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I was a member of Rotary International for many years. All meetings either started or ended with a recitation of the “Four-Way Test”.
- Is it the truth?
- Is it fair to all concerned?
- Will it build good will and better friendships?
- Is it beneficial to all concerned?
It was not unusual that someone would call out one of these “tests” during difficult discussions in order to re-center, so to speak, the discussion along ethical lines.
I have developed an economic four-way test for policy makers to follow. It is a simple way to categorize almost every government policy along more ethical lines, too. Strict adherence to this test would eliminate many policy errors by forcing a discussion of the true consequences of a proposed policy. Historically, this was an abbreviated version of the Reagan/Bush/Republican Party platform in 1980, when Ronald Reagan won his first of two presidential terms. I heard his vice-presidential candidate, George Herbert Walker Bush, deliver an explanation of these four points on the steps of the beautiful Capitol Building in Springfield, Illinois. I believe that almost every government policy can be evaluated by whether or not it passes each of these goals.
- Does it move toward sound money?
- Will it lower government spending?
- Will it reduce government regulations?
- Will it lower taxes?
Sound money: This policy goal probably is the most important of the four. There’s an apocryphal story that Ludwig von Mises once was asked which policy goal he would choose if given only one. Supposedly, the great Austrian school economist quickly replied “Return to sound money”. This makes eminent sense, because sound money would encourage spending restraint and a more laissez faire economy, which would result in lower taxes. Let us keep in mind that the world’s fiat money system is nothing more than government crime made legal by government itself. Fiat money creation is a crimes if committed by you or me. But government exempts itself from this crime. To do so is simply illogical. Perhaps the reason we refuse to admit the crime is that it is too massive and too imbedded in the economy for us to conceive of an alternative. Furthermore, sound money would force us to make hard choices now, whereas fiat money allows government to “kick the can down the road” and make it someone else’s problem.
Lower government spending: Needless to say, government spending is out of control everywhere. Here in America there is no pretense that the vast majority of spending is NOT to protect life, liberty, and property. Mainly its purpose is to rob Peter to pay Paul. This is known colloquially as the welfare state, that great cancer on the moral and financial fabric of society, not to mention a violation of our constitution and natural rights.
Reduce government regulations: Protecting the citizenry’s life, liberty and property does not require increased regulation. The defense department and criminal justice system handle these very well. But by what magic process do elected officials or hired bureaucrats suddenly become omniscient? What do they know about energy production, teaching children, affordable housing (however that is described), saving for retirement, providing just the right amount and quality of healthcare? The list goes on. As a long time consultant in the banking industry—which, of course, has been around for millennia and operates quite well in long established legal environments—documenting compliance with ever increasing regulations constitutes a huge expense that must be reflected in lower payment on interest bearing deposits and higher rates on loans. From an employment standpoint, reducing labor regulations and costs should be one of the first goals of any government reform. People must be allowed to work in whatever arrangement agreed upon by employee and employer. No intermediary, especially government, need get between them.
Lower taxes: Limited government (remember that out of fashion phrase?) does not require high taxes. Once people have been allowed to work, via reduced regulations, and government spending has been driven to a very low level consistent with the needs of such a limited government, government should make a good start toward actually running a budgetary surplus. Some part of that surplus should be returned to the people in the form of tax cuts. This will produce a beneficial feedback loop whereby lower spending requires fewer and lower taxes which results in a growing economy requiring even lower spending and so forth.
Trump Scores Zero on the Economic Four-Way Test
President Trump scores a zero on this test. He has successfully badgered the Fed once to lower interest rates and wants them even lower, despite prices on the rise (strike one). Plus, the Fed has switched gears, so to speak, by abandoning Quantitative Tightening and reinstating Quantitative Easing in order to fund his increase in spending (strike two). His profligate use of the Executive Order to increase tariffs is a direct tax (strike three) on American production and causes increased prices. His focus on the meaningless metric of trade deficits, both with the world and with individual countries and which he changes willy-nilly, is a regulatory burden for government to implement and for business to absorb and understand (strike four). No amount of propaganda about promises by foreign governments to move production to the US will negate any of these insults, and the American people cannot escape their predations. Price inflation is just the consequence of currency debasement. We can expect the dollar to continue to shrink against real money, meaning gold. Unless these policies are reversed, there is a real possibility of a 1923 Weimar Republic-style currency collapse and/or for the US to experience a depression that makes the Hoover/Roosevelt 1930’s depression look like a minor event. In other words, there is no way the American economy can improve unless Trump’s policies are reversed, the political class is completely discredited, and the US adopts laissez faire policies.
© Patrick Barron 2025 Website
