Why Capitalism Has an Image Problem from Charles Murray

A powerful essay by Charles Murray.  So why can't our politicians on either side get behind this line of thought?  Special interests and gerrymandered districts first come to mind.

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Why Capitalism Has an Image Problem

By CHARLES MURRAY

Mitt Romney's résumé at Bain should be a slam dunk. He has been a successful capitalist, and capitalism is the best thing that has ever happened to the material condition of the human race. From the dawn of history until the 18th century, every society in the world was impoverished, with only the thinnest film of wealth on top. Then came capitalism and the Industrial Revolution. Everywhere that capitalism subsequently took hold, national wealth began to increase and poverty began to fall. Everywhere that capitalism didn't take hold, people remained impoverished. Everywhere that capitalism has been rejected since then, poverty has increased.

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A butcher

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Henry Ford with his Model T

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Wall Street traders around 1925.

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The Google office in 2008

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A dry-cleaning store

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Traders on the NYSE floor in 2011

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While Ray Kroc (shown) and Mark Zuckerberg have been lauded as innovators, financial moguls attract more suspicion.

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Mark Zuckerberg

Capitalism has lifted the world out of poverty because it gives people a chance to get rich by creating value and reaping the rewards. Who better to be president of the greatest of all capitalist nations than a man who got rich by being a brilliant capitalist?

Yet it hasn't worked out that way for Mr. Romney. "Capitalist" has become an accusation. The creative destruction that is at the heart of a growing economy is now seen as evil. Americans increasingly appear to accept the mind-set that kept the world in poverty for millennia: If you've gotten rich, it is because you made someone else poorer.

What happened to turn the mood of the country so far from our historic celebration of economic success?

Two important changes in objective conditions have contributed to this change in mood. One is the rise of collusive capitalism. Part of that phenomenon involves crony capitalism, whereby the people on top take care of each other at shareholder expense (search on "golden parachutes").

But the problem of crony capitalism is trivial compared with the collusion engendered by government. In today's world, every business's operations and bottom line are affected by rules set by legislators and bureaucrats. The result has been corruption on a massive scale. Sometimes the corruption is retail, whereby a single corporation creates a competitive advantage through the cooperation of regulators or politicians (search on "earmarks"). Sometimes the corruption is wholesale, creating an industrywide potential for profit that would not exist in the absence of government subsidies or regulations (like ethanol used to fuel cars and low-interest mortgages for people who are unlikely to pay them back). Collusive capitalism has become visible to the public and increasingly defines capitalism in the public mind.

Another change in objective conditions has been the emergence of great fortunes made quickly in the financial markets. It has always been easy for Americans to applaud people who get rich by creating products and services that people want to buy. That is why Thomas Edison and Henry Ford were American heroes a century ago, and Steve Jobs was one when he died last year.

When great wealth is generated instead by making smart buy and sell decisions in the markets, it smacks of inside knowledge, arcane financial instruments, opportunities that aren't accessible to ordinary people, and hocus-pocus. The good that these rich people have done in the process of getting rich is obscure. The benefits of more efficient allocation of capital are huge, but they are really, really hard to explain simply and persuasively. It looks to a large proportion of the public as if we've got some fabulously wealthy people who haven't done anything to deserve their wealth.

The objective changes in capitalism as it is practiced plausibly account for much of the hostility toward capitalism. But they don't account for the unwillingness of capitalists who are getting rich the old-fashioned way—earning it—to defend themselves.

I assign that timidity to two other causes. First, large numbers of today's successful capitalists are people of the political left who may think their own work is legitimate but feel no allegiance to capitalism as a system or kinship with capitalists on the other side of the political fence. Furthermore, these capitalists of the left are concentrated where it counts most. The most visible entrepreneurs of the high-tech industry are predominantly liberal. So are most of the people who run the entertainment and news industries. Even leaders of the financial industry increasingly share the politics of George Soros. Whether measured by fundraising data or by the members of Congress elected from the ZIP Codes where they live, the elite centers with the most clout in the culture are filled with people who are embarrassed to identify themselves as capitalists, and it shows in the cultural effect of their work.

Another factor is the segregation of capitalism from virtue. Historically, the merits of free enterprise and the obligations of success were intertwined in the national catechism. McGuffey's Readers, the books on which generations of American children were raised, have plenty of stories treating initiative, hard work and entrepreneurialism as virtues, but just as many stories praising the virtues of self-restraint, personal integrity and concern for those who depend on you. The freedom to act and a stern moral obligation to act in certain ways were seen as two sides of the same American coin. Little of that has survived.

To accept the concept of virtue requires that you believe some ways of behaving are right and others are wrong always and everywhere. That openly judgmental stand is no longer acceptable in America's schools nor in many American homes. Correspondingly, we have watched the deterioration of the sense of stewardship that once was so widespread among the most successful Americans and the near disappearance of the sense of seemliness that led successful capitalists to be obedient to unenforceable standards of propriety. Many senior figures in the financial world were appalled by what was going on during the run-up to the financial meltdown of 2008. Why were they so silent before and after the catastrophe? Capitalists who behave honorably and with restraint no longer have either the platform or the vocabulary to preach their own standards and to condemn capitalists who behave dishonorably and recklessly.

And so capitalism's reputation has fallen on hard times and the principled case for capitalism must be made anew. That case has been made brilliantly and often in the past, with Milton Friedman's "Capitalism and Freedom" being my own favorite. But in today's political climate, updating the case for capitalism requires a restatement of old truths in ways that Americans from across the political spectrum can accept. Here is my best effort:

The U.S. was created to foster human flourishing. The means to that end was the exercise of liberty in the pursuit of happiness. Capitalism is the economic expression of liberty. The pursuit of happiness, with happiness defined in the classic sense of justified and lasting satisfaction with life as a whole, depends on economic liberty every bit as much as it depends on other kinds of freedom.

"Lasting and justified satisfaction with life as a whole" is produced by a relatively small set of important achievements that we can rightly attribute to our own actions. Arthur Brooks, my colleague at the American Enterprise Institute, has usefully labeled such achievements "earned success." Earned success can arise from a successful marriage, children raised well, a valued place as a member of a community, or devotion to a faith. Earned success also arises from achievement in the economic realm, which is where capitalism comes in.

