all these various contracts we've made with generations.
Gilder: Several analysts have questioned the basic accounting functions Peterson and Rudman and that group have been adducing. But, to Peterson, the whole Reagan Administration was an absolutely catastrophic failure. He's one of these one-hand economists. On the one hand, he can see liabilities. But he can't count assets—the other hand. So he sees the liabilities of the federal government growing. But he can't see the tens of trillions of dollars of new assets emerging from these new industries that have been generated and are now the spearheads of global economic growth.
American companies now earn some 47% of all the profits in world economy. American dominance today, industrially, is probably as great as ever before, except immediately surrounding a war triumph. This is much more important than these numbers Peterson talks about...
