Newton's third law of motion stated that for every action, there is an equal and opposite reaction. Applying this discovery to physical bodies, he revolutionized the understanding of science.

Applying this same law to what we read and hear could revolutionize our understanding of the way in which modern history is being shaped. Anyone who stops to consider will realize that the reaction of our public figures and our news reporters to every event is usually equal in force, but often opposite in fact, to what's actually happening. Applying Newton's law, one can discover an important and valuable means of understanding the real world.

Consider, for example, the strident cries we now hear and the furious activity we now witness to cope with the energy shortage and to keep the price of oil from soaring even higher. The fact is that there's a glut of oil, surpluses are ballooning, and producers are frantically cutting back production to forestall the inevitable drop in its price.

Let us also recall that a few years ago when the world adopted floating rates, many self-appointed experts thundered that world trade would be thrown into chaos, no doubt crippled, probably destroyed. The fact is that world trade more than doubled.

Just a short time ago the media was announcing with dire certainty that the oil nations were going to sop up all the money in the world, and leave the rest of the planet dried up and broke. The fact is that the oil producers have been redistributing their money faster than anyone thought possible. They are in fact supporting the money markets as ably as any, and more ably than some countries reputed to be solid financial citizens.

So it goes. One action in the real world, an equal and opposite reaction among vocal observers and public office holders. The applications of this principle abound, but there is no more striking illustration of its use than in the Congress and state capitols of the land. Time after time, our politicians and editorial writers are aroused by some suddenly observed inequity. They promptly begin to insist that new laws be drawn up to "protect" the public interest. Or they suggest that the public till be tapped to serve "social goals" which are often more politically popular than economically sound. Actions based on faulty perceptions of reality have now mortgaged our nation's future to the hilt and seriously impaired the ability of the private sector to function. Profligate spending, coupled with the tendency to reach out and regulate every segment of the total economy, is bringing the inevitable day of reckoning ever closer. Or to put it another way, the chickens are coming home to roost.

In my own home state not so long ago a very sick chicken indeed took up its perch on the doorstep of the Governor's mansion in Albany. It was the Urban Development Corporation, created in response to what the called "a mandate for public housing." The truth is that the UDC was neither a mandate nor a solution to the need for low cost housing. This quasi-public agency was set up because the people of the state had turned down a referendum that asked them to support such an ambitious development program. As a result, the UDC was backed not by the state's "full faith and credit" but by moral obligation bonds, a revenue-raising device that has now been imitated in no fewer than 20 other states.

We were told that through building public housing that the private sector was unwilling or unable to undertake, the UDC would pay off its borrowings. When the UDC was ineptly managed to the point of bankruptcy, the lending institutions were asked to throw good money after bad. The state was asked to honor an obligation that was neither moral nor constitutional in the first place. Although the issue has been obfuscated by the politicians and the press, the plight of the UDC should precipitate a long overdue appraisal of the power of the state and the federal government to operate outside the realm of normal budgetary, managerial and political accountability.

The world is full of examples of how bureaucracy's social reach can exceed its financial grasp.- While moral obligation bonds are a dubious claim on capital, they are peanuts compared to the burgeoning of federal "off-budget" and non-limited financing approved by the Congress in recent years. As the result of "government-sponsored" and "government-guaranteed" obligations, total federal borrowing from the public may soon top $700 billion --well over the present statutory debt limit.

It often seems that the lawmakers of the land have taken quite literally Voltaire's cynical observation that "the art of government consists in taking as much money as possible from one class of citizen to give it to another." Certainly what has evolved today is a system that appears to have perfected the art of transferring money as fast as possible from the public to the government.

The Congress has turned the limited power vested in it by the Constitution to raise revenues into a power-of-attorney on the assets of America. Transfer payments, the cosmetic term for funding what has begun to resemble the welfare state, are justified as a means of helping the socially disadvantaged. But, like many such grandiose remedies, supported with lofty public rhetoric, the results have left much to be desired. The cost of financing all social priorities, as they are euphemistically called, has brought us to a point where federal, state and local taxes gobble up one-third of all the money Americans earn. In addition, tax loopholes that reward some and penalize others, as well as direct and indirect regulation of everything from banks to barber shops, strongly influence how another 20 percent of the people's money is spent.

The federal bureaucracy, charged with spending the people's money, now rivals in number the American colonists who rebelled against taxation without representation. Yet, as we approach the Bicentennial of the Republic, we have a tax structure so complex and so riddled with loopholes and inequities that it is incomprehensible not only to the average citizen but to his elected representative. The net effect is that we are in some ways back to start: taxation without responsible representation.

