Dick Armey was an Economics Professor at North Texas State University now known as the University of North Texas, Denton, Texas. He also served as a Professor of Economics at the University of Montana, Missoula, Montana; Assistant Professor of Economics at West Texas Agricultural and Mechanical University, Canyon, Texas; Professor of Economics at Austin College, Sherman, Texas; Chairman of the Economics Department at the University of North Texas, Denton, Texas and Distinguished Fellow of the Fisher Institute, Dallas, Texas.
He earned his B.A. at Jamestown College, Jamestown, North Dakota in 1963; a M.A. from the University of North Dakota, Grand Forks, North Dakota in 1964; and a Ph.D. from the University of Oklahoma, Oklahoma City in 1968.


KJ- What do you believe the tax system will look like under a Democratic and Republican government?DA- You have a much clearer picture under the Democrats because they are so focused on income redistribution that there is no doubt where they are going to go! Charles Rangel (D-New York) has made it very clear that he wants to redistribute a trillion dollars worth of income. Barack Obama and Nancy Pelosi want the same thing so you are very clear where the Democrats want to go with taxes.
The Republicans should follow a pro growth policy and we have had some hints from John McCain that is where they are likely to go. However, John McCain’s biggest challenge is that there are a certain number of Republicans in the Congress who will try and take it by way of income redistribution, simply because they get caught up in simple-minded thoughts that it seems fair.


KJ- In your opinion, what should be done to the tax system in the United States?

DA- The United States needs to be thinking in terms of global competitiveness. The United States has uncompetitive tax rules where corporate is double taxated. This is a disadvantage, so the first thing we need to recognize is this double taxation. If you approach it like a flat tax you can get rid of the punitive double taxation, you then provide businesses with tremendous incentives for additional business investment activities.


KJ- Please help me understand the flat tax as I do not understand how it would affect people?

DA- The principle behind the flat tax is that there is no purpose to the flat tax other than to raise money. It diminishes the need for income redistribution or social engineering because the guiding principle is that the government is going to tax every dollar of income that is earned and the income will only be taxed one time at exactly the same rate that we tax every dollar, irrespective of source of earnings. Most politicians are just stupid on purpose on this subject. This thinking is not an accident because it shows that the politicians are narrow-minded and have self-centered interests and that is why you get such asinine construct as earned versus unearned income. The concept is totally without meaning and certainly without merit but it serves the purpose of the politician to say “Well it is only fair that we double tax this kind of income because it really was not earned anyway.” It sort of marks the notion that the labor theory of value is just simple-minded stuff that keeps politicians in office.


KJ- It is my understanding that you have been involved in major battles against higher taxes at the Federal and State levels, including defeating three of four multi-million dollar tax increases in Alabama, Oregon, Washington and Colorado. You accomplished this through Freedom Works so please tell me more.

DA- Freedom Works is an organization of Activists who fight for lower taxes, less government and economic freedom for all Americans. What Freedom Works finds is that even at the State level it is not an uncommon practice for people in office to exaggerate the alleged need for tax increases so they can cook the books, so to speak, to come up with a phony rational to raise the taxes. What the folks at Freedom Works do is spot the cases where it is clearly an exaggerated and highly verbalized case. We collect the facts and then we make it known to the community, the public. Where it is possible, we get it on a referendum. Anytime we can get the tax increase subject to the voters, the taxpayers can defeat it~even in such liberal states such as Washington State and Oregon. We sent our folks in there and rolled back the taxes because people then had a better understanding that it was not what they needed anyway. One thing you must understand about the politicians in public office is that they will say insincere things. Our folks at Freedom Works have a healthy skepticism regarding what they may say. What we have been able to do in so many states is roll back the taxes because we have taken the subject directly to the voters.


KJ- Your work at Freedom Works is a call to bipartisanship. What advice would you give anyone considering working in government or watchdog organizations.

DA- The first thing I would advise is to take your work seriously! It is a great privilege to be an elected member of Congress and you need to approach it like a responsible adult. I am always appalled by the number of people who get into these roles and then end up thinking only about themselves. It is a great privilege to do government service for the lives of other people. One of the things which I have stated over the years, as one of the most lacking ingredients among office holders, is that if they had any self respect, they would not do the undignified things you so often see politicians do. Our government would be much better off if the politicians acted responsibly. One of my lines is “there are only three discernable groups of people in the world that have the privilege of spending someone else’s money~thieves, politicians and children. They all need supervision!”


KJ- It is my understanding you are the author of Price Theory (1977), The Freedom Revolution (1995), the Flat Tax (1996) and Armey’s Axioms (2003). What is one of your favorite Armey Axioms?

