Advertisement
  1. Archive

Voters' top concern: Will recession ever end?

The Democrats are different this time around.

That is the striking conclusion that emerges from the oratory and position papers of their presidential candidates on what is plainly Topic A of this campaign: the economy.

The Republicans may turn out to be different, too, before the campaign is over, if the challenger from the right, Pat Buchanan, keeps rolling up a giant piece of the vote. But that remains to be seen.

That the Democrats, on the other hand, are taking two new stances, is already crystal clear.

The first is this: The recession has created the necessity, and the opportunity, for the Democrats to focus their campaign promises on the hurting middle class--people who vote.

It is not literally true that no Democrat has uttered a single word about the poor or disadvantaged minorities, but it is true in essence. More centrist members of the party have been telling the liberals for years that their party would never regain the White House if its candidates kept turning off so many voters by talking about the needs of people who largely do not vote. For the present, at least, they are no longer doing that.

The other change is more complex.

The Democratic candidates are saying that it is no longer possible to think of government as an institution with limitless potential for creating change. That idea is gone, at least for now, maybe forever.

Even Sen. Tom Harkin of Iowa, the candidate who styles himself as the one true heir of the Democratic presidents who held out the vision of limitless possibilities _ Franklin Roosevelt, Harry Truman and Lyndon Johnson _ makes no claim to the contrary.

Within the world of limits, however, the Democrats still find possibilities. All the Democratic contenders, and President Bush, as well, endorse some degree of government intervention to make affordable health care available to all. That is one example. Better educational opportunities, especially for disadvantaged preschoolers and adult workers facing technological change, is another. Some candidates give that more emphasis than others, but all back it.

Most also think that future economic growth and bountiful living standards depend in part on government efforts to help business become more efficient, more innovative and better at converting the fruits of research into products and services that will sell on the world's market.

At the core of their new "think smaller" posture is the belief that there is little prospect that the American economy can grow rapidly again, after a period of sluggishness that has lasted almost 20 years, unless the government takes a strong hand. Furthermore, they see rapid growth as the key to almost everything, including rising standards of living and the ability of government to pay for what people want it to do.

There is a chicken-and-egg problem here. Take education: the economy cannot grow as much as it should unless there is a bountiful supply of trained, productive workers _ but the economy can't afford to train the workers unless it is growing.

For now, at least, that reduces the role of government to that of catalyst rather than doer.

Though they do not put it in just those words, that is what the Democratic candidates are advocating.

It is a historic shift in posture. Even more surprising is this fact: All the candidates except Jerry Brown, the former California governor who has always heard a different drummer, accept the need to reduce the growth in federal spending through statutory changes in some of its most popular programs (not, to be sure, including Social Security.)

What follows are summaries of the positions taken by the principal Democratic and Republican candidates on these major economic issues in the campaign: anti-recession policy, programs for long-term economic growth and controlling the federal budget.

Ending the recession

Though the recession was plainly the issue most on the minds of the voters in hard-hit New Hampshire, the candidates have offered more sympathy than programs. Of the five major Democrats, only Gov. Bill Clinton of Arkansas and Sen. Bob Kerrey of Nebraska favor a tax cut targeted toward the middle class. On the Republican side, both the president and challenger Buchanan advocate such a tax cut, though Bush has not included it in the "must-pass" program he wants from Congress by March 20. The other candidates have a miscellany of recession-fighting ideas.

Brown His energy-conservation program could create "7-million jobs right off the bat," says Brown. Its central feature is a government program to "weatherize" every house in the country. That would cut energy consumption enough, over 10 years, to cover the $300-billion cost, he says.

Brown also advocates reviving two of Roosevelt's Great Depression programs: the Civilian Conservation Corps (CCC) and the Works Progress Administration (WPA). CCC employed young men at a variety of construction and conservation tasks (the version Brown created in California also employs women, he notes). WPA went beyond building things of brick and concrete. Unemployed people were paid, among other things, "to do murals that are now among some of the greatest works of art this country has."

Clinton The anti-recession tax cut that Clinton advocates is the most generous of the proposals currently on the table. It includes both a reduction for all taxpayers defined as middle class and an extra break for families with children. Thus it combines the approaches offered by Chairman Dan Rostenkowski, D-Ill., of the House Ways and Means Committee and Bush, though each of its elements is larger than theirs. Clinton would make up the lost revenue with tax increases on those with high incomes.

Clinton also would accelerate the construction of highways, airports and mass transit facilities financed by new transportation legislation, completing it in four years rather than six; enact a temporary investment tax credit to encourage businesses to buy new equipment; and help first-time home buyers obtain financing by permitting the Federal Housing Administration to insure mortgages covering more of the cost of the house.

Harkin An opponent of the middle-income tax cut, Sen. Harkin of Iowa would use an equivalent amount of money to put the unemployed to work in public construction jobs. He also wants a national moratorium on home mortgage foreclosures. The most savage among the Democrats in anti-Bush oratory, he charges that "Bush's recovery program can be summed up in three words: cut capital gains. Eight million unemployed? Cut capital gains. Stagnant economy? Cut capital gains. Trade deficit? Cut capital gains. Got a toothache? Cut capital gains."

