Rush Limbaugh and George Gilder, Together Again

My friends, it would behoove you to study everything you can get your hands on by George Gilder, a true American genius. Here is the second interview he was kind enough to grant me for my newsletter. Learn it, love it, live it.

Rush Limbaugh

RUSH: You are very gracious, sir, to consent to undergoing another grilling. What I primarily want to talk to you about is your December 18th op-ed in The Wall Street Journal. You made the case that American progress and innovation have depended heavily on genius. But the thing that puts you at odds with much of populist thought in America today is that you say this genius would not flourish in this country without immigration. For people who didn’t read the piece, could you basically recap your theory?

GILDER: All of America’s great achievements have come from immigration. We initially were a nation of immigrants, of course. That was the initial genius of America — that we received people fleeing persecution and oppression in Europe and elsewhere, who found a land of opportunities, new frontiers, in the United States.

This has been true throughout our history. New waves of immigrants have resulted in new upsurges of income, productivity, innovation and achievement. The spearheads of this achievement have always been this “genius class,” as I roughly describe it. I do believe that genius is 90% perspiration. But it does have a genetic content as well. This is a class of people who are just enormously more productive than others, and they tend to go where they’re welcomed, and stay where they’re well-treated.

America has been their land of opportunity for most of the past century. Receiving these immigrants during the Second World War made possible the Manhattan Project, which produced the atomic bomb, which ended the war successfully and then allowed us to continue in the lead in the arms race. This was critical, because it was almost entirely immigrants who created the atomic bomb, the hydrogen bomb, the intercontinental-missile program, the space program. All were heavily fueled by immigration and the geniuses who emigrated to our shores.

RUSH: Is it safe to say that the development of all these projects would not have occurred at all, were it not for immigration?

GILDER: Yes. I don’t think we could have had the Manhattan Project. The Manhattan Project was an achievement of European immigrants, a lot of them Jewish, who brought their genius to the United States and put together the bomb. There were some Americans, but mostly in relatively lesser roles. 
Then, later, all our technologies fed on this input from outsiders — particularly the microchip, which is really the heart of the present, American global leadership. 

RUSH: George, longer than anyone I can recall (aside from those in the business directly), you have been touting the relevance and importance of the computer to America’s future. In your piece in the Journal you cite some of the key inventors of the microchip, developers of that technology, as also being immigrants.

GILDER: The company that really founded the microchip industry in the United States, as the microprocessor industry evolved into the personal-computer industry, was Fairchild Semiconductor. When the parent company tried to control it too closely, the key people spun off and became Intel Corporation. The group at Fairchild and Intel were led by Gordon Moore and Robert Noyce, both of whom were American geniuses and inventors. But most of the other people at Intel, or at least half of the other major contributors, were immigrants. Andrew Grove fled through a field across the Hungarian border in 1956, barely escaping the Russian tanks. 
RUSH: Grove runs Intel now.

GILDER: Yes. Earlier on in his career, he ran a couple of crucial projects at Intel that made them dominant in MOS technology, Metal Oxide Semiconductor technology, which is really the foundation of the whole industry. In every major semiconductor company, and every major semiconductor project, between a third and two-thirds of key contributors are immigrants. Americans have just not focused on these hard-core engineering skills.

RUSH: But is that a lack of genius indigenous to America?

GILDER: I think it’s the result of a variety of things. In software, which entails similar degrees of genius, the numbers are not so high: Probably 10 to 15% of the major contributors to America’s software predominance an immigrants. But they are critical contributors. It’s not this overwhelming phenomenon that one discovers in microchips. But both of them were absolutely critical to the personal-computer industry, which, in turn, is the driving force of American economic growth and the spearhead of world economic growth today.

RUSH: A lot of readers — many of them who might not even have computers — are going to argue: “How can you say that? What about all these jobs we’re losing to Japan, jobs we’re losing to Mexico, jobs we’re losing across the seas — the manufacturing jobs that everybody thinks are the heart and soul of this country?” Here you’ve just said it is the microchip and its derivatives which are leading the world today in growth and expansion.

