The Case for Sound Money

0:00Governor, it's my privilege to welcome you to the Mises Institute Brown Bank Seminar and my privilege to introduce you and welcome you. And I wanted to say a few words about you. Uh-oh. Governor and I have been friends for a long, long time. I think the first time I ever met him, he was raised in the Lynette Island, but he had his grandparents here. And he used to come over when we were about that high and made him first then but his father decided he needed a little more discipline so he sent him off to a military school at Baylor and he was a great football hero there. He came to Auburn following in his father's footsteps whose father was a great sports hero here. Bob Game on a football scholarship and I think served in the best backfield Auburn ever had.

0:51Freeman James Middleton and Childress and he won all SEC and all American honors. He was number 23 in the program but number one in the hearts of the Auburn fans. And went on to play a while in pro football and then went back to Mobile and worked a little bit I began to work on an idea that was sort of the entrepreneurial dream of starting your own business from scratch. I came back to Opel Ica, where everybody knew him and trusted him and believed in him, and were willing to put some money in an idea that he had. So he started a business in his basement, he and one employee, and there was an idea of how to make plastic barbells for the coming leisure time industry.

2:06I can tell you from our discussions then and our discussions today that he is a rock-solid Jeffersonian who believes in very frugal, limited constitutional government, and even more rare in political circles, he's a person of absolute integrity, so those are rare qualities to find in the political field today, and he's got those, but most of my surprise came He came to my office one day and said he was going to run for governor and I was dumbfounded and he said, but I'm going to run as a Democrat. I said, oh no. But the poll showed a Republican could not get elected under any circumstances back in those days. He didn't, he chose not to run for a second term but ran again in 94 and was a second Republican governor but at this time it was on a level playing field.

2:59I was elected, it was a little skewed by the controversy in the Democrat party, but he won a very highly contested Republican primary and then beat the incumbent governor, Jim Folsom, and really has done a great job, and the Republican party has been benefited greatly by you being the governor, and I think this year seeing the strong Republican sweep is partly attributed to you, He has to speak to the Institute today on a subject that's real close to his heart that he and I have talked about a long, long time. And if you're going to have honest money, you need a gold standard. And so his talk today is on the moral case for the gold standard.

3:47So with that, Governor, we welcome you to the Mises Institute. Thank you. John is very generous in his comments, and he has been a good friend. He is a lawyer, too. and it's a pleasure to be here with Lew Rockwell and Dean Foer and Mrs. Foer, two people that have a very warm place in my heart, going back many, many years and during my first administration, Dean Foer came down and worked with us for several years, he's always been an inspiration to me and if you get to know him as I have, he will be an inspiration to you, Dean, it's a great pleasure, It's a pleasure just to run into you this morning. That's good, but more of a pleasure to see Mrs. Ford. It would be perfect.

4:51I think, as John has laid out the framework for our discussion, I'd like for you to direct it more or less. And what I might do, with your permission, is to give a framework of discussion, and then really answer questions, and hopefully questions will lead to pretty good orientation of the issues, if that's permissible. You know, economics is more than statistics, economics is a philosophy, or should be, or should have a philosophical base, I think.

5:45It's a greater part of justice, because if you coin the phrase, which is a new phrase, Justice. That really is what our Constitution was all about, because a person isn't free to control the necessities of life, you're really not free. Another aspect of this institute that I like, you seemingly, from the publications that I get and I read them all, every one of them, You are forced to look at history, and I believe that is a great shortcoming in our society.

6:33It is a lack of knowledge of history and a love of history. I get into arguments with people sometimes on something as fundamental as the separation of powers doctrine, the absolute linchpin of our former governor, which you're talking about. I'm very distressed about that, but I'm getting off of the subject, but I'm going to try to make next year National History year. And I've got to get up here with the Dean of History and the same at the University, but we have got to reinstate that. And I'm not getting off on a tangent, but you know, high tech, whatever what that means is fine. Mathematics is fine, and I'm an engineer, and all of that is fine. Rockets and what have you.

7:21But without a base, a philosophical base in the knowledge of history, it's, to my judgment, of naught. It just doesn't amount to anything. So, let's blend background and in thinking through that scenario, one of the folks in my office put an article that I had written a couple of years ago that kind of I think I think you wrote an addendum that you or someone from here wrote relative to this particular issue.

8:16But I'm going to read it very, very quickly, and this came in as an afterthought because I want us to get into economics. I want us to get into things like why is it that you've got to have two paychecks today to live as well as you could off of one paycheck 25 years ago, and I want us to get into what the feds were doing, liquefying Wall Street when she fell out of bed in 1986, and a number of those things, but I want to set a background for that. We'll certainly get around to the Federal Reserve and all of their transgressions and sins. Vision isolated from the past as many blind spots. Churchill observed, thus ended the Great American Civil War, the North was plunged to death, the South was ruined, the material advanced and the United States was cast back to a spell, Reconstruction followed the ashes of war. It kind of brings us up from the revolutionary days to the Civil War.

9:23Young men and women ventured westward in America connected by rail and telegraph, infrastructure financed largely by foreign money. Railroad towns boomed, and off-track communities faded. The process repeated 100 years later by an interstate highway system. The nation was free of military involvement, and entrepreneurs and vendors created wealth and multiplied as strong as the economy in the world is ever known. From Stanard, Orr, Campbell, Super, DuPont, Bell, Telephone, Edison, Electric, the list grew from Bob White, the open horse, Steel Furnace, Electric Bub, and Horseless Garage, all discovered in Texas, Pennsylvania. The business was the business of America during this period. The South remained primarily an agrarian economy. What Churchill aptly dubbed the Terrible Twentieth began with war, the Boxer Rebellion, the Boer War, World War I, the Russian Revolution, then came the Roaring Twentieth, the stock market crash, and the very Great Depression.