Considering that the manuals used by the agents of the IRS have now grown to 40,000 pages, our tangled tax system needs more than minor adjustments and reform. It may be time to dismantle that entire jerrybuilt structure and start afresh, as Toynbee reminds us, the citizens of London did after the Great Fire of 1666. Instead of adding more clauses and complexities, we might start over and return to some of the basics and good common sense which went into the writing of our Constitution.

The founders of this nation, who understood that taxation in any form is a choice of evils, envisioned that the federal government would focus on the taxation of exports and imports and leave the right to impose other taxes to the states. No one, of course, could have anticipated such end-runs around the Constitution as the Sixteenth Amendment. This Amendment to tax "incomes from whatever source derived" was no sooner passed into law in 1913 than the Congress began to spoon out exemptions and preferences. The chief beneficiaries of this labyrinth of rules and regulations are a veritable army of tax lawyers and accountants who make a handsome living telling other people what they should and should not do with their money.

What is even more wasteful is that the tab for this patchwork of special deductions and privileges to individuals and corporations is now roughly $91 billion. That is, $91 billion that our deficit-ridden government fails to collect. What has evolved in effect is a system in which the social priorities of the past have become the loopholes of today. When it was perceived, for example, that it was in the public interest for the government to assist its citizens to own their own homes, deductions were granted for interest payments on mortgages. Today the home mortgage loophole plus state and local property taxes amounts to a government subsidy to home owners of about $12 billion. Although the current social priority is urban housing, the chief beneficiary continues to be the ranch house in the suburbs.

Other examples of inconsistencies and inequities in the tax system are not hard to find. Consider, for example, that favorite target --capital gains, broadly defined as any appreciation in the value of an asset held six months or longer. Taking into account the rate of inflation, many of the capital gains that are taxable today are illusory. The taxpayer often has a loss in real terms instead of a gain. Thus, what was once designed to encourage private savings and investment, like many other exemptions and controls, is having the opposite effect.

Another inequity draining business and deterring investment is the double taxation of dividends. Businessmen, who can deduct the interest they pay on borrowed money, cannot deduct the dividends they pay for their use of shareholders' money. Nor can the shareholder write off his dividends. Either the corporation should be able to deduct the dividend, or the shareholder should be allowed a credit for the taxes paid by the corporation.

In Europe, which otherwise is no model for serious tax reformers, the systems generally are far easier on capital gains. Some European nations do not tax them at all, and few have stringent provisions for depreciation. Many nations simply have lower corporate tax rates which enable business to hire more people and attract more investors.

The original intent of the tax shelter, of course, was to encourage investment in risky but productive enterprises, like timber, real estate development, cattle feeding, and oil and gas exploration. While the concept applies to dozens of other minerals, such as iron, coal, and copper, the oil depletion allowance, on the books since 1926, has become the most controversial. Today, even some spokesmen for the energy industry suggest that the oil depletion allowance wouldn't be necessary if the government stopped meddling in the market with price controls on oil and natural gas. Whatever the outcome, more than a hundred other mineral categories with depletion allowances could be affected, including such natural resources as sagger clay, flake graphite and talc, which have their champions, too, in industry and the Congress.

All of these loopholes in our tax system have unfortunate political appeal since, unlike direct outlays, they do not show up in the generally bloated budget. Once on the books, they go on and on without even the cursory annual scrutiny accorded actual appropriations.

In theory, the loophole offers a simple and seemingly inexpensive way to support activities believed to be in the public interest. In fact, this concept is specious to the extent that the objectives frequently are not reached. Tax-free bonds, designed to permit state and local governments to compete with private industry for investment dollars, have not proved as useful to communities or as attractive to investors as they were intended. The tax investment credit on new plant and equipment does little to stimulate the use of labor and capital goods already in place. A simple and direct cut in corporate income tax would serve this end far better without routing more money through Washington.

Given recent rates of inflation, the exemption for estate taxes is scarcely giving adequate aid to widows and children. Given the still depressed state of the stock market, foundations, colleges and philanthropic institutions remain hard-pressed for funds. Finally, the cross-the-board personal exemption permits a privileged few to pay almost no tax, although they are pilloried for it. At the same time, the system penalizes the working man slugging it out at the bottom of the income scale. Instead of an assortment of exemptions for everything from soup to nuts, it might make far more sense to give each taxpayer a standard deduction plus 2 percent of his adjusted gross income up to a fixed maximum.