GILDER: Since the ascendancy of the microchip, beginning
around 1970, the U.S. has outperformed all the other economies in the world, overwhelmingly, in job-creation. You just can’t make the argument that we’ve been losing jobs to other countries. We’ve created some 35 million net new jobs in the last 30 years — while the Europeans, for example, have created almost no net new jobs outside of government consumption. The Japanese have created new employment, but substantially less than we have. 
How can we be losing jobs to countries that are creating jobs radically more slowly than we are?

RUSH: But the manufacturing sector is what many people look to and say, “Hey! You can’t be a unionized worker anymore and afford a house. You used to be able to in America in the ’50s. You can’t do it anymore.”

GILDER: Anybody whose livelihood depends on examining union jobs and the performance of unions, or collecting statistics for unions, or mobilizing campaigns for unions, has a great incentive to disparage all this new employment and opportunity in America, because it does largely arise outside the unionized sectors. That is true. The unions have all flocked to the dinosaurs. They all attempt to preserve jobs in old industries that are declining. 
And the new employment has been emerging in semiconductors, software, computer manufacturing, as well as services in software. Manufacturing has continued to grow. We’re the dominant computer manufacturer in the world. We also lead telecommunications and networks. And the Internet, which is entirely an American creation, is now the dominant force in the world economy.

RUSH: Yet you still have, in the American political scene, this anti-immigration sentiment. And many of the people who are showing some moderate signs of success [by] attacking this loss of manufacturing sector jobs are conservatives. Perot’s slightly conservative on balance, you’d have to say, although he’s made his money in computers. Buchanan is turning into a David Bonior in this area, when it comes to industrialized job-loss. 
And people believe it. When they read you saying this, they’re going to scratch their heads, because there are a tremendous number of citizens who believe we’re losing jobs left and right; that the country is going south fast; and that we’ve got to build a wall around America. Yet here you are saying the worst thing we could possibly do is limit immigration.

GILDER: Illegal aliens who come in and are prohibited from having employment, but mandated to receive welfare, are a problem — it’s the welfare state that’s the problem [in that case]. We have a welfare state mandated to reach out to immigrants and induce them to take advantage of all the benefits. You’ve been talking about this on your program. The welfare state is now an enterprise, and it’s “reaching out” to immigrants. The result is that today’s illegal aliens and immigrants are being captured by the welfare state more rapidly than previous immigrant groups. And this is very destructive, because welfare destroys everybody it touches.

RUSH: There’s a rising tide of people who believe that the only way to fix this is to stop all immigration.

GILDER: Rush, it makes no sense. I don’t think it’s very valuable to stop Mexicans from coming to the United States and doing the jobs they do mostly. National Review magazine, on the basis of alarms about illegal immigration, advocates a moratorium on all immigration, which would be incredibly destructive. It would mean that lots of high-technology companies just couldn’t operate in the United States.

RUSH: Let’s construct a hypothesis here. There’s a wall built around America — no immigration. We have embarked on a course of acculturating those who are here, who have not yet learned Americanism. That’s the strategy: Until we can acculturate those who are here, we need to shut down. Are you suggesting that, if this situation occurred, there is not somehow an ability here toproduce the genius amongst those who live in the contiguous 48 plus Alaska and Hawaii to continue this high-tech revolution?