10:18I was born in that depression in 1934. My parents were public school teachers in Lynette, Alabama, which was a cotton mill town just a few miles east of here. Teachers disciplined and taught me to read and write and pay attention. There was corporal punishment at school for misbehaving, corporal punishment for what happened at school, thought it normal. I still do. My teachers insisted I learn the basics, and I did. They gave a post upon me to give to literacy. Then, somber words, World War II, sent chills down our spines, cotton mills ran around the clock seven days a week in the Chattahoochee Valley. Cub scouts, myself included, recycled tin cans flattened by hammers and axes, stacked in neatland boxes and towed them to City Hall for collection.

11:03World War Two ended with the dropping of an atomic bomb on Nagasaki in an event in which history has no antistone. It was a need for a delivery system for nuclear warheads which spurred the development of The Redstone Arsenal and the economic growth of Huntsville, Alabama Germany and Japan lay in ruins, remembering the aftermath of a harsh World War I. Armistice Truman dealt generously with both nations. The economic resurgence of Germany and Japan would challenge the economic competitors of the United States and new generations as little to see that.

11:52The Marshall Plan proved America would be a great people with a giant heart. Its provisions led to restored Europe, which today is a major market for U.S. exports and One of our biggest competitors, the GI Bill, provided education to two million veterans, sharpening their skills and intellect to meet the challenges a post-World War II boom would bring. When China became two, Taiwan quickly became a trade patron with the U.S. and China remains China. And when the Korean War ended in 1953, two buddies of mine, both old and not aged 19, did not return home. It's a haunting feeling until just a good day. Birmingham was a bustling steel town when I was at Auburn. Mobile had a viable maritime base, plants that just glues some gas and couldn't produce enough tires. When I was a freshman in 52, public paper indexes were expanding, the quiet cities were home to major aluminum plants, TBA and redstone.

12:43Arson employed many people, including my wife, to be, Bobby Mooney, who was also a freshman here, she was from Decatur, a rural part of Alabama. Eisenhower warned the nation of a too powerful military-industrial complex, debate over defense Spending continues to this day as defense dollars impact the economy of Alabama and most every other state. As the 60s began, Alabama boasted the highest paid workforce of any southern state. Advertisement for cars, homes and most any other thing worked at a division where insatiable manufacturing was in jump start, employment rate in Lee County was less than 3 percent. Diversified products ran buses to Macon and Bullock Counties to procure enough workers to keep the plant operating 24 hours a day. In the state highways, chains, transportation for Athens markets were shipped at reasonable prices by water, rail and truck recombinations thereof.

13:34California mushroomed as migration continued its westward thrust, the human crisis passed and none of us knew just how close we had come to eternity, assassins, bullets killed, JFK, MLK, RFK and the Civil Rights Act codified equal rights for all. Prairie and public schools ruled unconstitutional paradoxically just as Hugo Black of Alabama wrote the majority opinion, we were introduced to a great society and told a faraway place like Vietnam, God warned our leaders to stay out of nam to no avail, our government gave us a diet of guns and butter and national apoplexy, Japanese products appeared on retail stores, shelves, cottage industries, like baseball gloves and toys, a man went to the moon as the stage was set for economic decline, the Vietnam war ended, oil prices skyrocketed, The Decade ended with double-digit interest rates inflation and unemployment in Alabama. Unemployment exceeded 15 percent. That was 1980 during my first term when I became governor of Alabama in January of 1979. The coal industry in Alabama employed more than 20,000 miners by the mid-80s, fueling 10,000 miners working in our state. The industry had been priced out of our own markets by foreign competition.

14:55Ronald Reagan was elected president in 1980. The economy boomed as did the national debt from Presidents George Washington and Jimmy Carter. America ran up a trillion dollar debt from President Reagan to Bush. The debt grew to four trillion dollars. The U.S. government milked taxpayers out of billions of dollars with HUD and S&L scandals. The 90s brought trouble in the Middle East and the coalition of allies kicked Saddam Hussein out of the way, using a lot of American muscle. Bill Clinton was elected president in November 1992, the sign was reported to have hung on his Little Rock campaign head, but it was read, his economy is stupid. The pundit's claim to the job issue. Alabama Department of Industrial Relations reported this summer that the job's rate was a low 5%.

15:41The economics of states change constantly. The Rust Belt recovers from economic dolems in Florida and California, to some states experiencing hard times. From USA Today's national news work, December 3, 1992, California is told it cannot issue IOUs. California finance officials who say the state could run out of money in April were told by a federal judge when it again can't issue IOUs to pay state workers. Judge Burrell said paying workers with paper that isn't immediately negotiable in case of its equivalent violates the Fair Labor Standards Act. The state plans to fill state work suit after they were paid in depression-style script during a July budget deadlock between Governor Wilson and the legislature. The state issued 3.6 billion in IOUs. New Hampshire, New York, Massachusetts, Connecticut have all seen better days. Remember this was written in 1992 when some of these states were in the state of of Depression, Louisiana and Texas prosper in an oil boom, they suffer in a glut, 8 Southeastern states were ranked by per capita income this year, this was written in 92 or 94, forgotten

16:50which, Florida 23,000, Georgia 21, North Carolina 21, Tennessee 21, Alabama 19, South Carolina 18,9, Kentucky 18,8, Mississippi 17, UC North Carolina, Tennessee, Alabama, South Carolina, Florida's number one rank is the obvious result of southern migration of huge numbers of middle to upper income retired persons. Georgia's time rank stems from 30 years of sustained economic growth in the greater Atlanta area. We often hear Alabama has superior natural resources and waterways, therefore, her problem is a total lack of political leadership of the past 100 years and we must change our image.