DA- One of my favorites is that “You cannot get ahead if you are trying to get even!” In other words, if it is about yourself or it is about power then you lose. In the past, someone came up with the simple-minded thought “Don’t get mad-get even!” What is scary about this simple-minded, self indulgent mind-set is that they pass it off as smart when it is not smart at all.


KJ- What is your impression of the government bailout?

DA- I think there is a growing body of literature now which is making the argument and I believe correctly, that the President and the Secretary of Treasury probably with all of this hot inflated rhetoric description of hard and dire circumstances, created it to be what it now is. There is an old line in economics which states, “Anytime a group of speculators use combined influences great enough~they can cause what they feel will happen to happen.” I think what has happened is horribly irresponsible on the part of the President and the Secretary of Treasury. They went in like Henny Penny screaming that the sky is falling which put horrible fears into the current marketplace. I was personally quite disappointed in them both as they should have known better, they should have done more and dealt with this better.
The market punishes irresponsible behavior and based upon what the government did this is what happened. It is very inconvenient for the market to give the type of correction that it just did. The same thing happened during the dotcom correction so now you have become an inconvenient minimizer rather than profit maximizer. In other words, the thinking is that we are just going to get you off the hook with this sweet little bailout package. Basically, the message the government is sending is that they can do it again and again and the government will get these institutions off the hook. I am afraid that what we are doing now is institutionalizing this type of behavior in our market because we have sent a clear message to go ahead and do this and we will cover you. One of my lines is that “I do not play poker for two reasons~one is that it is very risky and two~I am not good at it!” If you tell me that the government is going to cover all my bets, I promise you that I will be right there at the table betting the house on the pair of deuces.


KJ- What do you think the government should do in terms of going forward with our economy?

DA- This is where I argue that people should be listening to Jimmy Buffet instead of Warren Buffet and recognize first the things we have done wrong. The fundamentals of our current difficulties in the economy are the facts that we have a legacy of bad public policy. There has been nothing to even acknowledge the harm that has been done given the bad policy in place. The fact of the matter is that Barney Frank and others were preventing the corrections from getting into the process. It matters that you go back through and correct all of the bad public law that forced bankers into making bad decisions. Remember another Armey Axiom that “the politics of greed is always wrapped in the language of love.” These people pretended that they were going to make housing more affordable and look what they did. I do not know how you make housing more affordable when you inflate prices, but the whole idea was to serve their political constituency which was favored by the Democrats on these deals. You ended up with markets that just failed! In the private sector, every bad thing that happens in the private business sector people learn from; however, in this case the politicians did nothing to go back and correct the problem.


KJ- How easy will it be to go back and make the necessary corrections in government?

DA- What the government creates you would think that the government should be able to reform. By and large, I am against government regulations but the fact of the matter is that the government creates an institution like Fannie Mae and Freddie Mac, lets it run amok and even encourages it to do so by bailing it out. It is perfectly legitimate and necessary to control that which you create. Normally, I would tend to argue against coming in with government regulations and so forth. However, in the case of Fannie Mae and Freddie Mac, I would say that you will have to regulate it because it is not a real private sector enterprise. It is a public sector enterprise by definition and of course, the last thing the public can do is regulate itself. Unfortunately, the government has very little disposition to correct their own dysfunctional institutions.


KJ- What is your view of government and the economy after the November 4, 2008 election?

DA- In my opinion, it is hard to imagine that anyone could have more irresponsible economic policies than we have experienced these past few years. However, my guess is that we may see an even worse scenario in the sense that if Barack Obama is elected he can pretty well indulge himself with any kind of bizarre public policy position expanding government and then say “Well, it is not much different than what George Bush did during his administration."Having said that, President Bush has done the country a serious disservice by establishing the precedence for the Democrats to run amok which they are predisposed to do anyway. What fascinates me about the Democrats right now is that they are chomping at the bit with irrational exuberance. They are talking about coming back to a lame duck session and getting the ball rolling on their big and expansive government. I am amazed by their audacity and the fact that they cannot even wait for the election result to come in and wait to be sworn in!

KJ- Leader Armey, thank you for taking the time to answer our questions. Your perspective is valuable to the Tax Intelligence Report readers around the world and we genuinely appreciate the time you gave to share your knowledge and experience.
If you would like to contact Former US House Majority Leader Dick Armey, we will be happy to forward a message directly to him at your request.
Please email all requests to Kathleen@etsearch.com.

Kathleen Jennings
Editor, The Tax Intelligence Report
Kathleen@etsearch.com

Dick Armey
Former US House Majority Leader
Washington, DC.