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6The Daily Tar HeelTuesday. April 20. 1982
90th year of editorial freedom
John Drescher, Eduor
Ann Peters. stamoino Editor
Kerry DeRochi. Auxutt Eduor
Rachel Perry, Umin,tyEd,M
Alan Chapple, cy Editor
JlM WR1NN, State and National Editor
Linda Robertson, spons Editor
Ken Mingis, assocUu- Fduor
Elaine McClatchey. w.w Eiiwf
Susan Hudson, Famm EJwr
NlSSEN RITTER, A rts Editor
Teresa Curry, spotlight Editor
AL STEELE, Photography Editor
It's not easy
It's not easy being a congressman. No sirree. You've got to run for
election and do all that kind of political stuff that can really run you
down. The worst part, however, is. when you win. Then, gasp, you've
got to live in or near Washington, D.C.
It's bad in Washington. Real bad. How bad is it? It's so bad living in
the nation's capital that in December Congress approved a huge
retroactive tax exemption to cover the costs of living there. The exemp
tion was only for congressmen and not for other government workers
who apparently don't feel the pinch of living in Washington quite as
The exemption allows all legislators to deduct without documenta
tion at least $19,000 a year to cover Washington's high costs. If con
gressmen are not afraid to tell us what they spend their money on, they
can itemize and document their living expenses and can possibly avoid
taxation altogether. Those deductions can include everything from rent,
the hiring of a cook and home maintenance to food, cleaning and trans
portation. Even laundry could be deducted, although if congressmen
did this kind of detailed itemizing their spending would all come out in
the wash and none of them want that.
Sen. Jesse Helms has a much different idea. Helms has considered
sponsoring legislation that would cut by 5 percent the salaries of con
gressmen, the president and top federal officials. Helms said if the
public is being expected to sacrifice to stimulate the economy, public of
ficials should too.
While Helms' idea makes sense, it would be better to reduce the over
sized tax exemptions that congressmen are now receiving. The tax code
is already dubious enough without adding deductions that don't neces
sarily bear any relationship to the actual additional costs of living in
Washington. The deductions are worth most to those who spend the
most money and have the highest income. These exemptions also are a
shifty way for Congress to increase its pay without looking like it is.
Congressmen voted for a modest increase for top civilian and military
officials last year, including themselves. That increase was needed to
keep many talented workers from bolting to the private sector. No one
should complain about paying a fair price to keep talent in government.
But $1 9,000-a-year tax deductions that are not given to other citizens
are not fair. Those special tax breaks should be repealed.
As for living in Washington, a- recent study ranked the nation's
capital as the second best place to live in the United States. Boy, it sure
is tough being a congressman.
Sink or swim
The Cape Hatteras Lighthouse may bevstrong enough to pull political
archenemies to the same side, but when pitted against the ocean, the
building is in trouble.
Just recently, Gov. Jim Hunt and Sen. Jesse Helms cut their
backbiting and snickering to become instant-best-friends-for-life. The
reason for their new friendship: to save the lighthouse. Extraordinary
erosion has caused the J 1 1 -year-old structure to be in danger of becom
ing the nation's first underwater lighthouse.
Because of this threat, a committee called "Save the Cape Hatteras
Lighthouse" was formed last summer, pulling at the average North
Carolinian's heart strings and purse strings to save the historical land
mark. With the assistance of government and park service officials, the
committee has raised more than $125,000 of the $1 million goal. Hunt
and Helms, asked to co-chair the effort, have appeared on statewide
television together to encourage people to contribute money.
So far, the committee has worked on three plans to save the
lighthouse, the first of which is to build a large wall around it. Another
plan, more expensive, involves building steel breaks or jetties off the
coast to break the force of the waves. The last plan, least expensive,
least popular, but most feasible, would be to move the lighthouse
Brick walls and steel jetties can be considered as temporary' solutions
at best. No one can stop the ocean; not Hatteras residents, not the park
, service, and certainly not Hunt or Helms. It is encouraging to see North
Carolinians willing to spend money to save an historical landmark. The
only way, however, to save the lighthouse is to move it piece-by-piece
inland. In this case, North Carolinians would do well to accept the in
evitable and spend their money on moving the lighthouse.