Earning a living for yourself and your family through your own efforts is the most elemental form of earned success. Successfully starting a business, no matter how small, is an act of creating something out of nothing that carries satisfactions far beyond those of the money it brings in. Finding work that not only pays the bills but that you enjoy is a crucially important resource for earned success.

Making a living, starting a business and finding work that you enjoy all depend on freedom to act in the economic realm. What government can do to help is establish the rule of law so that informed and voluntary trades can take place. More formally, government can vigorously enforce laws against the use of force, fraud and criminal collusion, and use tort law to hold people liable for harm they cause others.

Everything else the government does inherently restricts economic freedom to act in pursuit of earned success. I am a libertarian and think that almost none of those restrictions are justified. But accepting the case for capitalism doesn't require you to be a libertarian. You are free to argue that certain government interventions are justified. You just need to acknowledge this truth: Every intervention that erects barriers to starting a business, makes it expensive to hire or fire employees, restricts entry into vocations, prescribes work conditions and facilities, or confiscates profits interferes with economic liberty and usually makes it more difficult for both employers and employees to earn success. You also don't need to be a libertarian to demand that any new intervention meet this burden of proof: It will accomplish something that tort law and enforcement of basic laws against force, fraud and collusion do not accomplish.

People with a wide range of political views can also acknowledge that these interventions do the most harm to individuals and small enterprises. Huge banks can, albeit at great expense, cope with the Dodd-Frank law's absurd regulatory burdens; many small banks cannot. Huge corporations can cope with the myriad rules issued by the Occupational Safety and Health Administration, the Environmental Protection Agency, the Equal Employment Opportunity Commission and their state-level counterparts. The same rules can crush small businesses and individuals trying to start small businesses.

Finally, people with a wide range of political views can acknowledge that what has happened incrementally over the past half-century has led to a labyrinthine regulatory system, irrational liability law and a corrupt tax code. Sweeping simplifications and rationalizations of all these systems are possible in ways that even moderate Democrats could accept in a less polarized political environment.

To put it another way, it should be possible to revive a national consensus affirming that capitalism embraces the best and most essential things about American life; that freeing capitalism to do what it does best won't just create national wealth and reduce poverty, but expand the ability of Americans to achieve earned success—to pursue happiness.

Reviving that consensus also requires us to return to the vocabulary of virtue when we talk about capitalism. Personal integrity, a sense of seemliness and concern for those who depend on us are not "values" that are no better or worse than other values. Historically, they have been deeply embedded in the American version of capitalism. If it is necessary to remind the middle class and working class that the rich are not their enemies, it is equally necessary to remind the most successful among us that their obligations are not to be measured in terms of their tax bills. Their principled stewardship can nurture and restore our heritage of liberty. Their indifference to that heritage can destroy it.

—Mr. Murray is the author of "Coming Apart: The State of White America, 1960-2010" and the W.H. Brady Scholar at the American Enterprise Institute.

Why I build my own @valueprop documents and presentations #emc $emc

I had a chance to spend some time with the Army CIO this week.  As you can imagine, one gets a little bit of internal management visibility regarding message, value prop, and key asks.  Let me tell you a story about how I prepared.

We have an extraordinary marketing and education department, and as you might imagine of a large Fortune 500 Tech company, we have ample internal resources to draw upon.  Presentations, white papers, podcasts, online training, key messaging, mandatory quarterly training of both technical and soft skill.  One of those most effective tools is the "white board" value prop conveyance.

What this entails is the study of key messaging, and the ability to diagram a scenario, and then effectively communicate the story line to a propective customer in a variety of roles; managerial, technical, financial.  Each individual is then evaluated by both managers and peers on their ability to effectively communicate said value prop.

While the many resources I described above are indeed valuable, the white board  exercises are great, and they paid a huge dividend this week.  

Just how many vendors do you think the Army CIO personally sees?  And of those, how many go in directly with a Powerpoint product pitch created from Central Marketing?  But nonetheless, we had a specific message we wanted to convey, a thorough understanding of the requirements, challenges, and problem sets, and an approach we thought was viable and distinct from the other, lessor players.

And being the good former Army Officer I once was, I painstakingly crafted my presentation.  Short, concise, and to the point, this presentation had undergone a number of revisions and pre-briefs to my management team at both the O6 and General Officer level.  I felt extremely confident that we could successfully deliver this presentation, and were standing tall in the office at the appointed time, shiny suits, spit shined low quarters, with crisp knots in our ties.

Of course, once we're in the office, there is a slight groan as I pass out the printed material.  

"Powerpoint.  Ugh.  Could you do this on a whiteboard without supporting material", I'm asked?

But of course! 

We sat around in very comfortable chairs and held a delightful discussion for almost an hour, with promises of follow-on appointments and deeper dives of the relevant material.  We got everything we asked for and more.  But most importantly, developed a much greater relationship and mutual understanding of the capabilities we could bring to the table.  One not necessarily created from Central Marketing.

And that's the value of the "white-board" story telling.

Essentials About the Federal Budget, separating FACT from Fiction or political talking points.

Everything You Ever Wanted To Know About The Budget* *But Were Afraid to Ask

By DAVID WESSEL

After 25 years of covering the federal budget, I'm still amazed at the persistence of fiscal misconceptions. The distinction between fact and political opinion has been blurred to the point of invisibility. The choices—what spending to cut, whose taxes to raise—are fundamentally political; the facts are not. But the budget is now so sprawling—the U.S. government spent $400 million an hour last year—that grasping it in its entirety is impossible. The budget, I've concluded, is best understood in digestible morsels.

Nearly two-thirds of annual federal spending goes out the door without any vote by Congress.

About 63% of the budget is on autopilot. Congress passes legislation every year to keep the government operating, the phones answered and the National Parks open, but much of the money the government spends doesn't require any affirmative vote. Social Security benefits get deposited. Health-care bills for Medicare for the elderly and Medicaid for the poor are paid. Food stamps are issued. Farm-subsidy checks are written. Interest payments are dutifully made to holders of Treasury bonds.

