In this article, I focus upon my background and credentials for writing about how economics can be reconciled with Christianity and offer some comments on why I believe that Christians who espouse liberal interpretations of the faith—those who are increasingly being identified as belonging to the “religious left”—hold views that conflict irreconcilably with rational economic principles. Inasmuch as these views seem to prevail within the so-called “mainstream” Protestant denominations and much of the Catholic Church and are therefore widely regarded as authoritative, I believe that they have caused a great deal of damage to the social and economic fabric of this nation and to the world as a whole. Liberals may not be—as I am fond of saying—wrong about everything, but in the fields of liberal thought with which I am most familiar, economic analysis and biblical scholarship, I find them to be wrong indeed.

My career as an economist began as an ABD (all but the dissertation) at the University of South Dakota, where I spent eight years teaching seven different courses per year. I returned to the University of Wisconsin in 1967 to write my doctoral dissertation on the evolution of the Mexican tax system, but it was not until the fall of 1970 that I actually finished that project and thereby completed the requirements for the Ph.D. degree. My dissertation, which I typed myself the old-fashioned way, ran to 625 manuscript pages. In the fall of 1968, I took a position at the University of Alabama, where I remained for the rest of my career. Until 1982, my specialty was the economy of Mexico, and I spent one year (with my family) in Monterrey, Mexico, where I served as a Fulbright Professor at the Universidad Estatal de Nuevo León. I managed to conduct my lectures in Spanish. Incidentally, my interest in Mexico stemmed largely from the fact that I grew up in Amarillo, Texas and obtained my B.A. and M.A. degrees from the University of Texas.

The collapse of the Mexican economy in 1982 convinced me that the government of Mexico was incapable of adopting sound economic policies and that I would only grow more frustrated if I continued to focus on that country. Fortunately, the gentleman who taught international finance at Alabama retired around that time, so I volunteered to take his place. I had had graduate training in international finance and had taught international economics for years, so the transition was not difficult. I continued to teach such subjects as principles of economics, macroeconomics, and economic development. I managed to write a textbook in international finance that was published by Dryden Press in 1992 and was adopted at a number of the leading universities in the country. I never seriously attempted to do another edition of that book, however, and by 1995 I was looking forward to retirement and the pursuit of other intellectual interests.

In my professional career, I elected, at some considerable cost to myself in light of academia’s preoccupation with producing publications in professional journals, to focus much more upon the teaching of economics and finance than upon the writing of scholarly articles that few people would ever read. Over the course of my forty years in the economics profession, however, I did manage to write a number of articles and papers, most of which were co-authored. Most of them dealt with Mexico, but some covered other topics. Never during my professional career, however, did I venture into writing about how Christianity should deal with economics. On the other hand (There I go again.), I did do a good of thinking about that issue.

My religious background is that of a “mainstream” Protestant steeped in the social gospel of doing good. I became a member of the Methodist Church before I entered high school, but I did not become a regular church attender, and I rebelled against my parents’ efforts to make me go. By the time I finished high school, I had become a good Darwinist and didn’t see much point to all this church business anyway. Soon after I married, however, some of my latent Christianity manifested itself, and I joined the American Lutheran Church—now the Evangelical Lutheran Church in America (ELCA)—because that was my wife’s affiliation. Although I did not start to become a serious Bible scholar until the late 1980s, I was a dutiful church attender for some years, and I actually served as church treasurer for awhile. In that capacity, incidentally, I learned to appreciate how important it is to the financial health of a church to have wealthy members who donate generously.

Over the years, my close study of the U.S. and Mexican economies, my growing awareness of the failure of “mainstream” religion to incorporate even rudimentary economic principles into its teaching, and my growing awareness of the disparity between liberal biblical scholarship and what seemed to me to be the truth all combined to turn me politically from a moderate liberal who voted for George McGovern for U.S. Senator into a rabid Reagan conservative who openly endorsed supply-side economics and the privatization of Social Security accounts. Along the way, I also began to believe, despite what I had learned from liberal churchmen, that the passages in red in some Bibles accurately quoted what Jesus said; and I began to entertain such “heretical” notions as thinking that the Gospels, Acts, and Revelation were all written before AD 70. In short, I became a preterist. For some years, however, I was too ill-schooled in the study of religion to know what a preterist was.

