The Reich Reich: the Clinton crew has embraced the German model - just as the Germans have realized it doesn't work - emphasis on government-run economic programs as supported by Bill Clinton and Labor Sec Robert Reich - includes related article on the Europeanization of the American economy

National Review, July 11, 1994 by David Gitlitz, Lawrence A. Kudlow

There's More

Another Administration initiative would expand federal subsidies for the commercialization of industrial technology. The Commerce Department's National Institute of Standards and Technology is the locus of the Administration's "technology development" effort. Within the warrens of the NIST is a little-known duchy called the Advanced Technology Program. Until recently, it was a sleepy backwater funding small-scale research and development projects. Under Clinton's 1995 budget, however, its funding would more than double, to $450 million, and under legislation now pending in Congress, part of the National Competitiveness Act, the ATP would break new ground for U.S. government involvement in capital market decisions (the ATP would even purchase preferred stock offerings).

No rundown of the Clinton Administration's statist ambitions would be complete without mention of health care. Suffice it to say that in developing its proposal, the Administration adopted fundamental components of the German system, including the creation of monopoly "purchasing alliances." It also bears noting that the German health-care payroll tax, now at 13.4 per cent, was 11.4 per cent in 1980, 8.4 per cent in 1960, and 6 per cent in 1950.

Why does the Clinton Administration seem intent on following a blue-print for stagnation? Senior members of the Administration cannot be unaware of the drag on economic dynamism and growth of the European welfare state. Yet they seem undeterred. The only explanation is that it's a political calculation. The creation of new entitlements and subsidies for health care, training, employment, technology development, and infrastructure means an enormous extension of government largesse to the middle class, a "trickle down" social policy for the masses. Democratic political strategists make no bones about their conviction that such a payoff is necessary to re-establish the Democratic Party's electoral dominance.

The political bet is that the party's gains among the new clients of the security state will outweigh the losses resulting from the burdens on entrepreneurs and risk-takers - groups that are not considered Democratic constituencies in any event. The economic bet is that interventionist government can at least maintain stable, moderate economic growth rates, enough to keep unemployment from rising. The political calculation may be right as far as it goes, but it suffers from a pinched economic vision. For if, as the President says, "we have a lot to learn" from Europe, it is primarily that no amount of government can restore the spirit of enterprise when the heavy hand of bureaucracy snuffs it out.

Has the U.S. economy already become Europeanized? Between 1986 and 1993, economic growth, wealth creation, capital formation, labor participation, families, and entrepreneurship have been under constant attack by policies that raised taxes, expanded social insurance, and mandated costly regulations.

This fiscal hall of shame includes: higher taxes on capital gains, personal income, corporate income, payrolls, Social Security benefits, gasoline, real estate, and trust estates; lengthening business depreciation schedules; ehmination of deductions and exemptions; ending Gramm-Rudman sequestration.