Congress can alter these programs, but if it does nothing, the money is spent. As Eugene Steuerle, an economist at the Urban Institute think tank in Washington, puts it: "In 2009, for the first time in the nation's history, every dollar of revenues had been committed before Congress walked in the door." The government's total take was only enough to pay for promises that had been made in the past—interest, Social Security, Medicare, Medicaid and so on. For everything else, the government had to borrow.

The U.S. defense budget is greater than the combined defense budgets of the next 17 largest spenders.

About $1 of every $5 the federal government spent in 2011 went to defense, and about 20 cents of that $1 was spent on the wars in Iraq and Afghanistan. In all, the U.S. spends about $700 billion a year on its military. That's more than the combined military budgets of China, the U.K., France, Russia, Japan, Saudi Arabia, Germany, India, Italy, Brazil, South Korea, Australia, Canada, Turkey, the United Arab Emirates, Spain and Israel. The Pentagon counters that the U.S. also asks its military to do more than all those other countries combined—to keep sea lanes open for international trade, for instance, and to be prepared to deploy almost anywhere.

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About $1 of every $4 the federal government spends goes to health care today. That is rising inexorably.

In 1981, spending on Medicare for the elderly and disabled and Medicaid for the poor accounted for 9.5% of federal outlays besides interest. By 2011, the two programs were consuming nearly 25%. In 2021, if current policies remain in place, government spending on health care will consume 33%, according to the Congressional Budget Office, even if the Affordable Care Act survives Republican attacks. The Medicare prescription-drug benefit alone will cost the government more over time than the wars in Afghanistan and Iraq. The war spending will end someday; the drug benefit is permanent.

Firing every federal government employee wouldn't save enough to cut the deficit in half.

The federal government spent $435 billion last year in wages and

benefits for its 4.4 million employees, about 35% of whom are uniformed military personnel and another 29% of whom are civilians working in the departments of Defense, Veterans Affairs and Homeland Security. Eliminating the federal workforce entirely would have saved a lot of money, of course, but it would have pared last year's deficit by only one-third. So where does all the money go? A lot of what government does is siphoning money from some and giving it to others, or occasionally to the same people. About $2.3 trillion, two-thirds of all federal spending last year, went to benefits of some sort for individuals: Social Security, Medicare, Medicaid, food stamps. Another $220 billion went for grants to state and local governments for everything from schools in poor neighborhoods to sewage-treatment plants.

The share of income most American families pay in federal taxes has been falling for more than 30 years.

There are a dozen ways to measure the slice of income that the government takes in taxes, and most point in the same direction. One meaningful metric: The CBO estimates that for families in the very middle of the middle class, the federal government took an average of 19.2% of their income before deductions in 1981 in income, payroll and all other federal taxes. State and local taxes have risen for many, but the federal tax bite has eased. In 2007, just before the recession hit, the CBO estimates that the tax take for Americans was 14.3%—and it has fallen since to 12.4% in 2011, according to the nonpartisan Tax Policy Center. Nearly half of American households—46%—didn't pay any federal income taxes at all in 2011. The vast majority of them didn't make enough money to owe taxes, or they took advantage of tax breaks that Congress has created. About half of those who didn't owe federal income taxes were hit by payroll taxes levied on wages to finance Social Security and Medicare.

The federal government borrowed 36 cents of every dollar it spent last year, but had no trouble raising the money.

Even though the red ink is flowing now at a rate of $1.2 trillion a year, the U.S. Treasury is borrowing at interest rates lower than at any time in at least half a century. But the government still paid $230 billion in interest last year. That's more than triple the $64 billion it spent on all research and development outside of defense, from the National Institutes of Health to the National Aeronautics and Space Administration. When interest rates return to normal, as they surely will someday, each additional $1 trillion in debt will add about $50 billion a year to U.S. annual interest payments, money that won't be available for spending on other things.

This truly is unsustainable. The U.S. today is in the postdenial phase of coping with deficits, the ones that will persist even after the economy regains its health. No one of consequence in Washington argues that deficits don't matter. Deciding what to do about them is contentious because it's about apportioning the pain. Getting the facts straight is a necessary first step.

—Adapted from "Red Ink: Inside the High-Stakes Politics of the Federal Budget," which will be published July 31. © David Wessel. Crown Business/Random House, 2012.

Write to David Wessel at capital@wsj.com

Social Network Aims to Capture Movers and Shakers - WSJ.com

Social Network Aims to Capture Movers and Shakers

By MARSHALL HEYMAN

For many of its New York members, the early social media site A Small World, which launched in 2004, represents a time that already feels like a distant memory, a time, perhaps, of dancing on tables at Bungalow 8. But just as Amy Sacco is attempting to reclaim West Chelsea, so is the former investment banker turned Internet entrepreneur Erik Wachtmeister attempting to reclaim the void left by his former endeavor, which he departed for good in 2009. A Small World, an invitation-only network, despite its original cache, was eclipsed by the more user-friendly Facebook FB -0.83% .

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Kristina Sahlén

Louise and Erik Wachtmeister, who will launch Best of All Worlds Monday

Monday, he and his wife Louise will launch Best of All Worlds, an app and a site meant to help users "discover people, places and things in an intimate environment based on where you're located and people you know," said Mr. Wachtmeister, the son of Swedish Ambassador Count Wilhelm Wachtmeister and Countess Ulla Wachtmeister.

Within the app there are five modes users can turn on and off: social, party, professional, family and private. Each mode allows for different photographs of the user.

Mr. Wachtmeister is keeping Best of All Worlds invitation only also, he said, "to keep an intimate network" and "create organic growth of the platform where everyone is connected by three degrees." He said he felt there was a space in the market for something between Facebook—"which is mostly newsfeeds"—and LinkedIn, "which is extremely boring and professional."

"There's a huge gap in the middle for functional relevance," he said.

A first round of 5,000 invitations went out in mid-May, to coincide with the Facebook IPO, and since then the site has invited 5,000 more users.

