The Public Policy/Raise Taxes

...Some of the supporters of the budget-balancing legislation were quite clear that their goal was to force the President to choose between raising taxes and cutting defense...

...The people of the 1980s are planning a large build-up of the defense forces, which is an investment in the security of future generations as well as of this one...

...As during the TWA hijacking crisis, President Reagan had grown...

...Indeed, it merely brings us back to the familiar question that always bedevils proposals for antiterrorist action: Should the lives of hostages be the first priority...

...They can, or should, only say that the available evidence makes that outcome extremely improbable...

...And they should support a tax increase now...

...Sell High" While the philosophy may seem simplistic -it works...

...These future generations might legitimately be expected to share the costs of this build-up as it would be imposed upon them by the resulting deficits and increase of the federal debt...

...THE PUBLIC POLICY...

...Moreover, there is apparently a strong possibility that the Congress will cut defense below the level of its budget resolution, using the deficit as its reason, or excuse...

...That leaves only the argument that this operation differs from other terrorist crises in that the lives of hostages were not at stake...

...But the liberal press has, without fully acknowledging the fact, made up its collective mind that the lives of today's hostages must be paramount...

...forces is itself a threat to world peace...

...King is not favorably reviewed-if reviewed at all-in the nation's high aesthetic organs...

...The high priest of spilled guts and maggot infestations is the new front against liberalism...

...Such a position would not have required believing that deficits do not matter or that deficits of the size implied by the tax cut could be tolerated "forever...

...When this negative news hits the market place institutional selling occurs and the price of stock drops...

...One should try to bring to bear upon them whatever judgment and conclusions from history one can muster...

...It may turn out that such a tax cut would raise the revenue, just as it may turn out that there is human life on Mars...

...The Buy Low-Sell High philosophy means that you buy good quality stocks when they are out of favor...

...And that ended the press's brief flirtation with the idea that international cooperation rather than unilateral U.S...

...The issue is what those who support the defense program originally outlined by the President should have done, given the conditions in the country, and what they should do now...

...That is true even under the normal criminal law...

...We are, of course, tolerating a much larger deficit than we have been used to, but still the existence and prospect of the deficit is also accepted as requiring unusual restraint of expenditure...

...If it did, terrorists would permanently surround themselves with innocent civilians...

...enterprise in motion is bound to disturb the literati...

...This is not to say that every dollar of additional revenue would be spent for defense...

...rrrrr~rrrrrrrrrrrrrrr~rrrr~~~r rrrrrr--rrrrrrrrrrrrrrrrrrrr The Lemley Letter c/o The Chicago Corporation 208 South LaSalle Chicago, IL 60604 r (12 issue LI 2 years ues) $ 84 L s (36 issue Please start my two-month complimentary subscription...

...But they did not...

...One can like or dislike these shifts, depending presumably on where one's interests and sympathies lie...

...And the reason is that most institutional money managers are short-term result-oriented because much of the money they manage doesn't pay taxes (Pension Plans) and because they are competing against other institutions for assets to manage...

...Of course, they should have tried harder to convince the country of the need for the defense program and should continue to do so...

...It amounts to arguing that an army could return fire only at those individual soldiers in opposing trenches who had actually been observed sniping...

...Individual investors can be more long-term oriented since favorable tax treatment requires at least a six-month holding period...

...It had not risked the lives of hostages who were free by the time of the interception...

...The Post followed suit...

...In present circumstances the bargaining power of the supporters of more defense will be strong, because the President will presumably be on their side...

...It had required a minimum of international cooperation from Italy and Tunisia which might not be forthcoming in the future...

...And like the Big Mac, King sells in exponential numbers-some 50 million copies to date of the nineteen volumes written under his own name and the recently revealed pseudonym of Richard Bachman...

...Of course it was only a matter of time before the champion of adolescent horror appeared as a pitchman on the "glass teat" (in Harlan Ellison's phrase), the medium that sets the standards for his vast audience of word consumers...

...Among other things, King says, he believes in God, whereas Kubrick went out of his way to inform him that he did not...

...These are the kinds of things one must think about in deciding whether a tax increase would be good or not...