The Bottom Line
Everyone remembers when their
mothers told them that practical
jokes and pranks would always lead
to trouble. But some people just
don't listen, including Eric
Finkleman, a 25-year-old law stu
dent at Vanderbilt University, was
returning from a bus tour of a local
distillery last Saturday when he
pressed his bare buttocks against a
window which in turn popped open,
sending him to the pavement below.
He was returning to school from a
tour of the Jack Daniel's distillery in
nearby Lynchburg, Tenn.. The win
dow from which he fell was intended
as an emergency exit.
Finkleman's prank, commonly
known as "mooning," sent him to
the hospital with a head injury and a
broken hand. He was listed in good
"I've seen some strange things in
my 23 years on the force and this was
one of the strangest," said traffic of
Ticer Charlie Hay.
Politicians are always getting in
volved in something. And with that
involvement, they quite often secure
lots of public attention. However, for
three N.C. legislators, the publicity
they receive may spur a little contro
versy in their respective districts.
You see, on page 44 of the May
issue of Playboy Magazine, right be
fore the centerfold of Playmate Kym
Malin, is a picture of Rep. Daniel T.
Blue Jr., D-Wake; Rep. Ruth M.
Easterling, D-Mecklenburg; and Sen.
Rachel G. Gray, D-Guilford. But
unlike many others pictured in the
magazine, the three representatives
are fully clothed.
They are shown in a picture taken
from, a Public Broadcasting System
production about the Equal Rights
Amendment fight in North Carolina.
Blue said he had not seen the picture,
but had heard about it. "I guess if it
were Playgirl, I'd be in the center
fold," he said.
Rev. W.W. Finlator, Pastor of
Pullen Memorial Baptist Church in
Raleigh, is also in the picture. "I was
very honored to be with that group
on that occasion," Finlator said.
Blue was also thankful that the Reve
rend was with them. "If somebody
gets mad about it, I can say, 'Well,
the preacher's there,' ",he said.
And that's the bottom line.
By MIKE SALEMI
By JIM WILDE
To view President Reagan's economic policy in an appropriate light, one must take
the perspective of the long rather than the short run. This is true for two reasons:
first, because the benefits of Reagan's tax and spending cuts will riot be experienced
for some time, and second, because our attention is now riveted to a recession for
which Reagan's tax and spending policies bear little responsibility.
Let's begin with some facts. The prosperity of the nation depends upon the pro
ductivity of its work force. Since World War II, that productivity has increased at an
average annual rate of about 3 percent: Put simply, the persistent! increase in worker
productivity means that each year the average worker has enjoyed an increase in his
or her standard of living. Walter Heller, chairman of the Council of Economic Ad
visers under President Lyndon B. Johnson, has often pointed to economic grbwth as
the best hope for our nation in its struggle to improve the lot of our most disad
vantaged citizens. Both liberals and conservatives alike, then, should be dismayed by
the fact that in recent years the productivity of our work force has ceased growing at
its previous rate. " , i
Since 1973, growth in worker productivity has occurred at a rate somewhat less
than 1 percent per year. Some economists argue that this decline is due to the oil price
increases of the 1970s and is beyond our control. But others suggest that today's slug
gish growth is the bitter harvest of two decades of unwise economic policy, policy
that paid too little attention to the growth of capital. I
For the past 20 years, our economic policy has been dedicated to
the short rather than the long view. Our policy prescription for
recessions has been to stimulate national spending with tax cuts,
additional government spending and monetary policies designed to
provide cheaper credit. But we have paid little attention to the side
effects of these policies on our long run growth.
During the presidential campaign, candidate Ronald Reagan focused on four eco
nomic goals: I) reduction of the rate of-inflation, 2) elimination of the budget deficit,
3) revitalization of the economy .through its employment and production, and 4)
elimination of the scope of governmental activity. Now that the Reagan administra
tion has been in office for about 15 months, it is appropriate to discuss the success of
the policies it has selected to reach these goals.