As of midweek, Mr. Wachtmeister said 20,000 people had registered on the site from 120 countries.

"These are from all walks of life: fashion, media, banking and politics," he said. "They're people who are outgoing and very connected who travel a lot. Our goal is to capture the top 1% of movers and shakers. But I don't want to drop any names."

Write to Marshall Heyman at marshall.heyman@wsj.com

The Builders - Henry Wadsworth Longfellow (1807-1882) cc @hipchicklette @reneesimcox

The Builders - Henry Wadsworth Longfellow (1807-1882)

All are architects of Fate,
Working in these walls of Time;
Some with massive deeds and great,
Some with ornaments of rhyme.

Nothing useless is, or low;
Each thing in its place is best;
And what seems but idle show
Strengthens and supports the rest.

For the structure that we raise,
Time is with materials filled;
Our to-days and yesterdays
Are the blocks with which we build.

Truly shape and fashion these;
Leave no yawning gaps between;
Think not, because no man sees,
Such things will remain unseen.

In the elder days of Art,
Builders wrought with greatest care
Each minute and unseen part;
For the Gods see everywhere.

Let us do our work as well,
Both the unseen and the seen;
Make the house, where Gods may dwell,
Beautiful, entire, and clean.

Else our lives are incomplete,
Standing in these walls of Time,
Broken stairways, where the feet
Stumble as they seek to climb.

Build to-day, then, strong and sure,
With a firm and ample base;
And ascending and secure
Shall to-morrow find its place.

Thus alone can we attain
To those turrets, where the eye
Sees the world as one vast plain,
And one boundless reach of sky.

All are architects of Fate,
Working in these walls of Time;
Some with massive deeds and great,
Some with ornaments of rhyme.

Nothing useless is, or low;
Each thing in its place is best;
And what seems but idle show
Strengthens and supports the rest.

For the structure that we raise,
Time is with materials filled;
Our to-days and yesterdays
Are the blocks with which we build.

Truly shape and fashion these;
Leave no yawning gaps between;
Think not, because no man sees,
Such things will remain unseen.

In the elder days of Art,
Builders wrought with greatest care
Each minute and unseen part;
For the Gods see everywhere.

Let us do our work as well,
Both the unseen and the seen;
Make the house, where Gods may dwell,
Beautiful, entire, and clean.

Else our lives are incomplete,
Standing in these walls of Time,
Broken stairways, where the feet
Stumble as they seek to climb.

Build to-day, then, strong and sure,
With a firm and ample base;
And ascending and secure
Shall to-morrow find its place.

Thus alone can we attain
To those turrets, where the eye
Sees the world as one vast plain,
And one boundless reach of sky.

--
Stephen.Bates@gmail.com | +1 202-730-9760 

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The Weekend Interview with George Shultz: Memo to Romney—Expand the Pie - WSJ.com

WSJ.com

George Shultz: Memo to Romney — Expand the Pie

By ROBERT L. POLLOCK

Stanford, Calif.

George Shultz has one of the most preposterously impressive résumés in recent American history. World War II Marine (1942-45); distinguished academic economist; business executive; secretary of labor (1969-70); director of the Office of Management and Budget (1970-72); secretary of the Treasury (1972-74); chairman of Ronald Reagan's economic transition team; and the secretary of state (1982-89) who wound down the Cold War.

He's also been an active adviser to GOP leaders including George W. Bush in the years since. And, as I just learned, he's not a bad singer either.

When I called out of the blue on Wednesday morning, the 91-year-old éminence grise was in his office at Stanford University's Hoover Institution and willing to meet for an interview that afternoon.

The executive summary? On the economy: "We have some big problems in this country." He's very concerned about debt, and about monetary, tax and regulatory policy. On foreign policy: "We're weaker, much weaker" abroad than we were two decades ago.

But despite it all, Mr. Shultz is confident that if we get the policies right again, America can regain its footing: "When Ronald Reagan took office, inflation was in the teens, the prime rate was in the 20s, and the economy was going nowhere. We still had the remnants of wage and price controls, particularly in oil and gas. And Jimmy Carter said we were in 'malaise.' It was a bad time. I'm convinced the economy can be turned around because I watched Ronald Reagan do it."

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Terry Shoffner

"It took long-term thinking," Mr. Shultz emphasizes. "I'll give you an example. [Reagan] knew and we all advised him you can't have a decent economy with the kind of inflation we've got. . . . The political people would come in and say 'You've got to be careful, Mr. President. There's gonna be a recession [if the Federal Reserve tightens the money supply]. You're gonna lose seats in the midterm election.'

"And he basically said, 'If not us who? If not now when?' And he held a political umbrella over [Fed Chairman] Paul Volcker, and Paul did what needed to be done. And by late '82 early '83, inflation was under control, the tax changes that he made were kicking in, and the economy took off. But it took a politician with an ability to take a short-term hit in order to get the long-run results that we needed."

Is inflation a primary threat today? Not an immediate one, says Mr. Shultz, "but it's a building problem because of all this liquidity that's being stored up. . . . They [the Fed] think their contribution to doing something about [our economic troubles] is very easy money. Well, by this time money is very easy. It doesn't have to get any easier. . . . It takes other things to get the economy going—not more money."

Mr. Shultz dwells at length on the national debt, and on the Fed's role in enabling it: "It's startling that in the last year, three-quarters of the debt that's been issued has been bought by the Fed and the balance has been bought by other countries, so U.S. citizens and institutions are not on net buying U.S. debt. . . . The Fed doesn't have an unlimited capacity because when it buys the debt what it's doing is monetizing the debt. Sooner or later that has got to get out into the economy. Can't be held forever. And when it does in that kind of volume—as Milton Friedman taught us, inflation is a monetary phenomenon—it's gonna be hard to control."

As Mr. Shultz sees it, there is plenty of empirical evidence about which policies promote growth and which don't.

"I think the things that need to be done are sort of in the air, and you almost feel as if everybody knows what they are," he says. "It's quite apparent that we need to have another round of the 1986 tax act. That is, clean out the preferences and lower the rates. . . . It's also not a mystery that our corporate tax rate is way too high and there are preferences there that could be cleaned out."