GILDER: For certain key jobs and key inventive roles, there are just a very few people in the world capable of performing them. The numbers are small, and that small number tends to be distributed all around the world. So any company that wants to be absolutely on the leading edge, to get the best people in every field working together to produce some new product — whether it’s a new kind of fiber-optic application for a broad-band Internet, or whether it’s a new kind of digital disk, or a new Internet computer, or whatever it is — those people have to command the best in all these fields. If they can’t get the best people to come to the United States, they have to go to the best people. That’s just a fact of life.
And it’s not new. It was true about Henry Ford, when he was starting Ford Motor Company. Ford was the leading-edge company in the world economy, and he “imported” a whole bunch of people from Scotland, England and Germany to help him build his cars. Key advances in Ford Motor Company were attributable to immigrants. When you are leading-edge, you are effectively the spearhead for the entire planetary economy — [so] you’ve got to get the best, wherever they are. That’s true about a lot of companies in the United States.

RUSH: Isn’t it also true that America is one of the few places where genius can flourish?

GILDER: That is right. So it would be horrendous, not just for the U.S. but for the world, if you stopped the geniuses from coming. But there’s another point: For the last decade or so American culture — the public culture, the TV culture, the mass culture — has been kind of hostile to genius.

RUSH: They’re hostile to all achievement.

GILDER: Correct. You, of course, have been the leader in making the case against this hostility in our culture. But the schools are amazingly hostile to genius. The result has been that American culture does not produce as many of these people as it did in the past. Asians who come over and can hardly read the language are thus immune to most of the seductions of the welfare state and to the seductions of the imperial National Education Association establishment. These newcomers dominate the schools [and ignore] all these distractions — while Americans are so attuned to the anti-achievement culture that they regard these activities as beneath them.
So the immigrants, ultimately, will help. You get these people in high schools winning the valedictorian awards and going to the best colleges. It creates a competitive counterforce that I think will regenerate American culture.

RUSH: Back to this resentment of achievement. We have these high-achieving immigrants now being aced out of entry into various colleges, because we’re trying to not “humiliate” people. We are limiting the number of high-achievers so as to spread the opportunity around to others. The goal now is that everybody will pretty much be the same, in terms of equality of outcome.

GILDER: That is, of course, a menace. If you really want to have equality, you can have everybody equally poor.

RUSH: There are those striving for it, even as we speak.

GILDER: Exactly. And if you have a moratorium on immigrants, you’ll be making a major contribution to it. Because a lot of these immigrants are very aggressive and creative and innovative and some of them are geniuses who can revitalize an entire economy. 
Pat Buchanan — who is correct about many things — has, I think, been somewhat twisted by this aspiration to cut into the unionized lower-middle-class Democrats Perot is alleged to have attracted. It is chiefly a political appeal he’s making; he’s trying to expand the Republican parry. I think he’s very smart. But they’ve stumbled on a bad one when they seriously talk about a moratorium on immigration. Not just a slight little error, but a truly deadly mistake.
RUSH: It resonates, though, because there’s a new nationalist fervor among people who believe their jobs and livelihoods are being taken away from them. I think they are largely union people who’ve grown up in unionized homes; that’s been the culture that they’ve been familiar with, and that’s what America always was to them, and now it’s vanishing. Union membership is down below 15%. And those who still survive are having to “give back” wage gains and benefit gains. 
They think that anybody who wants to save their livelihood and their tradition is a great American, because that’s what America was. “America was not the computer. It wasn’t the microprocessor, the microchip, or Microsoft. It wasn’t the Internet. America was steel. It was coal. It was the Teamsters and truck-drivers.”

GILDER: We had the Korean War. There were bodies coming back in bags, and three recessions, and people lived eight or nine years less.

RUSH: And you had to have a bomb-shelter in the back yard. You had to get civil-defense instructions, and to see that the drinking water changed every three weeks in case they nuked us.

GILDER: And, in many of these same union families, their parents came here on a boat and struggled in some appalling jobs, by anybody’s standards today. I mean, to celebrate coal miners’ jobs! One of the great triumphs is to get beyond this kind of work, where people died years younger. It just is a false nostalgia. Here we had, during this early period toward which people are nostalgic, two World Wars, the Great Depression, the Korean War.

RUSH: It’s an economic nostalgia. They remember the days where you, on a salary of $12,000 a year, could buy a house, and could afford to send your kid to college, and there were no credit cards, so you didn’t go into debt. And now the average cost for a house is 10 times what anybody makes a year.