17:39Such political cliches are, I probably think about that statement, natural resources compared with what? or home, the Mississippi River, coal deposits in Kentucky and Montana, oil reserves in Texas, Tammany Hall of the Louisiana Kingfish, if you want to have politicians. Clout it is accurate to say, we are blessed with a good environment, so are many other states. Typing quality political leadership, generate conflicting opinions, images of fuzz, The economic birth caused by long-term inflation is a direct result of the United States government monetary policy since 1964 by both Republican and Democratic administrations in Washington.

18:43in slaves wage earners, the harder he or she works, the tougher the ends to meet. History speaks clearly. External forces that drive economic changes are markets, natural resources, war and climate. Internal forces are political, laws, infrastructure, taxes and inflation, capital and interest. Even so, the greatest catalyst for social advancement in human initiative in a literate society kind of brings you up to date for the last 100 years very quickly. I think that the question I would have to you is going back to the late 70s when we had extraordinary inflation, high interest rates, how those interest rates have come down, but They really haven't come down when you look at them.

19:44Today's interest rate schedule is a confusing thing. The discount rate 3.5% to 3%, prime rate 8.5%, yet the banks are paying 5% on CDs. That's a mix that I've never seen before in my life, John. And it drives, I think, money into a very speculative part, wherever that speculation may be. And here we see the government more and more trying to subsidize speculation. And I don't know where that's going to lead us, but I think we are fundamentally breaking a lot of principles of the past.

20:31I would like to, as the first issue, talk about monetary policy. We know that in our constitution it deals with the concept of hard currency. That means stability in something that will hold its value down through the years. And we know we lived with the gold standard until President Nixon eliminated in the 1960s. Now we have a Federal Reserve that I think is more political than the United States Congress. And I think that is an issue that we need to talk about, and I would start by asking these questions.

21:22This is the statement that it takes two paychecks to live as well today as it did on one paycheck 20-25 years ago. Is there some of the truth to that? Or is that just an old wife's tale? Any other? How would an individual coming into young adulthood view their economic opportunity as we go into the 21st century compared with their parents? For those two good questions There are two very big questions, actually, and I appreciate a lot of what you had to say here. I think it's true that Americans don't know their history very well. But one of the things that we find is that most people can't make the connection between their history and the downward spiral and going off the gold standard.

22:17This break with gold money or commodity-based money is something that most academics, most educated people don't make that connection. They don't see the cause and the effect of the downward spiral that you refer to and the fact that it does take two paychecks to equal the same standard of living of the 1950s. I think that the statistics indicate that the real wage rate in the economy, the real average person working in a factory or a store is making as much or less than what they were doing in the 1970s, but the inflation has covered all that up.

23:11It creates a mirage of improvement because your wages are going up, but your purchasing power that you get from your wages has been eroded away because we happen to be on a gold standard system. Which was a driving incentive to the two paychecks. Exactly. You know, if you can't purchase the food, clothing, shelter, education, so on and so forth, with the one paycheck, then the natural inclination is to send the wife out into the workforce and try to supplement that in some way, or to try to work a second job or to do moonlighting and that sort of thing, because that certainly is the case today.

23:56Well, let's talk about it, and let's talk about it in this vein. Here's a terrible thing that's occurred. If the government sent in police to take you home, to confiscate things, you'd get very mad. And it would be taken seriously and not tolerated, I mean as you can know some of the government actions lately, where some of the law enforcement groups got out of whack out of the west a couple of times, the reaction was terrible, a fellow called his name Jule up in Atlanta that the FBI accused of setting a bomb. We are upset about that and you're reading the newspapers, how horrible it is. It endangers our freedom and our opportunity. But I can't get anybody angry about this monetary policy. How are we going to put some zing in that issue? John?

25:07Roosevelt sent the police out and confiscated all the gold. He made the people actually turn It's absolutely amazing to me that the American people tolerated that and put up with it, just to take your personal property just by eating, and that was sort of the beginning and the end for any semblance of money being bagged. Well, there was a movement here a few years ago in Congress, wasn't there, to go back on some kind of metallic standard, or a gold standard? I'm mixed. They got mine before, but they're not going to get it next.

26:01The only conversation I've had with Richard Nixon, which was an alternate delegate in 68, in his long lines and we could go speak to him for something like 15 seconds to pass on so I was there had been a rumor that he was might believe in wage and price control and so I decided that would be my question so I said it's Nixon are there any circumstances under which you would institute wage and price control absolutely no he said you know what doesn't work for the long And then he comes up in 1971, closes the gold window, that's right, puts on wage and price controls, and announces in a television interview that he's a Keynesian economic support, and so in 72 I refused to vote for him as a delegate and let the ultimate vote, but that was the issue that soared up with me and Nixon was the wage and price controls and the gold window.

27:05Well, we can talk about it. What do you think about the Federal Reserve if we don't get the gold standard? What do you say is going to happen? What are the effects that you can Identify Day Relative to the inflation that we have seen over the last 10 or 12 years. Tangible. Can anybody think of anything tangible? Yes sir. I'm just going to emphasize your point about the two paychecks required to support one family. And this seems to me the central government or what we like to think of as the northern government.