For Mr. Shultz, the tax issue is not just about rates—though he believes lower rates often produce more revenue than higher ones, and "it's the revenues you're looking for"—but about predictability.

He asks me what sports I like. "Let's talk about football. . . . You want to know the rules and have an impartial referee, but you also want to make sure somebody isn't going to come along and change the rules in the middle of the game. . . . Now it's as though we have all these people who have money on the sidelines and we say 'Come on and play the game,' and they say 'Well what are the rules?' and we say 'We'll tell you later.' And what about the referee? Well, we're still struggling for who that's gonna be. . . . That's not an environment designed to get people to play."

Mr. Shultz cites the handling of the auto bankruptcies as an important deviation from rules-based economic policy. The question was "are we gonna have a political bankruptcy or a rule-of-law bankruptcy? Political bankruptcy was chosen. So the result is that the unions got paid off and the regular creditors didn't."

He also cites Washington's "habit of passing bills that are thousands of pages long and you know most legislators haven't even read what they're voting for."

That would be ObamaCare, of course. "I fear that the approach to controlling costs in the health-care business is moving more and more to a wage-and-price-control approach. And one thing you know from experience is when you control the price of something, you end up getting less of it. So if you control the price of health-care providers, you will have fewer of them and that's gonna wind up as a crisis. The most vivid expression of that . . . was Jimmy Carter's gas lines."

Experience. Examples. Evidence. Shultz themes.

As we turn to foreign policy, the national debt again looms large: "Now remember something. Alexander Hamilton, our first secretary of the Treasury, and a very good one, redeemed all of the Revolutionary War debt at par value, and he said the 'full faith and credit' of the United States must be inviolate, among other reasons because it will be necessary in a crisis to be able to borrow. And we saw ourselves through the Civil War because we were able to borrow. We saw ourselves able to defeat the Nazis and the Japanese because we were able to borrow. We've got ourselves now to the point where if we suddenly had to finance another very big event of some kind, it would be hard to do it. We are exhausting our borrowing capacity."

Mr. Shultz is not an alarmist about the rising power of China. He believes Chinese leaders understand their interest in having good relations with the United States. He is withering in his critique of those who would blame cheap Chinese labor or a cheap Chinese currency for U.S. economic problems:

"We are consuming more than we produce and we've done that a while and we're complaining about the fact that we have an imbalance of trade with China. But if you consume more than you produce, you have to import. It's just arithmetic. And if you spend more than you earn, you have to borrow. It's just arithmetic."

Mr. Shultz is more concerned about the Middle East, an area where he concedes even the Reagan administration struggled, "just like everybody." So what would he do about the threat of an Iranian bomb? Is he concerned we haven't seized the current opportunity to weaken Iran's ally in Damascus?

"[Syrian President Bashar al-Assad] and the Iranians have been a strategic adversary. Gadhafi was sort of a tactical adversary. . . . I think I would have said to the Turks, 'I see you are providing safe havens on your border and probably you could use some help. We're there with you.'"

He also thinks we can have a deterrent effect without major military strikes. He recalls an episode from the 1980s when the U.S. Navy became aware of Iranian efforts to mine the Persian Gulf: "We boarded the ship. Took off some mines for evidence. Took off the sailors, sank the ship. Took the sailors to Dubai, I believe, and said to the Iranians 'Come and get your sailors and cut it out.'"

What about Mitt Romney? Is he running on the right themes? Will he have a mandate if he wins?

"He made one speech that I thought was outstanding, addressing a long-term problem. And that was the speech about K-12 education, and he pointed out the degree to which the United States is falling back. . . . We know that economic growth in the long run is correlated to education achievement."

Could he recommend one book for Mr. Romney to read this summer? "This book that John Taylor"—the Stanford economist and Mr. Shultz's colleague at Hoover—"has just published, 'First Principles: Five Keys to Restoring America's Prosperity.' You don't have to spend weeks reading it."

Mr. Shultz also mentions the memo his economic transition team wrote for President-elect Ronald Reagan in 1980, recently excerpted in The Wall Street Journal ("Advice for a New President," May 26): "If you just took that and put that into effect again, then we'd be in business."

I try hard to pull Mr. Shultz back toward despair. Aren't we an older, more poorly educated society than the one that climbed out of similar debt after World War II?

"Well, we gotta get after these things! Somehow people are locking into the idea of chronological age. There's another way of calculating age. That is what is the probability of your dying within the year. If you use that way of calculating, people who are 75 today on that basis are 65 as of some earlier time. . . . We need to gear our retirement system in such a way that people keep working longer."

He suggests ending Social Security taxes for people who have paid in for 40 years. The way to meet our demographic challenge is to keep people in the labor force longer, Mr. Shultz says, and not fall for European notions that there is some fixed amount of work to be divided up. "The trick is to keep expanding the pie."

We end on some wistful and optimistic notes. "There's no lack of creativity in the United States." Silicon Valley, he says, "is a giant Stanford spinoff." He waxes lyrical for a moment about Steve Jobs. "My wife tells a story," he says about a party with Jobs's wife. "[My wife] says well 'Where's Steve?'" "Steve is thinking. He's decided to take six months off and think" is the response. "He was a creative genius," adds Mr. Shultz with admiration.

Shultz conservatism is not dour, budget-balancing conservatism. Nor was Reagan's. It is a belief in the human spirit.

And, of course, in economic policies based on evidence. As the interview closes, I am treated to a song—not a note out of place—that was sung by the secretary on Milton Friedman's 90th birthday:

"A fact without a theory is like a ship without a sail. Is like a boat without a rudder. Is like a kite without a tail. A fact without a theory is as sad as sad can be. But if there's one thing worse in this universe, it's a theory . . . without a fact."

Mr. Pollock is the Journal's editorial features editor.

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The Weekend Interview with George Shultz: Memo to Romney—Expand the Pie - WSJ.com

WSJ.com

George Shultz: Memo to Romney — Expand the Pie

By ROBERT L. POLLOCK

Stanford, Calif.