GILDER: But the average house is 20% bigger than it was, and 79% of new houses have air-conditioning.

RUSH: So you would agree with the premise that every day in America is a better day.

GILDER: Yes, absolutely! And my grandchildren are going to live phenomenally, incomparably better than we do.

RUSH: Despite what happened to Don Shula, let me go to one more thing in your column, because this really intrigued me. You know, if I didn’t have my mind, I would like to have yours. In fact, I’d probably rather have yours anyway. But you say the current Republican fervor to balance the budget is “Hooverian.” And that they’ve wasted a year on this premise.

GILDER: When you [make] a balanced budget your goal, you play into the hands of the Democrats. You immediately put the focus on cutting government spending. So your whole campaign is perceived by the people — who get their information largely from the media megaphones — as negative. The Republicans are somehow going to cut spending drastically, and this terrifies the 33% of Americans who are dependent one way or another on government jobs and subsidies.
So you end up terrorizing millions of people, but you don’t achieve anything of value. Because Democrats succeed: As a result of this threat, they succeed in mobilizing sufficient political force to stop major cuts. Meanwhile, the things worth doing, the things people will really enjoy — tax-rate reductions, privatization, deregulation, all these positive programs Republicans should push and you’ve been pushing for years — get lost. 
So we end up just talking about balanced budgets seven years from now. Who the hell cares?
The last time we had a balanced budget was 1979. It was an all-governmental balanced budget, and we [also] had a trade surplus. Yet the whole private economy was in the red. With the Reagan years, America’s assets have risen, since then, from about $17 trillion to $40 trillion. Yet we’re speaking as if the Reagan Administration was some kind of orgy of debt.

RUSH: Bit is it an error of substance they’ve made? Or an error of strategy? Because obviously what they’re trying to do is nor just balance the budget. They’re trying to end the welfare stare. They’re trying to reduce the size of government so as to make more prosperous the individual. You would agree with that, wouldn’t you?

GILDER: I agree with their visions. I don’t agree with their tactics — and their tactics have now, in my judgment, largely subsumed their vision. So they end up essentially attempting to achieve something called “balanced budget” by cutting various government programs. That is a completely negative formula, and it’s political poison. Moreover, it doesn’t achieve any good results

RUSH: But I am in favor of ending a lot of government programs. I’m also in favor of the American people understanding why. I don’t want to have come up with a strategy to fool the American people — perhaps, to win, you must. But I would love to be able to educate the American people, to say: “This program is worthless. It’s wasteful. It doesn’t need to exist. We don’t need to be paying you to conduct sleigh-rides around herds of elk in Jellystone National Park. And I’m not going to sit here and take your job away from you without telling you why. I’m going to make sure you understand this is not a function of government.”

Is that strategy a guaranteed loser, because so many people have now been indoctrinated to the degree that they depend on government, and panic if they think it’s not going to be there?

GILDER: I think you have to start by cutting tax rates. Big tax- rate reductions would be entirely positive. They would pay for themselves. They would enrich the country. They would make Republicans popular — despite what the polls happen to say.

RUSH: The Democrats would do the same thing, though. They would call them tax cuts for the rich, and you’d still have the same arguments that are taking place now. Because Democrats are not going to lay down and let happen what the true objective is, which is to reduce government, regardless of how the Republicans characterize it.

GILDER: To the extent the goal is defined as cutting back government programs, the Democrats win. To the extent the goal is defined as unleashing the American economy, creating huge numbers of new jobs and opportunities, reducing tax rates, deregulating bureaucracy, we win. The focus on the balanced budget is a mistake, and this mistake was imposed on the party by a pollster. Politicians who follow public-opinion polls earn the contempt of the public. And that is the big danger today, because Republicans on television most of the time are saying something about a balanced budget that isn’t true.