Kerrey Though he specifies that it would not generate "massive stimulation" to the economy, Kerrey backs a temporary middle-income tax cut of $350 to $500, offset by increased taxes on those he considers wealthy. The issue is fairness, he says. Kerrey also wants to push banks to make more loans to deserving individual and business borrowers.

Tsongas Over and over, former Massachusetts Sen. Paul Tsongas tells the voters that he's not running to be Santa Claus but to get the economy on the road to long-term growth. He ridicules the various proposals for middle-class tax reduction as "a $30-billion program that would put 97 cents a day in the pockets of each family." He adds that "economists agree it won't create jobs or help our economy," which isn't exactly correct. Even many economists who consider such a tax cut undesirable long-term policy think $30-billion is enough to have an impact. Tsongas also advocates a one-year investment tax credit and accelerated spending under the new transportation program.

Bush The president's anti-recession program is embodied in the seven-point proposal he has submitted to Congress for action by March 20. Unlike those among his rivals who advocate a reduction in the capital gains tax as a tool for long-term economic growth, the president promises it would create new jobs almost instantly. This year only, the new tax break would apply to sales of assets that had been owned for as little as one year; after that, a longer ownership requirement would be imposed. Both his version of the investment tax credit and his proposed $5,000 credit for first-time home buyers would expire at the end of this year _ another incentive to act now. Provisions to help the moribund commercial real estate industry also are included in the Bush package.

Buchanan In addition to a tax cut on ordinary income for middle-class Americans, the Republican challenger would abolish capital gains taxes on "the working and middle classes" and cut them in half for higher income investors. He also backs an investment tax credit. Buchanan breathes fire as he criticizes Bush for creating the recession "when he collaborated with liberal Democrats in imposing a new regimen of taxes and regulations on America." He takes, for himself, Bush's 1988 promise of "no new taxes" and pledges he will keep it.

Creating long-term

economic growth

No area of government policy receives more attention from the candidates (in their position papers, if not always in their stump speeches) than the need for strong medicine to restore the nation's competitive position in international markets and to cure its sickly rate of economic growth.

They agree on many things, among them permanent tax breaks for businesses that spend money on research and development (which Congress may well pass before the primaries are over) and the need to improve education for young people and provide ongoing training for adults.

The sharpest disagreement centers on whether the government can, in fact, successfully identify the winning industries of the future and take action to foster their growth. "Industrial policy" is the name generally given to such efforts. Brown, Kerrey and Buchanan are among its more ardent advocates, though others would reach for the same goal in different ways. Clinton, Kerrey and Tsongas all give priority to shifting federal money no longer needed for defense research to the domestic side.

Brown Space, bioscience, telecommunications and materials science are the industries Brown wants the government to assist for "environmentally sound, resource-efficient growth."

Most of all, however, he believes in the growth-enhancing prospects of his radical tax plan, which would abolish all present federal taxes and replace them with a flat 13 percent tax on nearly all personal income and a 13 percent value added tax on business transactions. That is the only way, he says, to take back the country from those who manipulate the present tax system to the detriment of the nation through their contributions to political campaigns.

Clinton Every dollar for research eliminated from the defense budget would be put into an expanded civilian research budget under Clinton's plan. He would create a federal agency to coordinate and support the new research efforts and help develop the results of the research into marketable products and services. He would reduce the capital gains tax on investments held for more than five years in new businesses and deny corporations tax deductions for the cost of moving jobs overseas.

Clinton's education and training program includes apprenticeships for all high school graduates who do not want to go to college and payment of college costs for all who do. The college loans would be repaid through mandatory payroll deductions or by a period of public service, in such jobs as police officer, teacher or day-care worker. Clinton reports that American businesses spend an amount equal to 1.5 percent of their annual payroll costs on worker training, but is concerned that 70 percent of it goes to the mostly highly paid 10 percent of all workers.

Harkin Though most of the candidates touch on the need for more and better infrastructure _ fundamental public facilities such as highways and airways and sewer systems _ Harkin is the only one to make it a centerpiece of his campaign. And he is the only one to stress the relationship between abundant, well-maintained infrastructure and the profitability of private industry. "George Bush and the Republican Party can't get it right," he says. "They don't understand that you cannot fertilize a tree from the top down." Harkin also wants to shift scientists and engineers from defense to build new transportation, telecommunications, energy and environmental systems.

Kerrey The government must support technology advances with direct investment, Kerrey says. He would concentrate on new forms of infrastructure. "In the 20th century, it was highways; in the 21st, it will be information infrastructure." He calls for reorganization of the federal government, reducing the 14 present Cabinet department to 7, as one way to help government efforts to create large numbers of new, high-paying jobs. His health plan, the centerpiece of his campaign, would enhance growth among its other benefits, he argues. Like many of the others, he would create a new civilian research agency, modeled on the Pentagon's coordinating office.