George Shultz has one of the most preposterously impressive résumés in recent American history. World War II Marine (1942-45); distinguished academic economist; business executive; secretary of labor (1969-70); director of the Office of Management and Budget (1970-72); secretary of the Treasury (1972-74); chairman of Ronald Reagan's economic transition team; and the secretary of state (1982-89) who wound down the Cold War.

He's also been an active adviser to GOP leaders including George W. Bush in the years since. And, as I just learned, he's not a bad singer either.

When I called out of the blue on Wednesday morning, the 91-year-old éminence grise was in his office at Stanford University's Hoover Institution and willing to meet for an interview that afternoon.

The executive summary? On the economy: "We have some big problems in this country." He's very concerned about debt, and about monetary, tax and regulatory policy. On foreign policy: "We're weaker, much weaker" abroad than we were two decades ago.

But despite it all, Mr. Shultz is confident that if we get the policies right again, America can regain its footing: "When Ronald Reagan took office, inflation was in the teens, the prime rate was in the 20s, and the economy was going nowhere. We still had the remnants of wage and price controls, particularly in oil and gas. And Jimmy Carter said we were in 'malaise.' It was a bad time. I'm convinced the economy can be turned around because I watched Ronald Reagan do it."

image
Terry Shoffner

"It took long-term thinking," Mr. Shultz emphasizes. "I'll give you an example. [Reagan] knew and we all advised him you can't have a decent economy with the kind of inflation we've got. . . . The political people would come in and say 'You've got to be careful, Mr. President. There's gonna be a recession [if the Federal Reserve tightens the money supply]. You're gonna lose seats in the midterm election.'

"And he basically said, 'If not us who? If not now when?' And he held a political umbrella over [Fed Chairman] Paul Volcker, and Paul did what needed to be done. And by late '82 early '83, inflation was under control, the tax changes that he made were kicking in, and the economy took off. But it took a politician with an ability to take a short-term hit in order to get the long-run results that we needed."

Is inflation a primary threat today? Not an immediate one, says Mr. Shultz, "but it's a building problem because of all this liquidity that's being stored up. . . . They [the Fed] think their contribution to doing something about [our economic troubles] is very easy money. Well, by this time money is very easy. It doesn't have to get any easier. . . . It takes other things to get the economy going—not more money."

Mr. Shultz dwells at length on the national debt, and on the Fed's role in enabling it: "It's startling that in the last year, three-quarters of the debt that's been issued has been bought by the Fed and the balance has been bought by other countries, so U.S. citizens and institutions are not on net buying U.S. debt. . . . The Fed doesn't have an unlimited capacity because when it buys the debt what it's doing is monetizing the debt. Sooner or later that has got to get out into the economy. Can't be held forever. And when it does in that kind of volume—as Milton Friedman taught us, inflation is a monetary phenomenon—it's gonna be hard to control."

As Mr. Shultz sees it, there is plenty of empirical evidence about which policies promote growth and which don't.

"I think the things that need to be done are sort of in the air, and you almost feel as if everybody knows what they are," he says. "It's quite apparent that we need to have another round of the 1986 tax act. That is, clean out the preferences and lower the rates. . . . It's also not a mystery that our corporate tax rate is way too high and there are preferences there that could be cleaned out."

For Mr. Shultz, the tax issue is not just about rates—though he believes lower rates often produce more revenue than higher ones, and "it's the revenues you're looking for"—but about predictability.

He asks me what sports I like. "Let's talk about football. . . . You want to know the rules and have an impartial referee, but you also want to make sure somebody isn't going to come along and change the rules in the middle of the game. . . . Now it's as though we have all these people who have money on the sidelines and we say 'Come on and play the game,' and they say 'Well what are the rules?' and we say 'We'll tell you later.' And what about the referee? Well, we're still struggling for who that's gonna be. . . . That's not an environment designed to get people to play."

Mr. Shultz cites the handling of the auto bankruptcies as an important deviation from rules-based economic policy. The question was "are we gonna have a political bankruptcy or a rule-of-law bankruptcy? Political bankruptcy was chosen. So the result is that the unions got paid off and the regular creditors didn't."

He also cites Washington's "habit of passing bills that are thousands of pages long and you know most legislators haven't even read what they're voting for."

That would be ObamaCare, of course. "I fear that the approach to controlling costs in the health-care business is moving more and more to a wage-and-price-control approach. And one thing you know from experience is when you control the price of something, you end up getting less of it. So if you control the price of health-care providers, you will have fewer of them and that's gonna wind up as a crisis. The most vivid expression of that . . . was Jimmy Carter's gas lines."

Experience. Examples. Evidence. Shultz themes.

As we turn to foreign policy, the national debt again looms large: "Now remember something. Alexander Hamilton, our first secretary of the Treasury, and a very good one, redeemed all of the Revolutionary War debt at par value, and he said the 'full faith and credit' of the United States must be inviolate, among other reasons because it will be necessary in a crisis to be able to borrow. And we saw ourselves through the Civil War because we were able to borrow. We saw ourselves able to defeat the Nazis and the Japanese because we were able to borrow. We've got ourselves now to the point where if we suddenly had to finance another very big event of some kind, it would be hard to do it. We are exhausting our borrowing capacity."

Mr. Shultz is not an alarmist about the rising power of China. He believes Chinese leaders understand their interest in having good relations with the United States. He is withering in his critique of those who would blame cheap Chinese labor or a cheap Chinese currency for U.S. economic problems:

"We are consuming more than we produce and we've done that a while and we're complaining about the fact that we have an imbalance of trade with China. But if you consume more than you produce, you have to import. It's just arithmetic. And if you spend more than you earn, you have to borrow. It's just arithmetic."

Mr. Shultz is more concerned about the Middle East, an area where he concedes even the Reagan administration struggled, "just like everybody." So what would he do about the threat of an Iranian bomb? Is he concerned we haven't seized the current opportunity to weaken Iran's ally in Damascus?

