Loading the Economy enough for a consciously-low estimate: Private sector - Arthur Andersen/Hatch, 1977 State and Local govt. - CRS estimate, 1976 35 $4.3 billion .35 billion .18 billion .08 billion Considering the partial and dated nature of these figures, the fact that inflation in the four years of President Carter's Administration seems likely to average nine percent a year and the dramatic proliferation of programs of affirmative action in recent years, its incremental cost must be clearly in excess of $5 billion - perhaps as much as $7.5 billion. It is essential to remember at this point that $5 - $7.5 billion is only the tip of the iceberg. It is just the incremental cost of compliance - what Dante DiGaetano pays to satisfy his official tormentors. The full economic cost is the better use Mr. DiGaetano could have put his time and money to, the demoralizing effects on his workers and himself, the chances that workers hired under the new regime may not be as productive, the loss of wealth represented by the exclusion of skilled workers, the possibility that he may give up in disgust and apply for a job in the Department of Labor, and so on. This will be many times higher, if inherently less quantifiable. Affirmative action is yet another wedge driven between the American worker and the fruits of his labor. The most obvious wedge is that proportion of the fruits comandeered in the shape of direct and indirect taxes. Affirmative action certainly contributes to this because of the expensive oversight apparatus that accompanies it. But a less obvious wedge is the inefficiency it induces in the productive base. This means that an hour of work yields less fruit. Instead it is spent getting wrong numbers on the telephone system, and hunting for lost mail. Where the worker faces a high marginal tax rate, quite small changes in return can make him decide to go fishing instead. This is exactly what is happening to the American economy. Since 1973 particularly, there has been a drop in American productivity growth that cannot be explained in terms of the changing combination of capital and labor input.18 In real 18. Denison, "Explanation of Declining Productivity Growth," Survey of Current Business, August 1979. 36 Policy Review 19 terms, national income per person employed in the first half of 1979 was below that of 1973. The most obvious culprit is the distortion and misallocation effect caused by complying with federal regulations. Affirmative action is only a small part of this Murray Weidenbaum estimates that total incremental cost of oversight and compliance in 1979 was some $102.7 billion.1 But since it has such a personal impact on the labor force, its dynamic economic impact is probably out of proportion. One can work happily designing a pollution filter, but not if passed over for a promotion on the grounds of race. In any event, affirmative action is a symbol and a symptom of the regulatory socialism which, sprouting with the New Deal, has grown like a kudu vine until our institutions and their classical liberal inspiration are on the point of vanishing from sight.20 Perhaps the best way to look at affirmative action is to regard it as a "rent-seeking" activity, of the sort described by Gordon Tullock.21 Rent-seeking is the process by which individuals and groups attempt to get society at large to pay them a subvention. Professor Tullock has demonstrated that most societies in history have been organized in this way. Government officials and their clients exact income in the form of salaries, bribes and the proceeds of government-sponsored concessions and monopolies. Everyone else invests time and money in evading them - "rent avoidance." Professor Tullock gives an example of an entrepreneur in a developing country who knew nothing of the production process in his factory because his time was best spent negotiating with, and paying off, various functionaries. Without (as yet) the venality, the same process is, according to him, under way here. It is significant that Du Pont Corporation has recently found it desirable to appoint as chief executive a lawyer specializing in government negotiations and public relations instead of a chemical engineer. Some of 19. Weidenbaum, p. 22. 20. Theodore Lowi, The End of Liberalism (New York: W.W. Norton, 1969). 21. Gordon Tullock, "Rent Seeking," Working Paper No. CE 78-2-8; and "The Backward Society: Static Efficiency, Rent Seeking and the Rule of Law," Working Paper No. CE 78-7-1, Center for the Study of Public Choice, Virginia Polytechnic Institute. Loading the Economy 37 his time will probably be spent negotiating with EEOC officials about the amount of income to be redirected from Du Pont workers and stockholders to whatever groups are politically important enough to be designated "protected classes." The actual making and selling of chemicals somehow gets shuffled lower and lower in his In tray. From an economic standpoint, it would be better to pay the $5 billion out in undisguised grants. ERRATUM In E.G. West's article "The Unsinkable Minimum Wage" (Policy Review #11, Winter 1979; pp. 83-95), a graphic table was unintentionally omitted. With our apologies to Professor West and to our readers, Table One (see pp. 88-89) is reproduced below. Source: May Current Population Survey, individual records. 5 THE SON OF SEPARATE BUT EQUAL: AFFIRMATIVE ACTION Orrin G. Hatch The legacy of the modern, "activist" federal judiciary has been substantial. In such diverse areas as legislative apportionment, criminal justice, civil rights, environmentalism, and abortion, this judiciary has played the key role in the development of important public policy. It would be no exaggeration to suggest that the federal judiciary—in particular, the Supreme Court has been the major architect of much of the most important domestic and social policy of the United States during the past three decades. In few areas, however, has the high court had as great an impact as in transforming this country's public policy as in the area of what has come to be known as "Affirmative Action." The Supreme Court, in my view, in such cases as Fullilove, (1980)' Weber, (1979)2 and Bakke (1978),3 has been busily engaged in reinstituting the power of the state to distinguish between citizens on the basis of race, ethnicity, and other essentially irrelevant factors. While it took the Court more than sixty years to confess its errors in Plessy v. Ferguson (1896) in upholding the doctrine of "Separate but Equal," it has wasted much less time in moving to reverse the Brown (1954) notion that the Fourteenth Amendment to the Constitution entitled all citizens to equal protection of the laws without regard to race or ethnic origin. In a series of cases compressed within a period of less than six years, the Supreme Court has called into question some of the most enduring ideas of what the Fourteenth Amendment represents. The idea of a "color-blind" Constitution, as referred to by the elder Justice Harlan in his classic Plessy dissent, now seems more remote than during even the most entrenched days of Jim Crow and Theodore Bilbo. The idea of a society in which the law would take no account of an individual's skin color-the great goal of the civil rights movement of the 1950s and 1960s-is now regarded by many as, at best, an exceedingly naive sentiment and, at worst, as one reflecting a commitment to secondclass citizenship, even servitude, for this country's minorities. |