An examination of the relevant data clearly indicates that the president is at best
batting .500 with respect to these goals. Although all of the major price indicators
show that the inflation rate has moved significantly below the double-digit range, it
seems likely that the federal budget deficit will be in the triple digit (or really the 12
digit) range during the coming years. Relative to the size of the economy, this deficit
may not be a record. However, its size is mtimidating enough to send shivers down
The Reagan administration has also succeeded in shifting the tread line depicting
the economic role of thegoverhment. Defense spending is up and social program
ming down, though the precise extent of these changes is still up for grabs during the
present budgetary negotiations. The net effect of these shifts may be little change in
overall federal expenditures, but the president has achieved a start on the definite
change in emphasis which he proposed as a candidate. On the other hand, the state of
' the overall economy, as measured by almost any data on output and employment, is
exceedingly bleak. The pessimism which has resulted from this depressed economy is
no doubt compounded by the high hopes which accompanied the inauguration of
Ronald Reagan. .
Reaganomic policies are based on the premise that increasing supply is the key to
realizing this set of economic goals; thus the term "supply-side" economics. The
"supply-side" label itself is indicative of the difficulties we are now in. After criti
cizing the previous administration's Keynesian approach as manipulating demand
while neglecting the supply side of the economy, the present group put its own
blinders on by disregarding the demand side. The administration based its attempt to
increase supply on an expectation that the business community would quickly re
spond to the prospect or fact of lower tax rates by deciding to buy new plants and
equipment. In doing so, it failed to take into account weak demand. Since firms were
experiencing considerable idleness in existing facilities during the low-demand reces
sion, they were in no mood to be induced into expanding their facilities to increase
output. The present administration is paying a confidence-rating price for its failure
to understand the two-sided nature of the market.
One of the great ironies of this policy analysis is that Reagan's main economic suc
cess the lowering of the inflation rate is due not to the administration's supply
side policies but to the ignored demand-side forces. Businessmen are lowering prices
not because of a flood of added output but because consumers have been unwilling
or unable to buy. The United Auto Workers and the other unions have been forced
to give back promised wage increases; not because more people had joined tne work
force, but because so many of the union members had been laid off. Energy prices
are down not because of a great increase in supply but because of the oil glut resulting
from worldwide, recession.
"Another1 cruel fact for Reaganomics concerns the interrelationships among its
goals. The expected revitalization of the economy has not occurred, and one of the
results has been the enormous amount of red ink in the federal budget. It is clear that
the scheduled tax cuts will make no dent (or no appreciable dent) in the budget
deficit. An economy pulling smartly out of recession on the strength of an increased
money supply accompanied by low interest rates is the best hope of those who wish to
stop the hemorrhaging red ink. '
Growth of capital is essential for growth in the productivity of labor and thus for
overall economic growth. Capital growth implies that on average our work force has
available more and higher quality tools each year than it had the year before. Capital
growth is also essential for the introduction of technological breakthroughs and in
ventions. Without investment and growth in capital we would still be using mechani
cal devices to perform division and this newspaper would be set in type by hand.
For the past 20 years, our economic policy has been dedicated lo the short rather
than the long view. Our policy prescription for recessions has been to stimulate na
tional spending with tax cuts, additional government spending and monetary policies
designed to provide cheaper credit. But we have paid little attention to the side effects
of these policies on our long-run growth. ;
During this period we have experienced sustained and often accelerating inflation.
The inflation of the 1960s and 1970s has inhibited the growth of capital for several
reasons. First, inflation has caused savers to remove their money from the financial
pipeline that ultimately provides businesses with the funds they need to undertake in
vestment. The saving rate in the United States, already low by world standards, has
fallen to its present level of just over 5 percent. As a nation, we sive just 5 cents of
each dollar of income we earn. In contrast, the Japanese save more man 20 cents per
dollar. - , I .......
Second, inflation has caused persistent increases in our tax rates. Prior to this ad
ministration, Congress had rejected resolutions that would have" adjusted our tax
tables annually to compensate tax payers for inflation. As a result, Inflation itself has"
raised the effective tax rates of all. These unlegislated tax increases have tended to
bear most heavily on the middle class and have indirectly impaired economic growth
by creating a disincentive to work and by channeling to taxes funds that might other
wise have gone to investment. And, finally, inflation has created an environment in
which businesses have perceived investment itself to be risky.