"[Syrian President Bashar al-Assad] and the Iranians have been a strategic adversary. Gadhafi was sort of a tactical adversary. . . . I think I would have said to the Turks, 'I see you are providing safe havens on your border and probably you could use some help. We're there with you.'"

He also thinks we can have a deterrent effect without major military strikes. He recalls an episode from the 1980s when the U.S. Navy became aware of Iranian efforts to mine the Persian Gulf: "We boarded the ship. Took off some mines for evidence. Took off the sailors, sank the ship. Took the sailors to Dubai, I believe, and said to the Iranians 'Come and get your sailors and cut it out.'"

What about Mitt Romney? Is he running on the right themes? Will he have a mandate if he wins?

"He made one speech that I thought was outstanding, addressing a long-term problem. And that was the speech about K-12 education, and he pointed out the degree to which the United States is falling back. . . . We know that economic growth in the long run is correlated to education achievement."

Could he recommend one book for Mr. Romney to read this summer? "This book that John Taylor"—the Stanford economist and Mr. Shultz's colleague at Hoover—"has just published, 'First Principles: Five Keys to Restoring America's Prosperity.' You don't have to spend weeks reading it."

Mr. Shultz also mentions the memo his economic transition team wrote for President-elect Ronald Reagan in 1980, recently excerpted in The Wall Street Journal ("Advice for a New President," May 26): "If you just took that and put that into effect again, then we'd be in business."

I try hard to pull Mr. Shultz back toward despair. Aren't we an older, more poorly educated society than the one that climbed out of similar debt after World War II?

"Well, we gotta get after these things! Somehow people are locking into the idea of chronological age. There's another way of calculating age. That is what is the probability of your dying within the year. If you use that way of calculating, people who are 75 today on that basis are 65 as of some earlier time. . . . We need to gear our retirement system in such a way that people keep working longer."

He suggests ending Social Security taxes for people who have paid in for 40 years. The way to meet our demographic challenge is to keep people in the labor force longer, Mr. Shultz says, and not fall for European notions that there is some fixed amount of work to be divided up. "The trick is to keep expanding the pie."

We end on some wistful and optimistic notes. "There's no lack of creativity in the United States." Silicon Valley, he says, "is a giant Stanford spinoff." He waxes lyrical for a moment about Steve Jobs. "My wife tells a story," he says about a party with Jobs's wife. "[My wife] says well 'Where's Steve?'" "Steve is thinking. He's decided to take six months off and think" is the response. "He was a creative genius," adds Mr. Shultz with admiration.

Shultz conservatism is not dour, budget-balancing conservatism. Nor was Reagan's. It is a belief in the human spirit.

And, of course, in economic policies based on evidence. As the interview closes, I am treated to a song—not a note out of place—that was sung by the secretary on Milton Friedman's 90th birthday:

"A fact without a theory is like a ship without a sail. Is like a boat without a rudder. Is like a kite without a tail. A fact without a theory is as sad as sad can be. But if there's one thing worse in this universe, it's a theory . . . without a fact."

Mr. Pollock is the Journal's editorial features editor.

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Pure Awesomeness: Teaching 'Taco Bell's Canon'

Teaching 'Taco Bell's Canon'

By JAMES E. COURTER

Is it true that college students today are unprepared and unmotivated? That generalization does injustice to the numerous bright exceptions I saw in my 25 years of teaching composition to university freshmen. But in other cases the characterization is all too accurate.

One big problem is that so few students are readers. As an unfortunate result, they have erroneous, and sometimes hilarious, notions of how the written language represents what they hear. What emerged in their papers and emails was a sort of literary subgenre that I've come to think of as stream of unconsciousness.

Some of their most creative thinking was devoted to fashioning excuses for tardiness, skipping class entirely, and failure to complete assignments. One guy admitted that he had trouble getting into "the proper frame of mime" for an 8 a.m. class.

Then there were the two young men who missed class for having gotten on the wrong side of the law. They both emailed me, one to say that he had been charged with a "mister meaner," the other with a "misdeminor."

Another student blamed "inclimate weather" for his failure to come to class, admitting that it was a "poultry excuse." A male student who habitually came late and couldn't punctuate correctly had a double-duty excuse: "I don't worry about my punctual errors."

To their credit, students are often frank when it comes to admitting their shortcomings and attitude problems. Like the guy who owned up to doing "halfhazard work." Or the one who admitted that he wasn't smart enough to go to an "Ivory League school." Another lamented not being astute enough to follow the lecture on "Taco Bell's Canon" in music-appreciation class.

Many students have difficulty adjusting to life in dormitories. One complained that his roommate was "from another dementian." Another was irritated by a roommate's habit of using his "toilet trees" without asking. A female student, in describing an argument over her roommate's smelling up their room with cheap perfume, referred to getting in her "two scents' worth."

Some find you can't go home again. After several weeks at school, one coed returned to her childhood house only to find life there "homedrum."

To be fair, many of the young men and women I encountered over the years are capable of serious thinking on social issues and international affairs. The Iraq War, in what one student called "nomad's land," was very much on their minds. Some were for it, some against it. The most ardent supporter was the guy who described his attitude as "gun-ho." One student lamented that we're becoming a society that "creates its individuals in a lavatory." Another worried that education reform might result in school being in "secession" year round.

When it comes to relationships, it is, in the words of more than one undergraduate, "a doggy-dog world." But I'm sure most of us could sympathize with the girl who said she resented being "taken for granite" by her boyfriend. Some learn the price of intimacy the hard way, like the coed who referred to becoming pregnant on "that fetal night." She might have been better off with the young gentleman who spoke of his policy of keeping relationships "strictly plutonic."

One struggling freshman summed it up for all of us when he wrote, "Life has too much realism." Maybe so, but I don't recommend coping like the guy who referred to getting away from it all by spending the day "sitting on a peer."

Among students' biggest complaints is that they have to write so much in college. In his end-of-semester evaluation, one honest soul complained that "writhing gives me fits." Sad to say, it's not uncommon to hear students remark on how much they look forward to being done with English.

Who knows what language they'll use then?

Mr. Courter recently retired from teaching at Western Illinois University in Macomb, Ill.