27:52The fact that it's driven the wives and mothers of America into the workforce and left children to be raised by strangers in daycare centers seems to me a crime of unbelievable proportions and who knows what the social significance is but it's just building up terrible things for the future and I think you're exactly right that this is a way to get people morally indignant about the sort of monetary policy we've had ever since Nixon. The Cost Push Inflation is something I think no one is talking about. To give you a tangible example to answer your question, I worked for Ford Motor Company for quite some time and watched the cost of your vehicle because of needing EPA regulations Go from about $65 in 1968 to about $965 in 1978 to about $2,800 in 1995.

28:54Now this is additional money you're spending supposedly to get cleaner air and that's a dubious belief anyway if they're really making the air any better off, at least with the later regulations. Certainly the first ones generated some positive things to the economy. So when the government comes along and forces you to buy things that you might not voluntarily One of the problems, and let me give you an example, and I've thought about that often, and the manufacturers did not oppose it very much, that I recall, they did not oppose it. And I kept wondering why, and I don't want to be cynical, but if I'm going to put a car down a production line and the government is going to require me to put three or four or five or ten items on there, that same car and all I got to do is put it on there and put a fat profit on it and then you got to buy, that's not a bad situation, that's communist

30:01capitalism isn't it? Sure, who had the patent on a catalytic converter? That's right. So I'm just saying there's a cost push element here as well as sort of the demand side. The first paycheck I had when I left this great institution was $500 a month working for Caterpillar Tractors and that was enough money to get married, have children and buy Father, how do you respond to this? When I present what's just happened here to my peers, I'm told, one, they have far more than they ever had when they were young, and secondly, their kids have far more than they ever had when they were kids.

31:02You're saying everybody's poor or wrong, and all my peers say we're all better off.

31:12Let me think about that. Well, that's, I mean, debt comes into play. Yeah, debt comes into play. I would not say, I would not say that economically...

31:32One of the insidious things about inflation is that it does benefit some people. Some people are actually helped by inflation. Speculative ventures are helped by inflation. The number one beneficiary of course is the government itself. They're taking in all of these resources from the economy and using them themselves, but also you mentioned what are the tangible effects of the current inflation because it doesn't seem to come out in the CPI as much.

32:18But, of course, inflation can come out anywhere in the economy. It doesn't have to come out in tied detergent prices. It can come out in stock prices, or automobile prices, or land prices, or timber prices, or whatever it happens to be. You know, the inflation can pop out in the economy anywhere. It doesn't have to be in lettuce, in grocery store items. It can be in the stock market. I think that the group of people in the economy who are the primary owners of stock in the economy, the top level, are doing fairly well by this speculative bubble. But it's the people, the two-thirds of the American population who don't own any stock, who don't have any stock-based pension plans, those are the ones that are complaining.

33:09Those are the ones where the paycheck is not making it, it's not getting it there. Yeah, let me get back to your question there. You asked a good question and I didn't really address it as well as it needs to be addressed. I think you're absolutely right. I can't convince my peers. They all think it's great. This isn't part of the problem that your peers have been the recipients of the vast transfer of wealth. One of the reasons that they may actually be better off is that young people are being taxed to fantastic rates to support them. Again, something that started with Nixon. That's when Social Security Medicare really began to thrive as a transfer program. So there's that aspect to it, too. Now, that one works, you know, and nobody will talk about it when we get on to something else.

33:59I have really benefited and I'm really going to get him for tens of thousands more in the next few years if I go through the fancy operations that I might not get, you know, if you weren't going to give it to me. Well, I remember this figure from a couple of days ago, because I was...

34:23The federal dollars that come into our Medicaid in Alabama, and it's for nursing homes only, National Homes only, went from in 1990 from about $67 million to last year to half a billion. The difference, the difference in the rate it went up over those five or six years and the rate of medical inflation which was twice the rate of the consumer price index at the end if you do it on a graph was 200 million dollars so when i first saw that i said my god we must have built a uh 10 times more nursing home beds you know how many we built more zero it's custom those things have gone from ten to twelve thousand dollars per year to write at $29,000 per year. The nursing home operators are getting rich, filthy rich, got to be.

35:40And that is, that is the best prime example of what a national government, of what a national government can do when the people are overtaxed, there's jillions of dollars coming in, they add to that the debt and the deficit, and it's hard to stop it. I mean, the thing feeds on itself, and I believe it is out of control. Thankfully, the President and Congress are talking about stopping it, not stopping, and you hear more talk about a balanced budget amendment, but in that example that I just gave you, it's just one of many, relative to the way the federal government spends dollars, and most people accept it, I mean most, I don't find many people that The only group that I know that will not accept major increases are our 4 year schools, no matter how much money you want to give them, I'll send it all back.

37:15in the whole country, Vice Presidential debate, and Al Gore made one of these snotty comments about gold standards, and Jack Kemp had supported the gold standard at one time, and boy that's stupid and ha ha ha, and of course Kemp kind of backed off a little bit, but it seems to me that for years, really since 1896, at least in the Democratic Party, and the Republicans got on the bandwagon later on, but that politicians have always beaten on the gold standard. I think it confused people a lot to what goes on, to where if you find yourself thinking that we should have a gold standard, it's like it's equating it with believing in segregation or, you know, or that women shouldn't be allowed to vote, you know, that kind of, kind of thing.

