THE POLITICS OF STAGNATION
The state of the union is far more parlous than President Clinton's soothing speech would have us believe. Going into 1996, the vast majority who inhabit the sensible center of America are appalled at the elbows-out partisanship and polarization in Washington. The pettiness, the anger, the demagoguery are disgusting. The Washington scene is a caricature of a TV talk show, with sanctimonious politicians screaming past one another, forsaking accomplishment only to wallow in self-righteousness. Who voted for this?
It's wrong simply to focus on who is winning and who is losing. Thanks in part to a media culture that prizes celebrity over thoughtfulness, conflict over compromise, and ideology over pragmatism, political extremists of both parties are egged on to ever more bombast. Ridicule and exaggeration pass for explanation and context. The Democrats yell that the Republicans are out to destroy Medicare. The Republicans shout that the Democrats want to destroy the middle class with taxes. This kind of vulgar politics is doing great harm to America.
It is time to return to a political discourse of sense and sensibility, of respect and civility. There are no overwhelming political mandates in America that sweep away the need for negotiation and compromise. The 1994 elections did not signal a return to 19th century conservatism any more than the 1992 elections signaled a return to New Deal liberalism.
The most important issue is the one discussed least: growth. Fast, noninflationary economic growth, at 3%-plus a year, is the key to securing jobs, raising income, and providing resources for education and health. Yet most of the talk about balanced budgets, entitlements, Medicare, and taxes is really about defending existing franchises in an era of government downsizing and slow growth, be they health care for the elderly or subsidies for cattle grazers. The current debate is about how to survive the economics of stagnation, as interest groups vie for their "fair share" of finite resources.
With the 1996 campaign under way, it is time to judge policies--taxes, entitlements, research, education, and the balanced budget--by their impact on economic growth. Taxes, for example, should be cut and simplified to spur capital spending and reward individual work. Simply giving tax credits to families for having children does little to expand the economy, however welcome the extra cash may be. It would be far better to cut income taxes.
Monetary policy must also focus on growth. The effort to downsize government is already putting an enormous fiscal drag on the economy, which is crawling along at about a measly 1% to 2% rate. It will get worse once a budget deal is finally reached. Yet hard-liners in the Federal Reserve, obsessed with zero inflation, resist lowering interest rates. They want lower economic growth and higher unemployment to keep prices from rising. We believe that productivity is higher than official figures indicate and allow for faster growth without more inflation.
If the economy doesn't grow at 3% a year, there is little hope of generating the resources people will need to live well, raise children properly, and plan for their old age in the 21st century. It may indeed be that the trashy tone in American politics today results from huge fights over the distribution of income in a static economy. Only through policies that promote investment in fast economic growth can the U.S. really prosper. That's what the 1996 campaign should be all about. Here's hoping.