Among the consequences of my drift into the part of the world inhabited by a fringe of the “religious right” was my decision to leave ELCA, of which, I suppose, I may still technically be a member. After reading some of the material coming from the bureaucracy and the top leaders of that church, taking into account the directions in which the leaders seemed determined to go, and examining academic work being produced by scholars with links to ELCA, I came to the firm conclusion that I could no longer support that denomination. I hope that a “revolt of the masses” can turn the church around, but I consider that outcome very unlikely during the rest of my lifetime.

The “social gospel” to which I referred earlier largely consists of efforts to improve the economic situation of the “poor” and the suffering, both within this country and in the rest of the world. During the last century, as a consequence of the growth of “progressive” ideologies and the resulting enormous expansion of the role of government, the “mainstream” churches, including the Catholic Church, ceded to government the primary responsibility for improving the lot of the less fortunate members of society. Churches have continued to play a considerable role in this welfare activity, of course. They have done so with their own financial resources and by endorsing the expansion of government’s role as the “great provider.” The ecclesiastical support for the expansion of what I do not hesitate to call the “welfare state” has been particularly forthcoming from the “mainstream” churches, including the Catholic Church. Simultaneously, it has been within these same denominations that liberal biblical scholarship has made the greatest inroads, with a resulting loss of confidence in the truthfulness and integrity of the Bible and a weakening of belief among the rank and file of church members. By enthusiastically embracing the implementation of the social gospel through the expansion of government-financed programs, the leadership of the mainstream churches has sought to preserve the strong sense of purpose that is essential to their survival.

The enthusiastic support of mainstream churches for the expansion of the welfare state cannot be explained, however, solely as an effort to maintain a strong sense of purpose. Not to be overlooked is the fact that the churches are on the receiving end of the spending on various government welfare programs designed to benefit the poor and the suffering. I hasten to add, however, that I do not regard the term “welfare program” as pejorative. I frequently use that term to refer to government spending that is intended to directly benefit groups of people whose economic status is considered to be below the desirable social norm, and I personally approve of much of it. I readily admit, however, that substantial amounts of government spending benefit people who are already well off economically and that some of this spending is difficult to defend in terms of social or economic results.

That churches are frequently beneficiaries of government spending is amply borne out in a statement issued in March of this year by Mark S. Hanson, Presiding Bishop of ELCA. According to Bishop Hanson, Lutheran Services in America (LSA), a joint operation of ELCA and the Lutheran Church-Missouri Synod, brings social services of one variety or another to over 6.2 million persons per year in this country. In providing this assistance, LSA receives billions of dollars from the federal government, 90 percent of which comes from the Department of Health and Human Services. The programs involved include Medicare, Medicaid, Social Services Block Grants, WIC (Women, Infants, and Children Program), Head Start, and others. In addition, the Section 202 program of the Department of Housing and Urban Development allows individual congregations to participate in various food programs, the opening of their doors to the homeless, and to serve as providers of space for WIC and Head Start.

It is not my intention to critique the spending to which Bishop Hanson refers. My expertise as an economist does not extend to the evaluation of the federal government’s welfare spending. I have no doubt that much of it indeed benefits those who are the intended beneficiaries. My point in referring to it is simply to call attention to its existence and to suggest that the churches that receive compensation from the government have a strong financial incentive to support the expansion of the activities involved.