...The hijackers, trapped in a plane rather than able to escape to land hideouts, were especially vulnerable...

...RAISE TAXES The problem of adequacy of tax revenue is simply the defense problem...

...It's frightening how many novels of suspense I've written...

...30 THE AMERICAN SPECTATOR DECEMBER 1985...

...at its deepest levels, it explores the trauma of family violence and children's hidden emotional lives, combining those themes with a tale of gothic horror...

...This method of investing should work in any market for patient investors, who have a desire to trade in the stock market -for capital gains...

...Apple, Jr...

...firmness had solved this particular crisis...

...One can think that an increase in U.S...

...Without Guggenheims or subsidies from the NEA, one might add...

...But it raises no new point of importance...

...Secondly, attacks on terrorist camps require little or no international cooperation-vide Israel...

...D...

...The fault is the failure of too many in the Congress and in the country to appreciate the seriousness of the national security threat and to give sufficient priority to defense...

...They also include the people who plan the operations, train the actual hijackers, provide the guns and grenades, and maintain the entire infrastructure of terrorism which makes hijackings and bombings possible...

...Thus, Stephen King, looking rather like a debonair Rod Serling in his smoking jacket, hawking American Express cards on television...

...His best novel, The Shining (1977), is a haunted hotel story inspired by Shirley Jackson's classic suspense novel, The Haunting of Hill House...

...Thus the New York Times murmured approvingly: "The Reagan Administration's passage from aimless shelling of the Shuf in Lebanon last year to the carefully calibrated aerial intercept near Sicily may mark our collective passage from bluster to mature self-defense...

...provided Mr...

...Second, the government and the public could have decided that the deficit resulting from the tax cut should 28 THE AMERICAN SPECTATOR DECEMBER 1985 be accepted, rather than trying to limit that deficit by cutting expenditures...

...The Washington Post mumbled in agreement: "A chain of circumstances...

...but conclusions must be sparingly drawn...

...Whether the tax cut has increased or decreased the national income is uncertain, and the net effect has probably been small in either direction...

...That depends on the strength of the case for more defense expenditures...

...It is also the best King novel on film because Stanley Kubrick set out to create a cinematic equivalent rather than a literal reenactment of the story...

...The Congressional Budget Resolution enacted in August would cut defense expenditures in the five years 1986-1990 14 percent below President Reagan's 1985 budget proposals, which were already cut below his earlier programs...

...In his magisterial summing up for the New York Times "Week in Review," Mr...

...And it would rule out a bombing raid on the enemy's headquarters on the grounds that this was illegal and unjustified retaliatory action of an imprecise kind...

...Real defense expenditures today are no higher than was proposed by President Carter in his final budget...

...All companies, no matter how smart the people in charge, eventually have problems with earnings or sales-either because of incorrect internal business decisions or because of external market forces...

...Third, the limitation of total expenditures enforced by the tax cut could have been borne entirely by the nondefense side of the budget...

...Such a beautiful example of free Eric J. Sundquist teaches American literature at the University of California, Berkeley...

...A logical next step beckoned enticingly...

...But no one makes this argument...

...Horrifyingly, he works hard, writing every day except Christmas, the Fourth of July, and his birthday...

...Not only that, but eight of King's macabre tales have been made into profitable movies (he's done original screenplays for two others), and he is making a big move into the booming audio and video cassette market...

...It is only to say that defense expenditure is an increasing function of the revenue-that defense expenditure will be somewhat higher if revenue is somewhat higher...

...By his own admission, King is now an American "brand name," one more of the hundreds of household, everyday consumable artifacts with which his novels are filled...

...Wall Street Journal, July 18, 19781 But we did make that bet and it turned out to be wrong...

...In effect, the choice is between protecting the lives of a known number of identifiable hostages now and protecting the lives of an unknown number of anonymous hostages who will be put at risk in the future if this particular terrorist action gains its objectives...

...enough to keep the defense program intact...

...But they should also have supported a smaller tax cut than we had in 1981, and bigger tax increases than we had in 1982 and 1984...

...If you are an investor seeking long-term capital gain through the purchase of out-offavor, undervalued securities, send for your complimentary subscription to the Lemley Letter today...

