It has almost become a cliche to say that President Bush's handling of the economy has been atrocious. Almost every economic indicator we can find is either still dropping or increasing only erratically. The end of the second quarter, for example, marked the 13th straight quarter of low growth or overall decline in the gross domestic product.
But amazingly, Bush doesn't acknowledge that the U.S. is in real trouble. He finally admitted that the country had drifted into recession months after the recession began. But he still insists that the U.S. does not face a more fundamental economic quandary, if only because "we're the United States of America."
The reality is different. Borrow-and-spend economics has given us the debt everyone is so concerned about the (the federal deficit for the month of June was higher than the deficit for all of 1979), and all that spending hasn't given the nation high returns in productivity or living standards.
Bush's answer is to cut taxes--capital gains taxes (to be cut by a lot), small business taxes (to be modestly) and personal tax rates (to be cut by one percentage point). And he wants less government regulation.
Let's set aside for the moment the fact that Bush doesn't really believe in any of this and hasn't lifted a finger to cut taxes in four years. Let's set aside that Bush has watched as the cost of simply administering regulatory programs has skyrocketed from $9.6 billion to $11.3 billion in the last three and a half years. In other words, let's set aside that Bush is basically a moderate-conservative Keynesian who thinks supply siders are just plain silly. The economics themselves are dubious.
Supply-side economics failed dismally in the 1980s, with taxes dropping but with no real increase in productivity--one real measure of a nation's success. The per capita gross domestic product edged up at a lower rate than in any decade in 50 years.
And anyway, Bush simply refuses to detail how he would pay for any of this. In Detroit last month, he said the money would come from $132 billion in cuts he's already outlined. Three problems. First, Congress has already rejected these cuts. Second, the cuts include making Medicare recipients and veterans pay more for certain services. This is a truly bad idea when upper-income taxpayers are so clearly due a modest tax hike after years of Reagan-Bush. (And it exposes Bush as a liar since he's said time and again to veterans groups that he won't touch their benefits.
Third, $132 billion would only cover the one-percentage-point reduction in personal rates--Bush still hasn't told us how he would finance the other cuts. Nor, for that matter, have we heard which programs would be cut to pay for the deficit check-off plan he mentioned in Houston or the $10 billion job training program he mentioned in Connecticut or the other budget cutting plans he mentions everywhere.
So when Bush caterwauls about a spendy Democratic Congress, his already frayed credibility begins to disappear altogether. The president has never submitted a budget even close to being balanced, and if he had received every penny he's asked for over the last three and a half years, the deficit would be larger.
Supply siders scream that without tax cuts (paired with deregulation), the U.S. won't be able to attract new businesses (or new capital for existing multinationals). But the U.S. can't compete on a playing field of low taxes and regulation. Less developed countries will always be able to drop taxes and regulation further--their citizens demand fewer services and protections from their governments. There's no way the U.S. can win.
Furthermore, what sort of living standards does this formula create? Lowered ones. The environment will be worse, wages will be lower (because minimum wage laws die), working conditions will be more dangerous, and the government will have less to spend on infrastructure, job training, education and so on--the kinds of things that would raise living standards.
The U.S. must compete where it can--in high-tech, high-skill industries that less developed countries can't touch. That's why Clinton's plan to invest in (or spend more on) education, job retraining, better communications and transportation and so on makes so much sense. Only this sort of plan will make the country competitive for the future.
Clinton also has some accounting to do on how he would pay for his programs. Most of it, he says, would come from defense cuts. Some would come from raising the top rate on income-earners who make $200,000 or more. Some would come from a plan to trim (by attrition) federal employment rolls. Some random "waste" would be found and slashed. It doesn't add up.
Still, the deficit probably won't grow under Clinton, and it most certainly would under Bush. Clinton's numbers are simply lower. He has shown himself to be willing to stand up to the Democrats' special interests, and Bush continuously coddles the Republicans'. And, more importantly, Clinton spending priorities are in the right place.
Like most years, the economy is the issue this year. But unlike most years, the candidate with the best plan to heal the economy is obvious. Bill Clinton would rebuild America's skill and roads. He would initiate a moderate and careful technology and industrial policy (one that doesn't subsidize failure but does provide federal money for business cooperation) to make the country competitive.
He believes in targeted capital gains tax cuts which would provide incentives for new capital, not simply higher corporate profits. And his moderate views make him the perfect candidate to mediate labor-business relations, which have vastly deteriorated under President Bush.
It's becoming more and more clear that Bush will probably be the first elected Republican since Herbert C. Hoover 60 years ago to be denied another four years. That's fitting. Bush has no new ideas and no compelling arguments. He's a man who would much rather be President than do something as President. He has fought assiduously for the status quo and has ignored people's problems. And he should be held accountable on November 3.