Bishop Hanson’s statement was issued on the same date (March 8) as a joint statement by the heads of five mainstream Protestant churches denouncing the “cuts” in social welfare spending contained in President Bush’s budget proposals for Fiscal Year 2006. The churches represented, in addition to ELCA, were the Episcopal Church, USA; the Presbyterian Church (U.S.A.); the United Church of Christ; and the United Methodist Church. The joint statement is a ringing endorsement of the social gospel version of Christianity. It also exhibits a total disregard of what “mainstream” economists have learned about the process of economic growth. If ignorance is indeed bliss and the leaders of these churches are, in fact, as uninformed about the facts of economic life as this statement suggests, they should be in living in a state of heaven-on-earth ecstasy. I suspect, however, that the blissfulness of ignorance has been exaggerated and that they are not as uninformed as they pretend to be.

Early in their statement, the church leaders commendably allude to Scripture in order to support their attack on Bush’s budget proposal, and they do so without suggesting that the passage to which they refer may not be an eyewitness account of what Christ said. Their chosen passage comes from Luke 16:19-31, which presents the story of a rich man and a very poor man named Lazarus. There we read that the rich man lived in luxury and ignored the presence of the poor man at his gate. Eventually, the beggar dies and is carried by the angels to Abraham’s side. The rich man also dies, but he goes to Hades, from which he sees Lazarus at the side of Abraham. The rich man begs Abraham to have pity on him but is rebuffed. He then asks Abraham to send Lazarus to his father’s house to warn his five brothers to change their ways. Again, he is rebuffed by Abraham, who states (v.31): “If they do not listen to Moses and the Prophets, they will not be convinced even if someone rises from the dead.”

After relating the story of the rich man and Lazarus, the five church leaders attack Bush’s budget proposals for further enriching the well-to-do at the expense of the poor. Particularly heart-wrenching (in intent) is their statement that the proposed budget “would reduce Medicaid by $45 billion over the next ten years, and this at a time when 45 million Americans—the highest level on record—are already without health insurance.” They also assert that the proposed spending “cuts,” in combination with the proposal to make tax cuts permanent, most noticeably for people making over $200,000 per year, amount to asking “the poor to pay the cost for a prosperity in which they may never share.” Finally, after somewhat disparaging the faith-based charities approach endorsed by Bush, they state that although the churches make important contributions through their own charitable activities, “neither we, nor our Evangelical brothers or sisters, nor our friends of other faiths have anywhere near the resources to turn back the rising tide of poverty in this country.” In other words, it is to government that we must look for the financial means and the leadership with which to deal with the problem of poverty.

To fully critique this joint statement and the separate statements issued by the leaders of these five churches would require much more space than I can allocate to this article. Space remains, however, to point out some of the statement’s most egregious mistakes. I shall begin with these two observations. First, I gather from my study of the Old Testament that Abraham must have been a very wealthy man for his day, yet I do not recall reading about how he lavished large portions of his estate upon the poor and made the development of a welfare system in the lands under his control a high priority. Perhaps I need to pull out a copy of the OT and read the relevant portions again, or perhaps it may be that a righteous man who is also wealthy may justifiably dispose of his fortune in other ways than to disperse it among beggars. Second, it seems to me that examples of welfare states much like what the church leaders have in mind exist in abundance in Western Europe, which is exhibiting slow rates of economic growth, high rates of unemployment, very low birthrates, and other signs of deterioration. Moreover, despite the very high levels of welfare spending in Western Europe, its state-supported and, generally speaking, theologically liberal churches do not seem to be prospering. Could it be that there is something about the welfare state that undermines Christian belief?

Although the five church leaders accuse the Bush administration of favoring budget “cuts” that are certain to cause grave damage to the nation’s social fabric, their idea of what constitutes “cuts” is curious. What they really have in mind are reductions in rates of growth. For example, it is my understanding that the Bush proposals would reduce the rate of growth in Medicaid spending over the next five years from 7.4 percent per year to a mere 7.2 percent. From what I read about Medicaid spending, it appears that if its growth is not curtailed, numerous state governments are likely to be experiencing acute financial crises within the near future. I am certain that visitors to this site are well-acquainted with some of the waste that has materialized in connection with the extensive involvement of government in the field of medical services. Just this past week it emerged that the legislation of some states has allowed convicted sex offenders to acquire Viagra through the Medicaid program. The medical field is one that cries out for reform in the name of efficiency, but efficiency is a word that is totally absent from the statement by the church leaders.