Exemptions, whether they are for the corporation or the individual, the municipality or the university, tend to become imbedded in the revenue system. Their beneficiaries, in time, come to regard them as constitutional rights. Since one man's loophole is often another man's salvation, few are prepared to concede that their own tax breaks are a form of government hand-out. The homeowner's deduction for interest and local taxes is often the only thing that stands between him and foreclosure. The charitable deduction may determine whether a private college or hospital stays in business. Nonetheless, there is overwhelming need for the overhaul and simplification of a tax system which perpetuates loopholes within loopholes.

What's needed is a complete restructuring of our tax code to reduce bias, restore balance and meet the urgent demands for capital in our society. It's time to recognize that it's incentives --not tax dodges or wily schemes --that inspire people to work, invest and save.

In addition, the time has come to treat tax concessions as budget items, thus giving Congress a chance to weigh each item in terms of what it is costing and what it is producing. If federal departments were to submit their budgets with tax expenditures included, as has often been suggested, the Congress would have a more realistic picture of what resources the government is putting into each activity. Any private company which managed its affairs as the government has done up to now, with no clear-cut idea of costs versus benefits, would have gone out of business long ago.

A return to fiscal responsibility, with federal budgets on a pay-as-you-go basis, would surely put the country on a more sound economic footing. A gimmick-free revenue code would help produce the capital required by both government and industry. Just as no-fault insurance leveled premiums for motorists and cut down on endless litigation, a no-fault, or simplified, tax structure, with fewer ands, ifs or buts, would ease the burden on all taxpayers.

The time may be right, too, to check that other gigantic taxing institution, the Social Security System. That agency's actuarially unsound retirement and disability trust funds --like our pension plans with their escalator clauses--are headed for trouble. Inflation has debased the dollar, and the situation today is not unlike what happened in 1467 when the British government cut the silver content and weight of its coins. The aroused citizens of England, who were living on fixed annual payments, pushed a bill through Parliament specifying that "all debts should be paid in the same substance or quantity of silver as at the time of making the contract."

If those in our country who today depend on fixed annual incomes are not to be shortchanged, we may have to consider indexing as a way to blunt inflation. This accounting technique which ties wages and interest rates to the cost of living is a touchy topic, yet it might be preferable to dipping into general revenue or raising the tax rate.

As matters stand now, the government reaps bloated tax revenues from inflation. Such windfalls encourage Washington to spend more and more in the belief that the chickens fattened up by inflation will never come home to roost. The fact is that government borrowing will consume perhaps 80 percent of the capital raised during the coming fiscal year. One might well ask what is left for private industry, which accounts for 85 percent of the jobs. Just as a drug addict cannot be cured by more of the same, a Congress addicted to spending cannot be restrained by giving it a blank check on the public exchequer.

Perhaps it is time to resort to a modern version of "The Edict of Restitution," drawn up by the British Crown in the 16th Century. That decree permitted loot taken from others before the year 1552 to be kept, but declared that anything taken thereafter had either to be returned or compensated in kind.

Unfortunately, the spending instinct like the regulatory syndrome has a life of its own. Congress seems as loathe to cut back on spending as it is to dismantle the outdated regulatory system it has created.

The answer to every problem seems to be to throw more money at it or to devise new regulations to make matters worse. The government regulated the railroads and the airlines until they were on the ropes; it then suggested that private industry couldn't hack it and tightened the regulatory noose. The government told Detroit to spend a fortune on catalytic converters; it then announced that these contraptions were doing more harm than good. The government tells the utility companies to get moving on power plants to meet the nation's energy needs; it then delays their construction from here to eternity with an endless round of regulatory reviews. The government gives the U.S. Postal Service a monopoly on first-class mail, although it is often less efficient than the Pony Express; when deficits pile up, subsidies are offered in lieu of private competition.

Public statements of protest against restrictive government policies from spokesmen in the transportation, automobile, and utility industries among others are dismissed by politicians and the press as the self-serving propaganda of big business. The inference is that the voice of corporate America is not covered under the First Amendment, and that the knowledge business leaders have to offer is more dangerous than no knowledge at all. This attitude has caused many businessmen in this country to turn their backs on the intellectual and political debates that frame the direction of our society. They refuse to speak up to avoid provoking editorial writers or antagonizing the federal bureaus monitoring their operations.

Time after time, however, the misguided zeal of our regulators confirms one point: industry simply cannot be run by remote control from Washington. Like the government guardians of occupational safety who ordered back-up alarms on vehicles at construction sites, then required workers to wear ear plugs to protect them against noise, our regulators invariably trip over their own good intentions. The government, for example, produces double digit inflation by printing money with carefree abandon; then it tries to curb its extravagance with wage and price controls which turn initial mismanagement into a colossal blunder.