The Reagan economic program offers remedies for the decline in investment that
has contributed to the decline in the growth of worker productivity. By supporting a
conservative monetary policy, Reagan has already demonstrated that inflation can be
curtailed.' Reagan's tax cuts are designed simply to offset recent inflation-created tax
increases. And the Reagan spending cuts are meant, in the long run, to balance the
federal budget. Robert J. Gordon, an economist from Northwestern University who
is not a Reagan camp follower, has estimated that Reagan's tax and spending policies
are consistent with a budget that will be balanced when the economy is operating at
normal levels of employment rather than at the recession levels we are experiencing
In conclusion, there is wisdom in an economic policy that attempts to promote the
long-run growth of our economy. And it is true that such growth requires sustained
growth in capital that cannot be accomplished in an environment unsuitable for in
vestment. One can reasonably believe that a conservative approach to monetary and
fiscal policy will create an environment more conducive to growth than that typical of
the past 20 years. ' .
Mike Salemi is an assistant professor of economics at the University of North J w & associate professor of economics at the University of North Carolina
Carolina at Chapel Hill. at Chapel Hill.
An examination of the relevant data clearly indicates that the
president is at best batting .500 with respect to these goals.
It is precisely in the monetary segment of the economy that Reaganomics finds its
greatest hurdle, however. As long as real interest rates are as high as they are now,
there is little prospect for an investment boom, which is the central objective of the
tax program. The inflation fears which pushed interest rates up have apparently not
been Sufficiently relieved in spite of the recent inflation reduction. The characteristic
interaction of inflation with interest rates and taxes creates a disastrous set of dis
incentives to investment. Tax cuts are an imperfect solution to the problem because
they scale down this interaction' without offsetting its negative effects. It thus be
comes all the more important for interest rates and inflation to be brought down.
Can our lowered tax rates result in beneficial economic impacts? The answer ap
pears to be: "Yes, but don't oversell the outcome." Lower tax rates could increase
labor supply. The potential for this increase, however, is limited, since the major
source of new workers, the female workforce, has already been tapped and job
rigidities leave little room for expansion. The other two targets of the tax cuts, saving
and investment, may also be boosted as tax rates fall. However, in a type of chicken
and egg situation, it appears that saving and investment will not be able to help bring
down inflation until inflation itself is reduced., .
And what is the botton line of the Reaganomic tax program? the tax cuts can
only serve as a Moses factor capable of leading us toward an economic promised land
if they first operate in a traditional Keynesian fashion by stimulating consumer
demand. Once the general economic climate has improved, a boost in investment
spending may yield the prosperity for which we all yearn!
Letters to the editor
To the editor:
I was shocked and saddened by the
Campus Governing Council's decision to
cut $2,000 from the funding of the Black
Ink. In doing so the CGC has severely
limited the effectiveness of the only pub
lication that has made any attempt to
bridge the gap of cultural and social ig
norance that exists on this campus.
The Daily Tar Heel welcomes letters
to the editor and contributions of
columns to the editorial pages. All
contributions should be typed, triple
spaced on a 60-space line and are sub
ject to editing.
Column writers should include their
majors, and hometowns. Each letter
should include the writer's name, ad
dress and phone number. Unsigned
letters will not be printed.
The CGC's myopic vision is best sur
mized by the statement of representative
Dan Bryson (District 18), who finds that
it is "ridiculous to think that we want to
spend that much ($8,000) to fund a news
paper for an organization." The Black
Ink is not, nor has it ever been, a paper
for just one organization. It has been the
best source, and in many instances the
only source, that all students on this cam
pus have had to educate themselves about
events that affect the black community
and how these events affect the Universi
ty as a whole.
It is unfortunate that a 15-year-old
tradition like, the Black Ink can be cut
down in the span of 11 hours. But it is
even more unfortunate that as a result of
this cut the ability of diverse groups of
students to communicate through the
printed word will also be severely cur
tailed. And in the end, the entire Univer
sity community will suffer as a result of
its compounded ignorance.
Mark H. Canady
Black Student Movement
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