Columnist Williams to begin economics series

When economist and syndicated columnist Dr. Walter Williams visited Southeast Missouri State University in 1995, he lamented government's increasing role in our lives, spoke out against welfare and argued that the minimum wage was bad for America.

"If the founding fathers came back," he said then, "I think they'd be disappointed."

Today, Williams, the man who often fills in for conservative radio talk show host Rush Limbaugh, has criticisms just as sharp for the direction this country is headed.

And Williams believes many of the problems of the country center on the economy, whether it's the government leaving interest rates alone, tort reform, job creation or the latest rounds of tax cuts.

That's why Williams, a professor of economics at George Mason University in Fairfax, Va., is beginning a 10-part column series on the economy, where he tackles subjects like scarcity, economic theory, consumption and unreasonable pricing.

In a phone interview, we caught up with Williams -- who writes a syndicated column that appears in this newspaper -- and asked him about his conservative opinions and what he hopes to accomplish with the "Economics for the Citizen" series, which begins in next week's business section.

His comments were edited for space.

When you came here in 1995, you said that if the founding fathers came back, they'd be disappointed. Do you still believe that?

Williams: Oh yes, absolutely, maybe even more so. I think we've strayed away from the founding principles of limited government. We are doing things that if we get a majority in Congress, people think it's OK. Especially if it has to do with spending. Most of what government does today is to take the property that belongs to one of us and give it to another to whom it does not belong, whether it be food stamps, whether it be farm subsidies, whether it be bailouts to airlines, you name it. That's not a part of the founding principles of this country.

So in other words, the role of government is continuing to get worse?

Williams: There have been some improvement. More and more Americans are questioning what government does. The very idea that politicians can now talk about Social Security reform and it not be the third rail of political suicide, I think that's a step in right direction. Because back in 1964, Goldwater lost the election because he said we had to do something about Social Security. And so, it's a mixed story. I think there are more free-market think tanks and people are listening to them, at least reading their material, the Cato Institute, the Heritage Foundation and many, many others. I recognize we did not get into the mess we are in overnight and we are not going to get out of it overnight. So I'm pleased in some of those improvements I've seen.

What are your thoughts on the latest round of Bush tax cuts?

Williams: I think the more money we keep out of Washington, the better we, as Americans, can be. I think that one of the things that needs to be done, as in Bush's last demonstration, is to fight to make the tax cuts permanent, to fight to completely eliminate the estate tax. The estate tax is one of the most brutal taxes we have in our country. The reason why, is when people pay their estate taxes, they're using the high-powered dollars. That is, they have to sell a farm, sell a business, they have to sell stock. These are high-powered dollars. These dollars are producing things. When you take these high-powered dollars, they're going into government and they're going to be spent on consumption. They're moving from dollars that are producing things to dollars that are not producing things. I also think we need to get rid of the estate tax. And I would surely hope he is successful in pushing Congress to do something about Social Security because it is a disaster in the future waiting to happen.

That's my next question. You've said in some articles I've read that you're very much against the Social Security tax. Explain why you feel that way.

Williams: No. 1, it's a bad investment, if you want to call it an investment. The rate of return on Social Security is somewhere between 1 and 2 percent. If you look at the stock market, in any 10- or 20-year interval, the worst rate of return is 6 percent and the stock market is paid anywhere between 10 and 12 percent.

But there is a moral question that nobody really focuses on in the debate on Social Security. That is: What right does government have in telling an American, a free American, how much he should put aside out of each paycheck for retirement? And if he doesn't do it, he'll go to jail. If you look at it, why shouldn't government also tell us how much to put aside out of each paycheck for housing, for food, for entertainment, for education? I'm sure that if government told us how much we should take out of our paycheck for housing, as an example, we would find that tyranny. It's no less tyranny for the government to tell us how much to put aside for retirement.

Keep in mind, Social Security began in the late '30s. What in the world did we do from 1787 until 1936 or '37 without Social Security? What happened, is that old Americans died in the homes of their children. There were charitable foundations. Now Social Security has replaced that. Why should I honor my mother and father, when I can get you to honor my mother and father through the tax base?

Here's a question on job creation. During the recession, Missouri lost more jobs than any other state. We've seen some new job growth, but critics say it's less than Bush promised. What role does the president play in job growth?

Williams: First of all, presidents cannot create jobs. Government cannot create any jobs. What they can do, through their funding, they can create some jobs in some areas, but they come at the expense of jobs in other areas. Job growth is very, very important for the economy because it creates income for people. But there are things that government does that hamstrings job growth, like high taxes, high regulation. There are many things government does to restrict jobs. We have to get government out of the business of interfering with the economy.

Federal lawmakers -- and several state lawmakers in Missouri -- are promising legislation that would be pro-business. Here, the talk is tort reform. How much harm do you think the lawsuit-happy culture we have here in the United States does to our economy?

Williams: It relates to your former question. The level of litigiousness in our society is very costly. When producers produce things, they have to take into account that they are going to be sued. That has become a cost of doing business. Now, you mentioned that some legislators want to have pro-business legislation. I say that is wrong. They should have pro-people legislation. That is, it's neither good for them to have a pro-business legislation or pro-labor or pro-union legislation. It should be pro-people legislation and pro-people legislation is the kind of legislation that frees up people, let's them go about their business without interference from one economic agent or foreign government level or another.

Having said that, do you think effective tort reform would have significantly improve the economy in the United States?

Williams: According to various estimates I've seen, tort reform has the potential of saving the economy somewhere around $400 billion. That's the added cost that people have to take into account when they do business. I'm sure that will have something to do with job creation.

Interest rates are rising again. It's cyclical. Borrowers want interest rates to be low, but investors want interest rates to be high. Is there a best-case scenario as far as interest rates?

Williams: Yeah, of course, there is a best-case scenario. Leave them alone and the let the market find a particular interest rate. Government officials, or the Federal Reserve Bank, they don't know what the right interest rate should be. I think the market would know, and the market is just names and names and names of people trading. They should decide with their actions.

I've read that you think the minimum wage is a bad idea. That's an age-old debate. But what are your thoughts on it?

Williams: Well, the minimum wage law fixes wage at a certain level. What it effectively says that anybody who is so unfortunate, who doesn't have skills to produce $5.15 worth of value per hour, is not deserving of employment. Any employer will find a losing economic proposition to have to pay somebody $5.15 an hour when that somebody has skills that would only enable him to produce $3 worth of value per hour. And actually, the employer has to pay more, because he's also paying Social Security tax, fringe benefits, so the minimum costs is about $7 or $8 to hire someone.

Finally, about the column series on economics. Why did you decide to do this now?

Williams: As I said in the first one, I was the department chairman at George Mason University from 1995 to 2001. Part of the compensation of being department chairman is having a semester off with pay. So I had some time. I said, let me just play around with some ideas, some economic concepts for the readers. This was a good opportunity to do it. I love trying to teach people about economics. Teach them in a way that is easy to understand, without all the jargon. So this was a good opportunity.

smoyers@semissourian.com

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