Memo To: †Bob Rubin, U.S. Treasury Secretary
From: †Jude Wanniski
I think it is your responsibility to tell the President and alert the nation that the problem that will hit the world on January 1, 2000 (Y2K) will almost certainly not be manageable on the track we are on now. You may think it is not your responsibility to convey this warning, but because so much of the chaos that will result from computer-chip failures involve policies under your jurisdiction that I believe you have no choice but to assume responsibility. In several meetings last week with senior staff of the Republican leadership on Capitol Hill, I discussed Y2K and possible policy moves that could be undertaken to alleviate that part of the problem touching upon our government and governments around the world. Here is how I put it:
1. If it were not for high-powered computers capable of making billions of calculations in tiny increments of time, the Internal Revenue Service would be unable to manage the current federal tax system. The rapid expansion of computer power enables IRS to manage almost a† hundred million tax returns with a tax code that continues to explode in complexity. Computers enable IRS to manage chaos. I believe its officials are now unable to assure you that system will not break down -- that even without Y2K, the IRS computers have been having a difficult time coping with the burdens placed upon them in recent years. With Y2K, chaos will not be managed and chaos will result. There is no solution in hardware, software or data management that is conceivable. My recommendation is that you alert the nation and urge the Congress to enact a drasticly simplified tax code as soon as possible, to enable IRS to keep control over the public fisc at the point of breakdown. I also urge you to recommend tax simplification to the United Nations, as almost every country in the world has also come to rely on computers to manage public finance.
2. If it were not for high-powered computers capable of making billions of calculations in tiny increments of time, the nations of the world would not be able to manage the chaos of the floating currency system. With more than 150 national monetary units, domestic and global banking are now able to cope with the complexity of the myriad combinations in international commercial contracts only because of computer power. If computers disappeared, global commerce would come to a grinding halt as banking intermediation lost track of who owed what to whom at what time and place. The only solution that occurs to me is the kind of drastic global simplification that would flow from a dollar relinked to gold.† Iím aware that you and your staff have been close-minded to the idea of a renewed dollar/gold link, but I assure you there is no other solution that will do nearly as much to prevent a breakdown of global commerce. If you look at it in that light, you will understand that the rest of the world cannot possibly cope with Y2K unless the United States provides the international standard. If the President were to make this decision before the end of this year, the rest of the world would have ample time to link into our system and avoid monetary chaos as well. If all the world is fixed to a gold dollar, there would of course be only one accounting unit and no chaos to manage by computers.
3. In addition to faxing this memo to your office, Iím also posting it on my website in order to alert as many people as possible to the need for everyone on earth to be thinking of ways to simplify, if only to get through the worst of the chaos we must anticipate.† I append here a letter to my clients on the Y2K topic, which I sent on March 31. I sent a copy at the time to your deputy, Larry Summers.