Wesley Mouch Lives -- in Jurassic Park

GEORGE F. WILL

June 10, 1993|By GEORGE F. WILL

Washington -- At the Cato Institute, a libertarian think tan here, a recent lecturer drolly introduced himself in language fashionable in Bill Clinton's Washington: ''I am an excess of the 1980s.''

He is T.J. Rodgers, president and CEO of Cypress Semiconductor, which he founded 10 years ago with one used computer and no other employee. He is one of those who, in Mr. Clinton's words, ''profited most from the uneven prosperity of the last decade.'' (A question: What would ''even'' prosperity look like?)

Today he is wealthy. But forgive him that sin. His company, which has paid $60 million in taxes, has created 1,500 jobs for employees who have paid $150 million in taxes. They all own Cypress stock, which has generated today's market value of $500 million for shareholders.

''Venture experts,'' he says, ''are wrong more often than they are right. But surely they are right more often than Washington would be.'' If that thought is sensible, the proposed National Competitiveness Act (H.R. 820) is not.

It would get government deeply into business as a venture fTC capitalist, providing loans to, and buying preferred stock in, venture companies. This capital allocation would be done by the Commerce Department, currently run by Ron Brown, the former lobbyist and head of the Democratic National Committee. H.R. 820 could be a political slush fund for compliant companies.

If so, it might achieve the nearly impossible -- making the Commerce Department's record even worse than it is. More than half the almost $1.2 billion lent by Commerce in the last two decades is in default. In the 1970s the Economic Development Administration at Commerce lent $471 million, of which just $60 million has been recovered. And what is the penalty for such failure in Washington? A reward, such as H.R. 820's fresh infusion of taxpayers' dollars. Do you wonder why there is so much failure in Washington?

Rep. Chris Cox, R-Calif., notes that H.R. 820 would add more than $1 billion to the deficit in 1995. It would do so by authorizing the government to buy 20 percent of the equity capital in venture firms and to guarantee the dividends on preferred stock. ''I suppose, therefore,'' Mr. Cox says with tart irony, ''it is fitting that this bill is called the National Competitiveness Act, because will give most private firms the opportunity to compete with government-subsidized securities.''

Or perhaps H.R. 820 should be titled The Wesley Mouch Memorial Bill. ''This whole plan,'' says Mr. Cox, ''reeks of special-interest favoritism and make-work waste for bureaucrats. Anyone who has read Ayn Rand's 'Atlas Shrugged' will see frightening similarities between this statist scheme and the disastrous projects of the novel's arch bureaucrat, Wesley Mouch.''

But Mr. Cox's preferred title for H.R. 820 is The Jurassic Park Act because it will squander money cloning ''new industrial dinosaurs.'' The bill's premise is that Commerce bureaucrats and political operatives make better investment decisions than do authentic venture capitalists and authentic investors who put their own money at risk.

But when private investors guess wrong, the market liquidates their mistakes. When government capital-allocators guess wrong (as they are bound to do much more often than private investors, whose calculations are not colored by politics), the government just relabels its mistakes as ''jobs programs'' and pours in more money to keep them afloat.

Representative Cox quotes Don Valentine, a venture capitalist who helped launch a number of venture companies, including Apple Computer: ''To Washington I say, please do not help us. The world of technology is complex, fast-changing and unstructured. It thrives best when individuals are left alone to be different, creative and disobedient. Go help all the people who know how pork works and who want to be taken care of. But please do not help us.''

Of course Mr. Cox and others have argued in vain. The Democratic-controlled House passed H.R. 820, not to enhance competitiveness but to concentrate yet more power in Washington, further permeating American economic life with the inefficiencies of politics.

Consider. President Clinton wants to raise the top tax rate on the wealthy who do a disproportionate share of the nation's investing; and he wants to impose a 10 percent surcharge on those who have the most to invest; and he wants to increase the corporate rate; and he wants to keep high the capital-gains tax rate that punishes people who increase the value of an enterprise. And yet he has the brass to say H.R. 820 is ''wise,'' presumably because venture capital formation is inadequate. H.R. 820 is a paradigm of government fattening itself by pretending to cure problems it causes.

So, which do you prefer, T.J. Rodgers, the self-described ''excess of the 1980s,'' or H.R. 820, a sample of the excesses of the 1990s?

George F. Will is a syndicated columnist.

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