38:12And I was wondering, how do you get around that? I don't know. The gold standard, per se, is an issue unto itself. The average person has no reason to think about. and how do you get him to connect that with his financial problems is a very good question a knowledge of history would help back in the late seventies during your first administration you were allied, if I remember right, with Governor King, Massachusetts as governors in favor of gold Can you tell us a little bit about that, and are there any prospects for something similar to that now? Are there governors who share your views?

39:04I do not know. I have not had an opportunity. I just hadn't discussed that with any of them. You've got some... Conservative, I want to say conservative, I use it in the construction sense, governors, Sanctus Tennessee, I think, is fine persons like that would understand what we're talking about. Young governor over in South Carolina, Beasley, and others, but Most governments will say, well, the states have, we have to balance our budget. By a constitution, every state has to balance our budget.

39:52So they are concerned that the federal government doesn't seem to be able to do that. And a balanced budget and a gold standard, you know, it isn't exactly the same. No, I have never heard, I have never heard any, I don't think I've ever heard a political figure seriously, seriously discuss or advocate a return to a gold standard or a partial gold The gold standard, because when you ask them how would you do it, if you did, I couldn't tell you how to do it.

40:38I mean, where would you get the gold? What would the price of it be? You could be sullied. If I said right now, I am proposing a gold standard. And, you know, the question, how would you implement it if it happened? I could not answer that question to you. I wouldn't know how to do that. I don't know where we are, what the stockpile's goal is, what the price should be. What's the goal set up on that? $400,000 an ounce of buy? When we went off of it, it was $37,000, $35,000 an ounce of fish of it. And when it was illegal to own it, the big prediction was that if you legalized it, it's going to go down to $6 an ounce.

41:30The chairman of the banking commission said that. And so, what was it, 1972, 1973, it became legal and you could own it. So it's gone from $35 an ounce, it went up to $850 an ounce, and that's back down to $485. Gold has been around $400 an ounce for the last 5-6 years. Very little fluctuation. The Dow Jones has gone from, what, $2,000 to, it was 5 or 6 a week ago, I don't know what it is, a Dow. So, you get into some pretty serious economic theory, I can't relate to that, I mean...

42:19You know, Murray Rothbard write to that, and I'm not sure what year, but I think he said if you wanted to go on the gold standard this year, then I think it would be worth 3,000 What would it do to loans? Interest rates? I mean, I think we need to keep talking about it, because a thing like a gold standard probably will never be reinstated unless we are in trouble, it will probably take a crisis of some kind.

43:00I think you're right. The founding fathers who set gold in the Constitution, the reason they set gold in the Constitution is that they had had the bad experience, the crises of hyperinflation during the revolution. The continentals became worthless and all that paper money, they lost a lot of money, they lost everything. You know which country in the industrial, which industrial country today is the most sensitive to inflation by far? Germany. Not even a close second. You see, they got bit in the 30s, and out of that came Brother Adolf, and they are the most sensitive government in the country to inflation.

43:47Desperate down through the years, I mean part of our early heritage came from not wanting the king to get in your pocketbook, because kings had done that, I mean that's how they In British game, the French were horrible about it, but I don't know how we're going to get back there. I think from a practical standpoint, what we need to do most of all is try to balance our budget and reduce taxes at the same time.

44:37There are some schemes out there like asset-backed securities where banks today are trying to expand their own credit and this asset-backed security is just one example of many different ways that banks and others are trying to pyramid more credit upon our monetary base. Do you see anything that states can do to try to prevent this sort of pyramidization of the money supply? The only vehicle you would have to restrict banks would be through the banking department, and it would require additional legislation to give them more authority, because banks are pretty well regulated by the federal law.

45:31I think the banks, I think the big banks, the central banks, I think the way they got bailed out from a few years ago, and I think it is a disgrace and there were very few headlines about it. The Fed simply dropped the discount rate to the banks, cut the cost in half. They raise interest, and when you cut your cost in half, if somebody cuts your cost in And what that meant, that the American people bailed out the banks on a massive scale, and there was very little written about that.

46:17And I could not understand that, I don't know if the press didn't pick it up, I didn't hear any politicians talking about it, because it's hard, it's hard for the average person understand but they did didn't mean if i got up made a speech and said all right the banks your bank your local bank your friendly local bank

46:45it's taking you to cleaners

46:52you know Alan Greenspan wrote some of the best This article was out of the red on gold back in the 60s, and I thought then, I said, boy, if this guy could get in a key government position, we would really be in good shape, and you know, but once you get in there, the interests are different. The government doesn't want to go standing there, he's a government official. It was Greenspan who said, again, back in the period you were talking about, he said putting the Federal Government in charge of money is like putting a penny in the fuse box. Yeah, that's right.

47:37Power is a very corruptible, corrupting influence, and probably Greenspan is the most powerful person in the world today, just by low variance in decisions that are made there. Now, if we knew our history, we would know what Andrew Jackson almost did to the central of Bankers, and he understood it. The Madison was the first layman on a 12 inch tree on a rope, and that was his feelings on monetary policy that stole from the paychecks of the average American, and everybody knew it, that's why they didn't take it any further, he would shop, ain't no question about it.