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Don't Forget to Pack a Photographer

WSJ.com

Don't Forget to Pack a Photographer

By ANDREA PETERSEN

For summer vacation, the flight is booked, the hotel is reserved, the bags are packed, but what about the professional photographer to take snapshots and make you look supernaturally gorgeous?

A growing number of hotels and resorts are offering sessions with photographers to chronicle guests' vacations. Travelers want to record memorable moments without ruining them stressing about focus and flash. They want more sophisticated shots to share on social media. And vacationers realize that an iPhone may not catch that perfect surfing or skiing triumph.

Professional Vacation Photos

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Jose Jimenez-Tirado for The Wall Street Journal

Local photographer Joseph Jones shoots Chad and Katya Bradford while on vacation at Jumby Bay Resort in Antigua.

In May, Jumby Bay, a Rosewood Resort in Antigua in the Caribbean began offering a "Together Package" for couples that includes a two-hour shoot with a professional photographer. Earlier this year, the Sanderling Resort & Spa in Duck, N.C., launched an "Everlasting Memories" package with a family photo shoot and a YouTube video of the session (a disc of images is guaranteed within a week).

The Four Seasons Resort Bora Bora is planning to unveil a "Romance" room-service menu in August that will feature a couples' photo session. Walt Disney World in 2010 started selling a $350 one-hour "Enhanced Portrait Session." It includes retouching and flourishes such as black-and-white and sepia shots and a customized photo book (prints cost extra). A perk: Getting to wander around the Epcot theme park before it opens to other guests.

A host of independent freelance wedding and adventure photographers are also starting to offer vacation travel shots, seeing them as a lucrative side business.

Jumby Bay said it came up with the "Together Package" because its employees were getting so many requests from guests to take their pictures. The surge in multigenerational trips—often the only time an extended family is in the same place and, hopefully, relatively relaxed—is also boosting the popularity of professional shoots.

When family vacation photos were relegated to dusty albums and slide shows, getting quality pictures perhaps wasn't that critical. That's not so when you're sharing your shots with hundreds—or thousands—of Facebook fans and Twitter followers.

Then there is the perennial vacation photography problem: the missing family member. Shira and Chuck Badger, 35-year-old chiropractors from Henderson, Nev., say they have few vacation pictures that show both of them. They try the extended-arm self-portrait trick but "we always end up with double chins in those photos," says Mr. Badger. "And we're both in good shape." When the Badgers planned their wedding and honeymoon trip to the Four Seasons Bora Bora this week, they booked a photographer not only for their sunset ceremony, but also paid for a photographer and videographer (equipped with an underwater camera) to accompany them on a snorkeling trip to see manta rays.

Chad and Katya Bradford of Arlington, Va., booked Jumby Bay's Together Package for their honeymoon. The couple had photos taken of them on bicycles, lounging in a hammock and on a dock at sunset. The couple appreciated "having one less thing to worry about on our vacation," says Mr. Bradford, a 32-year-old consultant for the federal government. (The price tag for the Together Package starts at $10,500 for seven nights. It also includes meals, a couples' massage and other services.)

Natalie Davis has been vacationing on the North Carolina coast since she was 8 years old and bought a vacation house there last year. "We usually just ask anyone lying in the sun, 'Can you take a picture of all four of us?' " says Ms. Davis, who is from Vienna, Va. This week, she hired husband-and-wife team Mike and Allie Hawkins to shoot her, her husband and two sons on the beach in Duck.

Grant Myrdal, a photographer from Bend, Ore., offers shoots with skiers and snowboarders on the slopes of Mount Hood Meadows Ski Resort. "When someone is going 40 miles an hour down the hill, an iPhone doesn't do it," says Mr. Myrdal, a former photographer for surfing magazines. "I'll snowboard alongside [clients] with my camera firing away and get a sequence of shots of them doing big turns and the spray flying off of the powder," he says.

Prices for vacation photo sessions can range from about $100 an hour to much more. The Four Seasons Resort Hualalai in Hawaii, for example, charges $800 for an hour. A half-day shoot is $3,200.

Abercrombie & Kent, the luxury-travel outfitter, occasionally has clients who hire photographers for their entire vacations. "They just want to enjoy the destination without anyone [in the family] being responsible and having to worry about missing a shot or a memorable experience," says Rob Veden, manager of private travel at A&K. Mr. Veden says many clients hire a photographer for hours or a day.

Most pros offer some retouching to digitally erase blemishes and wayward hairs and brighten eyes and teeth. Tara Leigh, a photographer in Nevis in the Caribbean, has had some more involved requests. For a recent maternity shoot with a pregnant vacationer, the client said, "I don't want my thighs to be that big," Ms. Leigh recalls. Ms. Leigh, who had worked as a fashion photographer in Toronto, was used to digitally shrinking models. Afterward, the client was thrilled. "She said, 'I look like a supermodel pregnant lady,' " Ms. Leigh says.

Some city photographers are starting to get requests. Anna Azarov, a part-time photographer in New York, recently was hired to spend three hours with a vacationing couple from St. Petersburg, Russia. (She got the gig through the couple's travel agency.) Ms. Azarov shot them in Grand Central Terminal, Times Square, Bryant Park and "we took a little cab ride so they could get their photos taken inside a New York cab," Ms. Azarov says. They also wanted shots of themselves in McDonald's and Starbucks.

Last August, Cathy Bork from Egg Harbor Township, N.J., visited Disney World for the 18th time. Her family had not had a professional family portrait taken since their youngest child, Samantha, now 8, was born. They booked a one-hour photo shoot with Disney Fine Art Photography. They were photographed in the Morocco, Japan and France areas of Epcot before it opened for other guests. (Families can't book shots in the Magic Kingdom with its castle: That is reserved for "Disney Fairytale Wedding" couples.)

"We wanted to get a family portrait and vacationing and Disney World is what we love to do," says Ms. Bork. Enlarged photos from the shoot are now hanging in their home. Seven of the photos were featured in the family's Christmas card last year.

Write to Andrea Petersen at andrea.petersen@wsj.com

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