RUSH: Such as?

GILDER: Such as, that it will greatly lower interest rates and produce all these marvelous benefits. This could be achieved by tax cuts, but [not] by the balanced-budget process — because you have to begin by saying tax cuts cost revenue, which is nonsense. Republicans from the beginning agreed to accept the static budgeting method, that tax cuts don’t affect economic behavior. Tax cuts increase revenue, as you’ve explained endlessly, but this still hasn’t penetrated beyond your audience.

RUSH: Well, they’re even afraid to defend the Reagan years on that. But, if you get rid of the deficit, haven’t you freed up a pool of anywhere from $150 billion to $300 billion that doesn’t have to be borrowed by government and, as such, won’t money be in greater supply? Therefore, supply-and-demand would dictate interest rates would come down?

GILDER: That’s an accounting view of the economy. There’s another view, which focuses on asset values. As John Rutledge at the Claremont Institute in California explains, we have something like $40 trillion of assets in the American economy. Those numbers you’re using, relating to the flow of funds into the federal government, are picayune compared to the immense changes in asset-values that go on in response to different government policies. If you cut tax rates, asset-values in general increase. And they increase not by a few hundred billion dollars, but by trillions of dollars. 

Money is relevant only as a symbol of productive services that somebody has offered. This idea that somehow you can I unleash new money which will automatically expand the economy is the fallacy of demand-side economics — and I know you oppose that. Bur the balanced-budget illusion is largely based on demand-side calculations.

RUSH: What about the theories, as advanced by Pete Peterson and others, that if we don’t get a handle on it now, the national tax rate is going to be 84% for a child born in 1990? That Social Security and all of these things that actually should be calculated as part of the deficit but aren’t [will] bleed the economy dry, with taxation on fewer numbers of productive people? They say balancing the budget and paying for what you spend is crucial to keeping solvent all these various contracts we’ve made with generations.

GILDER: Several analysts have questioned the basic accounting functions Peterson and Rudman and that group have been adducing. But, to Peterson, the whole Reagan Administration was an absolutely catastrophic failure. He’s one of these one-hand economists. On the one hand, he can see liabilities. But he can’t count assets — the other hand. So he sees the liabilities of the federal government growing. But he can’t see the tens of trillions of dollars of new assets emerging from these new industries that have been generated and are now the spearheads of global economic growth.

American companies now earn some 47% of all the profits in world economy. American dominance today, industrially, is probably as great as ever before, except immediately surrounding a war triumph. This is much more important than these numbers Peterson talks about.

The Gingrich error was to start by cutting — by threatening — existing programs, rather than by starting with the flat tax. That should have been what they came into office with. Let Clinton make all the arguments about why we shouldn’t have a tax return on a post card. 

RUSH: Can the Republicans win in November?

GILDER: Sure, they can. I think Steve Forbes is really defining the issues on which we can win. To the extent the winning candidate really follows that theme, he can win. What’s your impression of Steve?

RUSH: I love what Steve’s doing. I absolutely do.

GILDER: Do you think he’s beginning to show some real political aptitude?

RUSH: I think he’s learning. I don’t know if it’s soon enough to overcome Dole’s insurmountable lead. It’s not over till it’s over but, boy, it looks awfully doubtful for anybody but Dole.

GILDER: A lot of people must tell you this, but you essentially did it in ’94. And you really could greatly change things in ’96. I think you could shape the situation and force Dole to respond to your position, because you really are the foundation of the Republican Party now. It’s a hell of a responsibility, Rush!

RUSH: Well, somebody has to do it.

GILDER: Why don’t you run? 

RUSH: I don’t want the pay cut.

GILDER: That’s right! But you could make these guys face this issue. They believe that Reagan’s tax cuts were a mistake.

RUSH: They do, because to them it’s a zero-sum game. They have no understanding of the expansion capabilities of people keeping what they earn. George, let’s talk again.

GILDER: Obviously, any time.