48:36But we have lost our ability to take such decisive action for some reason. I guess we're more civilized, John. Well, you know, to say you can't make a political issue out of it today may be true, but that was a man in the street issue back with Jefferson and Hamilton. That's right. and Jackson, I mean, people understood it because of, I suppose, the more recent history of what happened to the Continentals and they'd all been burned by paper money and I would assume that we, like you say, we're going to eventually reach a point where it's a crisis that people understand. What you'd like to try to do is prevent that crisis from occurring. I think, I read when Reagan first ran in the primary in New Hampshire that he wanted to advocate a gold standard and all his handlers talked him out of it and said, no, don't say anything about it.

49:29It's just, I guess people won't understand it enough right now. I wish y'all would write some good statistics on what inflation has done to the average American. That would be good to see. I mean, I know it and you get it in bits and pieces. But a short paper on it, in layman's language, would be an interesting endeavor. Well, another one of these tangible effects of inflation and easy money, paper money, that we've seen in recent years, and I think that just in the last couple of years, actually since Greenspan has been having breakfast with Clinton, I think, is that the American people are running up huge credit card debts and they're taking out what they call magic checkbooks from the bank now which are home equity loans where you're taking all the equity out of your house and you can write a check for anything, cruise to the Caribbean or a new car or a new basket, anything, whatever, and so the American people

50:35People have gone on an orgy of credit, using, bringing up credit cards and these magic checkbooks and, you know, it's not just the government debt that's being pumped up to astronomical levels but it's actual American debt and people are going bankrupt and they're losing their homes and right now we're in a good economy with low unemployment and if that, if and And when that ever starts to turn down, and that's the, you know, surest law of economics, is that what goes up must come down, you know, when we hit hard times, a lot of these credit cards and magic checkbooks and so on are going to be, really put a pitch on Americans more so than we already are.

51:22If public awareness, if the stage can be set, and more and more people understand what's To move along, if you want to talk about any other issues, the taxes is one, and the cost of government, I mean, the cost of government is ridiculous. When I was in office the first time, Alabama had a population of four million people plus, got the same population day, had probably more people in K through 12 and we had about 30,000 state employees when I left office.

52:10Had adequate fine office space my first time. I mean it was just fine. You go to Montgomery today, It is a high rent district in Alabama, if not the world. Massive, fancy office space that is, it just makes you know it when you see it, because it wasn't needed, and it's so far from early American government what it's all about. And it's something about government that expands. I don't know what it is, but it's something about the nature of it that will first take care of itself, protect its turf, and then expand, and expand, and expand.

52:59Somebody from up here ran from set. You're a libertarian, aren't you? Yeah, you're right.

53:13Welcome to my seminar.

53:19I saw that ad that you had. You know what I told my wife? How about that guy in the morning, bring him to Montgomery? I'm actually looking for a job because they're cutting the budget right now. Well, you sirs, you mean what you said in the ad? He's on my right. Taxes, federal and state taxes. It's true. People work about six months out of the year to pay all those taxes. That's true.

54:11A lot of hidden costs in government. In state government, one of the biggest hidden costs is French benefits. It runs 50% in state Alabama. Pay somebody $100 cost you $150. Our salary, payroll, straight salary in the highway department is $100 million. Total payroll is $153 million. That can't can't go on right now, right now, in the general fund, if we don't do anything, it automatically grows five or six percent a year based on built-in payroll benefits, we don't touch it, it grows an automatic five percent a year, I mean it can't, it can't, it's got to stop What you find yourself, I think you have a duty to recognize it and then the duty to try to do something about it.

55:19Several reasons. Number one, you got a moral responsibility to the taxpayers. From a humanitarian standpoint, we've got a lot of wonderful state merit employees, but if this thing keeps going the days to come, somebody's going to have to take a meat ax. If we act now, we've got a chance to affect a highway soft landing. Probably the same with education. We've got quite a 14 or 15, 4 year school, 30 odd 2 year school, fun keeps going. So, be glad to discuss those issues or any other issues with you that you might want to ask me before I get out of here. Well, the cost of government is something that people just don't understand.

56:09When I talk about public education in Auburn, or it doesn't matter, it could be any school system around the country, they really feel that it's a free good, that people just go and it just expands and that's okay, because no one ever actually has to write out a check or pay the bills. But it surprises people to learn that the average cost of a student going to Auburn High School or Auburn Elementary School is twice the cost, more than twice the cost of what it costs to send a child to Lee Scott Academy or to a private school and they're just flabbergasted that the public schools actually cost more than twice as much to educate a student of a relatively equal quality compared to a private school.

56:58What's the answer to that? Last year we spent our average expenditure in public education in 1995 was $4,000. We have $4,000 of which the state puts in about 60 to 70 percent, locals would be 20 to 30 percent, the feds, this is statewide, would be 10 percent, of course most of that is in the schools. There's very little correlation between dollars spent per child and performance on the SAT scores.

57:46We went up $4,500 this in 1996, so we had a 12.5% increase. Teacher-pupil ratio, classroom teachers certified, statewide average is about 17 to 1. I won't get into a lot that's being done in K through 12, but I think we are making progress. I think in Dr. Richardson, then Dr. Morton, Dr. Baker, we got the best management team in the United States, I believe that. And y'all have been reading about it in the newspapers, where they're challenging everything that walks. And that's 30 years late, but I'm very delighted with the...