...The Stephen King who has ridiculed the potential for sociological catharsis in his fiction and claimed that he's really just "selling public executions...

...Other possibilities existed: First, the cut in tax rates could have increased the tax revenue...

...Not quite, but King's seamy scare fiction does represent a curious mix of ideologies...

...But the one important national consequence has been the cut in the planned defense program...

...actions to suppress terrorism are unthinkable-even when one occurs in front of them...

...First, it is actually harder to apprehend terrorists who are flying around the Mediterranean than to attack them in their camps...

...action had solved this crisis successfully, that plainly indicated that this was a most unusualnay, unique-crisis...

...The outcome of the congressional budget resolution, which made deep cuts in defense and accepted few of the President's non-defense proposals, showed where the balance of political forces lies...

...concluded sagely: "The circumstances of the seizure of the Italian liner and the apprehension of those who carried it out were not typical of terrorist operations and are not likely to be repeated any time soon...

...Rather conservative on matters of private and family morality, but from all evidence to the left of center on domestic and foreign policy, King would make a pretty good American bishop...

...Over the next few days, the reasons why the U.S...

...If U.S...

...But the assignment of fault is not the issue...

...etc., etc...

...The budget submitted by the President in February 1985 was an attempt to chart a path for getting the budget deficit down substantially with only a small cut in defense by cutting the non-defense programs...

...That is why I favor a tax increase...

...I evaluated that possibility seven years ago in an article on the Kemp-Roth tax bill that by Herbert Stein was the forerunner of the 1981 tax cut: Economists cannot say that they know with certainty that the Kemp-Roth tax cut would not raise the revenue...

...D o you know me...

...The tax cuts have shifted income from some Herbert Stein is a senior fellow at the American Enterprise Institute...

...Impressive though these arguments sound laid end to end, none of them stands much examination when looked at singly...

...Even Time, the large fries of magazine journalism, has labeled him the hero of the "post-literate age," and the Village Voice excitedly found him to be an enemy of the left-a glib, sexist apologist for morality and the American way...

...R .W...

...They are probably correct...

...One can say that the fiscal squeeze now being put on defense is not the fault of the tax policy...

...The main consequence of the excessive tax reduction of 1981, and of the subsequent reluctance to make a substantial tax increase, has been to shrivel the increase of national defense expenditures that President Reagan had planned...

...The Gramm-Rudman proposal to drive the budget deficit down to zero by 1991, in five equal installments, would only tighten the noose around the defense program...

...beneficiaries of social programs to some taxpayers, from borrowers, including the less-developed world, to savers, from workers and investors in tradeable goods sectors to workers and investors in other sectors of the economy, from consumers of later generations to consumers in this generation...

...In my opinion, supporters of the defense program should have fought the budgetbalancing legislation tooth-and-nail...

...Most of his fiction, King has said, is "plain fiction for plain folks, the literary equivalent of a Big Mac and a large fries from McDonald's...

...Finally the rules of a just war dictate that, though care should be taken to avoid harming innocent civilians, their presence at a legitimate military target does not morally prohibit an attack upon it...

...interception provided no future lessons were carefully laid out...

...He will be able to demand a substantial increase in defense as his condition for agreeing to the tax increase that will enable others to get what they want, whether deficit reduction or increases in nondefense programs...

...That was both legal and-since it did not harm innocent bystandersmoral, in a way that a retaliatory strike against a terrorist camp would not be...

...As for myself, I am unable to visualize any great or lasting harm coming to the United States from having taxes equal to 22 percent of GNP rather than 20 percent, whereas I can visualize an irreparable disaster resulting from spending 6 percent of GNP on defense rather than 7 percent...

...He will soon release four new books over a fifteen-month period, beginning with a fat, longawaited novel entitled It...

...The shares going to each of these purposes will result from political bargaining...

...No tax increase will be possible without his acquiescence...

...The shortage of revenue has in fact limited the growth of expenditures other than those for defense or interest, but not...

...A cut in the defense program was not the logically and arithmetically necessary consequence of the cut in taxes...