Just as ceilings on the price of milk in California caused dairymen to dump their milk in Los Angeles harbor, ceilings on interest rates have caused lending institutions to turn down mortgages. Regulation Q, which controls how much interest banks can pay on savings, was originally designed to protect thrift institutions from competition and to channel money into housing. When inflation forced market rates to rise above the artificially-imposed ceilings, funds flowed out of the thrifts and the rest of the banking system into higher paying Treasury bills and commercial paper. Mortgage money thus dried up and those who continued to save at a low return ended up subsidizing those who could afford to borrow at high rates.

In a similar vein, the government's refusal to permit commercial banks to pay interest on demand deposits has long deprived banks of a stable source of funds. As a result, the customer earns no interest on his checking account and the banks must raise money at higher cost to meet loan demands. So it goes with the intent of the regulator invariably falling far short of his goal.

Despite all of these obvious foul-ups and failures, the government declines to remove itself from the credit market. Having bollixed up one segment of the economy, there are some in Congress who would bollix up the rest by allocating all credit. Although the public is not fully aware of the consequences, such a step would mean a virtual dictatorship over every possible way in which money is used. Such simple decisions as to whether one should buy a car or a condominium, open a pizza parlor or a laundromat would require the stamp of the inspector-general. The ability of businessmen in our society to decide what to do with their resources is already severely impaired by a rising tide of regulation on everything from labeling to lending.

Central planning, which inevitably leads to the state running all business and restricting all freedom, is hardly a new idea. The concept was tried out and found wanting in Sumeria back in 2100 B.C., but, until our time, the most famous example of an attempt to replace the law of supply and demand with the controlled economy took place in the Roman Empire. Describing the havoc wrought by the Edict of Diocletian, historian Will Durant wrote: "The weakness of this managed economy lay in its administrative cost. . . To support the bureaucracy, the court, the army, the building program, and the dole, taxation rose to unprecedented peaks. . .the state had not yet discovered the plan of public borrowing to conceal its wastefulness and postpone its reckoning."

Today, unlike Diocletian, we have learned that public borrowing does indeed postpone the inevitable day of reckoning, but the longer it is postponed the more long-drawn-out and injurious it is likely to be. The freedom and abundance which we now enjoy is the result of a long steep uphill climb, and we could not have achieved it without the private enterprise system. What the critics of this system fail to understand is that no group of central planners, even if they have the wisdom of Solomon and Socrates, can substitute their judgment for the judgment of the people. The way each citizen votes his dollars for goods and services in the market is as vital to survival of our system as the way each pulls the lever in the voting booth.

Suggesting that this nation needs central planners to tell the people what is good for them reflects a sweeping lack of faith in the people. There have, of course, always been some in our society who looked to Washington instead of themselves for salvation, and there are businessmen among them. Too many businesses have sought tax shelters instead of tax reform, subsidy and protection instead of freedom and competition.

Many men who have sought a federal response to all the problems man is heir to have often lived to regret it. Federal aid seldom comes without strings, as Kingman Brewster Jr., President of Yale, recognized when he complained recently that "the leverage of federal spending power" is being used indirectly to control colleges.

Those who toil in the groves of academe are now learning what men and women who work in the heat of the market place have long known. Give government an inch, and it takes the proverbial mile. This point was well illustrated by E. B. White in a recent article which described how disappointed his town of Allen-Cove in Maine was to learn that federal and state funds for the local hospital might not be forthcoming.

"People were mad as hops," Mr. White wrote. "Yankees don't want a planner in Augusta or in Washington telling them where to put a hospital or a school or how many beds or desks to install. They are accustomed to making decisions like that for themselves. They feel it is their right."

Mr. White then added, ". . . What most deeply disturbs the people in the small towns of Maine these days is not gasoline, not the cost of living, not unemployment. I think people are disturbed by the discovery that no longer is a small town autonomous--it is a creature of the state and of the federal government. We have accepted money for our schools, our libraries, our hospitals, our winter roads. Now we face the inevitable consequences: the benefactor wants to call the turns."

He is right. So those who look to government for the solution to every problem should not ask government to get off their backs. They should understand Newton's law and know that for every action there is an equal and opposite reaction. Accepting controlled wages and controlled prices leads to controlled housing and controlled education leads to controlled business and controlled media. When the day of reckoning comes we will be a controlled people.