58:33We had to codify it in the law. We literally had to codify it in the law. and once it was and that happened and you got some management there to execute it and on that issue, which I have always thought was such an important issue, my experience has been where I have found a strong principal, a strong superintendent, you don't have a good school system, you don't have that, you're in trouble, but no matter what they do, or how good the teacher is, or how much money goes there, until parents get back in this loop again, pretty strong, we're not going to have a society we want, and I don't know, government cannot raise a child, I am convinced of that, totally convinced, might help out some, but the drive, that seems to be something that's cropped up in our society, I have a hard time dealing with it, it's just tough to deal with from a governmental level, but I'm doing all the talking,

59:37Ask some questions or make some comments. Yes, sir. Think about a flat tax, no loopholes, and a standard deduction. I love it. Does it stand a snowball's chance in Hades? I think it could be very saleable. You know, one of the Republican candidates views that totally. And I thought it was credible, but I think it will take time, but yes, I think a flat tax is an idea whose time is close. I think Steve Forbes was right on target. He came down before we ever started and had a long chat with him about it.

1:00:36and I thought he did a good job, I thought his campaign, I thought his strategy was not sound, I mean you could not run for president on one issue which nobody understands, as good as it is, I thought if he could have blended it a little but he may have had a better campaign, but I think he got the point out, I thought he made a tremendous contribution, yes, I think a flat tax, But that would take a cut out of a lot of professions and work in this country. It really would.

1:01:21You know, that's another question I want to ask y'all. I read a book. What's the name of that book? It was a futuristic projection, and they also spoke down, and he was down in Montgomery when President Bush was down there a couple of weeks ago, or I can't think of the book. But he projected a lot about the economy. What was the name of that book, John? Four or five years ago, the book came out, or he's the historian, but it was a book primarily about the economy. I can't think of the name of it. Megatrans. Yeah, he was in Nesbitt. He was in Montgomery a couple of weeks ago.

1:02:06I had a chance to chat with him just for a minute. But in that, he said, could it be that in the 21st century, the question will be, how do you make jobs? We've always thought in terms of providing service and making products. I've never thought about it in terms of how do you make a challenge, and I see that, you know, we've got a lot of lawyers today, we've got a lot of lawsuits, we've got a lot of welfare, and looking after children, and abuse, and that drives our industry within itself. When I was governor the first time, in Montgomery, we had two lobbyists. We had the AEA, and we had Farm Bureau. That was it.

1:02:57Today you've got hundreds of them everywhere. Even the four-year schools are hiring lobbyists out of public funds. Figure that one out. That is an industry. And when these industries get their hooks into the government cash flow, it's hard to get them out. And they're good people. I mean, accountants. I ain't never serviced a lawyer. But accountants, I mean, think of what would happen to people who prepare tax forms, To give tax advice, it was two plus two equals four, John. Well, you know, Governor, we have seminars in here, and we give them papers all the time, where we show that in history, every time the government's been cut back, and they've reduced taxes, and they've reduced regulation, and they've balanced their budget, or they've gone onto a gold standard, and they've made economic reforms, and sometimes that means tossing a bunch of bureaucrats

1:04:30You're just not really set up to start a new business and deal with all of these regulations and so I think that we got rid of the bureaucrats who were regulating us to death and taxing us to death that we could then put those regulators and those bureaucrats to work with good old-fashioned American entrepreneurship. I think you're 100% right but I won't keep hearing you say it because I fight the bureaucrats every day and they wear you down, they wear you down. I think part of the thing is, it's very hard for you to say, okay, we're going to lower taxes, we're going to abolish the Fed, we're going to do these things. It's very hard for us as economists, I mean, we're not the greatest predictors in the world. It's hard for us to come to you and say, look, this is exactly what's going to happen, because it's probably not going to happen.

1:05:19There are other things that happen that... I mean, we just can't predict the perfect outcome. We always have the moral high ground that when you throw a beer crowd out on the street and fire him and he comes and says, look, my poor family doesn't, you know, I don't have a job now to raise my family. I mean, I would just look at him and say, well, yeah, I'm glad you lost your job. So, now some family where the wife is having to work to pay for your salary, now she can go home, or the husband can go home, whoever wants to stay home, they can stay home and raise their children with the Fed. It's hard to predict the outcome of what would happen if you abolish the Fed, but one thing I would tell people is, someone's got their hand in their pocket, and I'm going to get rid of it for you. What do you think's going to happen?

1:06:11That's right. I mean, that's what I find the average person is more and more receptive to understanding that than they were ten years ago. I think if this momentum is not building in your generation, we're in trouble. Real trouble. I think that public perception is very important. I have a patient in the nursing unit of Wesley Terrace, and when I first inquired, the cost was $2,600 a month. And later I said, can you confirm this? She said, no, it's gone up to $27 something. She said, Clinton gave us all a raise. I mean, this is perception, and that's what has to be followed.

1:06:58You're right, and it's taken me a long time. And this group is fighting, I can tell you. They're great. I agree. Yes, sir. Governor, there's one other tax that we have on us, and you kind of alluded to it a bit, but you tried to do something last year in a special session, and that deals with the tort system in Alabama. And I was wondering, I know that after this last campaign, Most people complain it was an ugly campaign, but it seems to me the only people making it ugly were the trial lawyers and Kenneth Ingram. They were the ones who funded that campaign, and also Gene Reese's campaign. But now we hear this, well, what we need to do is appoint judges instead of having these ugly campaigns.

1:07:47Isn't that really an attempt by the trial lawyers to slip their people in the back door with the idea we're going to be highlighted now? No, I think there are a lot of well-intended people that think offices for the judiciary ought to be selected a little different. I'm inclined to think that for circuit judges that they should stay just like they are. I'm inclined to think that for appellate judges, I've got an open mind, I'm not sure yet. But what you want a judge to do, what you're supposed to want a judge to do, you want him to interpret the law or the Constitution and use his best ability to define it as to the with meaning that the people who wrote it intended or the Constitution.