As for taxes, the five church leaders obviously are not interested in hearing about the Laffer Curve, which has been widely discredited in the media because of its associatiojn with supply side economics and (gasp!) Republicanism. What tends to get glossed over in the disparaging remarks about the Laffer Curve is that it has a solid foundation in both logic and empirical analysis. This curve is a simple concept that can readily be understood by anyone with an open mind and average intelligence. It derives its name from Arthur Laffer, a supply-side economist who supposedly unveiled the concept to the world by drawing it on a cocktail napkin.

Set up a graph with the tax rate on income on the vertical scale and total revenue collected on the horizontal scale. Now ask yourself how much revenue will be collected at an income tax rate of zero. Most of us would assume that at a zero tax rate the government will collect zero revenue, though I suppose it is possible that some people love government so much that they would give to it even at a zero tax rate. If we assume that such people are insignificant in number, we can place a dot for revenue collected at the point of origin if the tax rate is zero.

Now ask yourself how much revenue will be collected at a tax rate of 100 percent. The logical answer is not much. If such a confiscatory tax cannot be evaded, why would anyone earn income? The best answer I can come up with is that if government owns all of the means of production, everyone is then dependent upon it to survive; and if it is somehow able to prevent tax evasion, the government may then be able to compel people to perform some work. But as extensive experience with command economies demonstrates, the overall level of output in such economies cannot be expected to be high, which means total tax revenues will tend to be low even at tax rates of 100 percent.

An implication of the foregoing analysis is that if you draw a line relating tax revenues to income over the range of tax rates from zero to 100 percent, you are going to get a curve showing that rising tax rates produce rising tax revenues up to some point at which the curve starts bending backwards; i.e. above a certain tax rate, total revenues start to decrease. A vital question for the conduct of tax policy is this: at what tax rate does the Laffer curve start bending backward? In other words, at what tax rate do we get less revenue collected when we increase the tax rate?

The tax rate at which the Laffer curve starts bending backward depends on such factors as the ability of people to evade or avoid tax payments and the adverse incentive effects of higher taxes. These incentive effects, incidentally, are not mentioned by the five church leaders, but I believe that they are enormously important. It is my belief that in the United States, the curve starts bending backward at a marginal tax rate of over forty percent. The marginal tax rate is the rate applied to the last income earned. In other words, if you want to tax income for the purpose of raising revenue—as opposed to taxing income in order to punish income earners—there is no point in raising the marginal tax rate much above 40 percent. That is not to say, however, that tax policy should be designed to maximize revenues, for it may be, for example, that at marginal tax rates above 30 percent, there is more social benefit to be gained by allowing high income earners to keep their income than there is to be gained by taxing the “excess” away and having the government spend it for the benefit of the less fortunate.

What are the social benefits of allowing high-income recipients to retain income that could otherwise be used to fund government programs for the poor and the suffering? Some of the answers may seem obvious, but I shall explore the answers to that question in future articles dealing with economic issues if reader interest warrants that I do so. I also intend to explore whether or not the biblical concept of stewardship warrants the general approach to environmental management favored by those on the political left of the environmental movement. I can tell you right now that the answer is no, and that I fervently believe that drilling in Anwar will endanger neither the caribou nor the mosquitos.

Finally, I do believe that a case can be made in biblical terms for a social policy that encourages the development of some restraints upon ostentatious spending, or what the brilliant but misanthropic economist Thorstein Veblen called “conspicuous consumption.” In writing this, however, I must also note, as Veblen understood, that the desire to engage in conspicuous consumption is a powerful motivator. I shall conclude by suggesting that church leaders such as those whom I have pilloried in this article would do less damage if they focused more on restraining conspicuous consumption and conspicuous waste and less on the expansion of government social programs financed by increasing taxes on the wealthy.

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