...As he told a Playboy interviewer, his "old-fashioned frontier vision" of self-reliance, his em brace of traditional values of family and honor, and his belief that good and evil exist as universal values at war with one another no doubt put him at odds with "an urban and liberal sensibility that equates all change with progress and wants to destroy all conventions, in literature as well as in society...

...After a period of time those who run the company usually solve the problem, earnings start to improve, the institutions become more aggressive buyers, and the price of the stock goes up...

...LEMLE Y KATHLEEN PINTO DONALD YARLING ('1<>-I'tx Chi< ag Corporation (312)857,-7604 Outside Illinois (8(H)} 621-0686 Inside Illinois (800) 572-8024 29 THE AMERICAN SPECTATOR DECEMBER 1985 pose increase the relative attractiveness of spending for other purposes increases...

...By some curious hocus pocus, it could even be argued that this wise and wonderful success was actually an argument against any future anti-terrorist actions...

...They believed they could do that because they believed that the political process would not tolerate much cutting in non-defense spending...

...Still, King has complained that the film misrepresents his intentions...

...Can this be the Stephen Kingauthor of Carrie (in which a pubertystricken girl's pyrokinetic powers barbecue her high school prom and most of her home town) and Christine (in which a wrecked 1958 Plymouth Fury cybernetically repairs itself and, driverless, mows down its enemies) and Pet Sematary (in which a university physician discovers a Iitystic burial ground that allows him to resurrect first his dead cat, then his dead son, then his dead wife...

...One can think that cutting defense spending increases military strength by forcing the Pentagon to become more efficient...

...The adage Buy on Bad News-Sell on Good News is another way of stating this philosophy...

...If any of these propositions is correct the case for higher taxes is weak...

...Evidence of better management of the program would probably have helped to convince the country, and evidence now of improvement in management would be helpful...

...Because we had known the identity of the hijackers, we could mount a precise operation to seize them...

...It is worth wondering, however, exactly what innocent bystanders are doing in a terrorist camp...

...There are three ways to finance more defense-more deficits, more taxes, or more cuts in non-defense spending...

...And that is the main reason why it is convinced that U.S...

...Sixth Fleet, is virtually an American lake-mare nostrum as first the Romans, and later the British, called it...

...Certainly it would not...

...And, guess what, it was...

...In government budgets as in household budgets there is a law of diminishing marginal utility so that as expenditures for one pur Our Investment Philosophy "Buy Low The Lemley Letter suggests long-term investments in keeping with the Buy Low-Sell High philosophy...

...Like Jackson's book, The Shining is psychologically complex...

...Arguments can be advanced on both sides...

...11...

...That is particularly true for the Mediterranean which, with the presence of the U.S...

...Reagan's achievement was thus born in a most appalling failure of friendly governments to stand together against a common danger...

...If there is more revenue it will be distributed among deficit reduction, increases in various non-defense programs, and increases in defense...

...The tax cut and the resulting deficit are in fact limiting total expenditures...

...Thirdly, the guilty men are not confined to those terrorists who plant the bombs and hijack ships and planes...

...King was not surprised to be dismissed by the Voice...

...as a result, when the available income rises it is not all devoted to one purpose but tends to be distributed among many purposes...

...The legalistic approach to terrorism-which the press was implicitly adopting with its stress on the known identity of the murderers of Leon Klinghoffer-is an absurd one...

...It is a perfectly fair distinction...

...Name Address City State Zip I AS2 RALPH .1...

...Reagan with a rare opportunity...

...But I would not invest much in a McDonald's franchise on that planet, and I wouldn't bet the nation's economic policy on the assumption that the tax cut will increase the revenue...

...Along with Carrie (1974) and the vampire novel Salem's Lot (1975), The Shining typecast King-as his editor feared, but apparently he did not-as a specialist in the violent grotesque...

...Does this make a strong case for higher taxes...

...They are not matters that can be surely resolved by appeals to objective, empirical evidence...

...One can think that there is no significant national security risk, even with the lowered path of defense spending now in prospect...

...One can think that although there is an external threat the serious danger to American freedom comes from the increase in spending of the federal government, whatever that spending is for...

...There have been other consequences, but they have been distributional, shifting income from one group to another...

...It must surely be a crisis which provided no lessons for the future...

...It is doubly true under the rules of war...