1:08:50Now what we've had, we've had a large dose of judicial activism the last 40, 50 years, which has skewed a lot of things. People actually think if the court rules in a way that they favor, then the court is doing its duty. And back to the history, George Washington, in his farewell address, devoted some language to pointing out that if you change like that, it may appear good at first, but it's the way most free governments come down. I don't know, I have not made a final decision. For circuit judges, appellate courts, you can make a case that the governor ought to appoint, the senate confirm, that's how we do it at the federal system, yet make that judge run for retention at the end of every six years.

1:09:55The problem is, it's a lot, once you're appointed, if let's say the judge turns out like Kenneth Ingram, who's just a lackey for the trial lawyers, it's much harder to get rid of him, if he's got to just run for a, for a, for a retention, for the retention, and it just seems to me that it's very hard to predict what somebody's going to do until they're actually on the court, but this so-called Missouri plan, which I heard a judge in Tennessee years ago call it the Russian plan, that the problem is, once the I don't know the answer to that. Florida has that system. Tennessee does too. California has, and they got rid of Rose Bird, but they had to spend a lot of resources to do it.

1:10:44Now we've put some interesting law on the books that the public had picked up on. One of them was in January 1, 1996, any judge, any appellate judge that has received in aggregate over $4,000 from the lawyer and all the law firm or any clients or agents of the law firm When the list goes on, then the other lawyer can make him accuse himself. Now, that hasn't hit him yet, John. Oh, see, that is the law. Well, now, Judge, who was it?

1:11:30Judge Harrell, I don't know what his contribution list is, but I'm afraid a lot of folks in the business community are going to be disappointed. He's going to have to... But it works both ways, and what you find out, you get these sides that they both have an economic interest. They lose sight, totally lose sight of the law, and they want the judges to construe the law to fit their interests. That ain't what a judge is supposed to do. A judge is supposed to construe the law as the legislators intended it, or as the Constitution intended it, and that's the problem. You know, one of my thoughts on that is democracy's main attribute to good is not so much that it elects the good and the right people, but it allows you to get them out once they're in.

1:12:29The judicial system being changed to the Missouri plan or something like that is supposed to have some sort of panel that will get good people, Good People so the Governor really couldn't make a mistake. But if you leave it up to just running it, who else has got the most money? Who else can run the most money? I think that's the benefit of the Missouri Plan. Hopefully you get good people in there. If you get a bad apple, you do have a way to vote them out. I think the system we've had is just really atrocious. When I started practicing law, it wasn't like that at all. Why did they start out? They discovered a tremendous market. And I've never seen anybody that fell into a pot of gold willingly give it up.

1:13:24But it took them 20 years to do that. It may take us 20 years to get out of this. We're going in the right direction. My first term, let me tell you how it works, my first term court was never an issue, never heard a word. And back in those days, and this wasn't that far back, it was the early 80s, everybody thought Alabama's courts were very conservative, controlled by the utilities, the railroads, that's what everybody thought, highly conservative courts. So what they decided that they needed a statute that would get in venue, in most of the cases back then were tried in Mobile or Birmingham or Huntsville or Montgomery, poor urban areas.

1:14:21So they passed a law in order to be more conservative, Dean, to get the cases out in the rural districts. This was the business community. Like Barber County. Nah. They're in full retreat. They want to get out of Barber County, Greene County, and back into Birmingham. So a bad law at first may appeal to the group that they think they're being favored by, but it's too late so, particularly when you're dealing with a judiciary, a law that's just got to be solid, oh it's going to come back to haunt everybody, that's what we're living through, John's exactly right, I don't know where this tort reform thing, we're going Welfare Reform, Voter ID, Some Campaign Finance Reform, and the budgets will be the major agenda of the session that starts in February.

1:15:23Ballot Access Reform? Voter ID? No, Ballot Access. Let third parties have a better chance of getting over. Yeah, initiative and referendum, and third parties can get on there without too much trouble, can't they? Oh, it's easier to get on, it's easier for the Libertarian Party to get on in Russia than it is in Alabama. We do need ballot access. I don't mind proposing a ballot, I thought we did that last year. I know we proposed initiative and referendum. I thought we changed the ballot access a little bit. The governor asked me to present his initiative referendum program to the legislature in his first term. And while I was speaking on it, we had initiative referendum and recall.

1:16:12That's right, we put the recall there. So I was speaking to a joint session and they began to yell, hang him! This is a citizen of our state, he's entitled to be here, and he's entitled to be heard, so let's all be quiet and listen to him, and after he's through, we'll all hang him. One lesson in politics that I might pass on to you by citing a statement I heard a state Senator Mike O'Day, who's a friend of mine, and we were talking about some of the pressure pact issues and how various politicians reacted to it, and I'm not going to call any names, but he was telling me about the chairman of F&T several years ago, which is the major of Finance Committee and Finance and Taxation, and this particular senator was having a difficult time making a decision, which for the senator I was talking to, seemed the issue was clear-cut.

1:17:26And he said he kept pressuring him and badging him and badging him, and he got more nervous and more nervous, and they excused themselves and went into a room. And the senator that was telling me the story asked the other senator this question. He says, what in the world is wrong with you on this issue? He says, I'll tell you the facts. I am heavily committed to both sides.

1:17:55Governor, we really appreciate you committing some of your valuable time and coming to Auburn and speaking to this seminar. I'm glad to come home. Great. Thank you very much.

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