Tsongas Rhetoric, rather than specific proposals for government programs, takes up most of Tsongas' now-famous pamphlet, "A Call to Economic Arms." He excoriates the other Democratic candidates for their anti-business attitudes. "You cannot redistribute wealth that is never created. . . . The only engine that drives the economy is manufacturing," he says. But the Republicans, too, are wrong-headed, Tsongas says. "At the Republican core is an almost religious belief that an unfettered free market is the best of all worlds. Industrial policy is seen as equivalent to child porn." Among his many ideas for assisting business growth are a reduction in the capital gains tax, with progressively lower rates for longer-term investments in new businesses. Companies whose stock is publicly traded would be required to make financial reports only twice a year, instead of quarterly, as a way to reduce pressure on executives to focus on the short term.

Bush Relieving business from excessive regulation is one of the major points in the president's program for long-term growth. So is a variety of infrastructure proposals, mostly in the field of transportation. He would remove the limitations on federal financing of toll roads. He would put more money into the safety of the airways and into expanding airport facilities. Bush sees improved weather forecasting as a boon to further development of aviation. He would fund research on 300 mph magnetic levitation trains.

Buchanan An all-out advocate of "industrial policy," Buchanan says simply that "government ought to pick the winning technologies of tomorrow and back them." He favors enactment of a new investment tax credit. He would impose a two-year moratorium on new regulations on business and revoke most of the regulations that have been adopted under the Bush administration.

Paying for the

government

The government's huge deficits, forecast by the administration at $400-billion for this fiscal year, require any candidate who wants to be taken seriously to explain how any additional spending will be offset by cuts elsewhere or tax increases. That challenge has been accepted by all of the candidates.

What is most remarkable about this presidential year and these candidates is that all but Brown have offered plans to reduce the growth of programs heretofore considered untouchable: the entitlements. They have that name because anyone who meets the statutory requirements _ age, for example, or an honorable discharge from the military, or a certain level of income _ is entitled to receive the benefits of the program. Thus there is no way now to control these expenses. It all depends on how many eligible people apply.

Brown To stop the growth of the federal deficit, Brown proposes cutting military outlays in half.

The new federal tax system that he wants would raise some additional revenue. If his individual income tax and value added tax on business were set at 12 percent, they would raise the same amount of revenue as the present tax system, Brown says. The extra 1 percent would pay for a universal health care plan.

Clinton More than just entitlements would be covered under Clinton's program to restrict the growth in federal spending. He would limit outlays on "current consumption" _ any federal spending that is not an investment in the nation's future _ by imposing a ceiling that could rise only as much as the increase in personal income. Clinton also promises to cut the purely administrative costs of government by 3 percent a year, or some $6-billion, and his defense cuts would total $150-billion ($100-billion more than Bush's) over five years. He would reduce welfare payments for those who do not take a job or job training after two years, though in the interests of children he would not cut off the benefits entirely.

Kerrey Kerrey considers his universal health coverage plan a cap on entitlements under Medicare and Medicaid because it would incorporate an overall ceiling on health care costs. He would fund his health plan largely with a payroll tax of 1 percent on employees and 4 percent on employers.

Harkin He would cut the military by $420-billion over 10 years, by far the largest amount of any candidate, and would use $140-billion of that to reduce the deficit. He has no overall plan for restricting the growth in entitlements but would cut some specific ones, including some in agriculture _ a break with the positions he has taken as a senator from Iowa.

Tsongas Spending on entitlements would grow more slowly _ 1 percentage point less than the inflation rate _ under Tsongas' plan. That is much more restrictive than the administration's formula. He would apply a needs test to Part B of Medicare, which covers doctor bills and outpatient treatment; raise the gasoline tax; and use most of the savings in defense to reduce the deficit. But he cautions, "We have to be careful not to withdraw too much spending from the economy too quickly. We can't risk a serious economic shock during precarious economic times."

Bush The president's budget this year set forth a comprehensive program of reducing the growth in what he calls mandatory programs, a broader concept than the traditional entitlements. There is every sign that he will not push it until after the election. The targeted programs, many of them perennials with budget-cutters, include Medicare Part B, veterans benefits, some farm subsidies and increases in fees for various public services. The permissible annual rate of growth spending for these programs, under the Bush plan, would be determined by the growth in the number of people eligible, program by program, plus the inflation rate, plus 2.5 percent. That leeway has been built in mostly to accommodate what budget officials see as inevitable further growth in the cost of federally funded health programs.

Buchanan The Central Intelligence Agency, which he says costs $30-billion a year, is on Buchanan's list for cuts, as well as the Pentagon, the U.S. Information Agency and foreign aid. He recognizes, explicitly, that entitlements cannot be cut without congressional action but says he would nonetheless "take a look at these huge agriculture subsidies."

YOU MIGHT ALSO LIKE

Advertisement
Advertisement