In a treatise ongovernment published in 1690, British philosopher John Locke laidout an argument for property rights that would resonate on the farside of the Atlantic. Although God gave the fruit of the land toall people in common, Locke wrote, individuals have dominion overthe property that is their bodies. And by extension, they own whattheir minds and hands produce and have the liberty to do with it asthey please.
The Declaration of Independence and the Constitution later echoedLocke's notion that government has no rights to an individual'sproperty, nor can it dictate what that person does to earn it. As aresult, we take for granted the freedom to pursue our fortunes aswe see fit. Yet, as Locke noted, one person's pursuit oftenconflicts with another's, so government intervenes to strike abalance. Today, our free enterprise system is regulated in manyways by the exercise of government power, including taxes, industrysubsidies and monetary policy. A defining feature of the nextpresident's economic strategy will be how he or she uses governmentpower to tilt the balance in the economy -- not just among interestgroups and their pursuit of property, but among generations.
The federal budget
A hallmark of the Bush administration has been its willingness toshift the cost of today's government programs onto futuretaxpayers. Like his predecessor, President Bush sought to stimulatethe economy shortly after taking office. But President Clinton andthe Republican Congress eventually stopped the deficit spending,allowing the growing economy to yield the first federal budgetsurpluses since the 1960s. Bush has yet to take his foot off thegas, and now the growth nurtured by lower taxes and greaterspending is being threatened by the sub-prime mortgage meltdown,the credit crunch and related problems.
If the country sinks into a recession, as some analysts have beenpredicting, the next president will have a hard time selling fiscaldiscipline to Congress. But the time has come to stop billingfuture generations for the services we enjoy today. The burden onyounger workers will soon be increasing anyway as baby boomersretire in ever increasing numbers. The Social Security systemhas been masking the federal deficit by collecting more in taxes than it pays in benefits,but around 2014, those flows will start to reverse. For the firsttime in its history, it will start paying more to retirees than itcollects. And if there is no change in the system, the SocialSecurity reserves will begone by 2042, forcing dramatic reductions in benefits.
We want candidates to drop the facile pledges of budget disciplineand to talk about how they plan to scale the role of government tothe size of its wallet. Carrying on about "waste, fraud and abuse"in Washington is akin to complaining about the rust on the car thatran you over. Similarly, lawmakers' earmarks (a.k.a. "pork-barrelspending") may be a favorite target of candidates, but they don'traise the government's expenditures so much as they micromanagethem. The real challenge is to confront the steady increase inspending on programs that probably have a good reason for existing.They do something for somebody, somewhere. And once they getstarted, they're hard to stop. But just as individuals have to setpriorities, so does government. A good place to begin would be tocreate a system to track whether programs are accomplishing whatthey set out to accomplish, as Republican Rudolph W. Giuliani has proposed.
Prime targets for trimming include trade-distorting subsidies forU.S. industries, such as the price-and-supply-manipulating farmprogram. The freedom to pursue a way of life shouldn't be backed bygovernment guarantees, especially when we're struggling to persuadeforeign governments to abandon their own protectionist impulses. Weseek candidates who declare their support for internationalcompetition and lower trade barriers rather than pandering to thosewho feel threatened by the global marketplace.
The tax code
On the taxation front, candidates from both parties have largely stuck totime-worn scripts. Republicans say they won't raise taxes untilhell freezes over. Democrats say the rich should pay more andeveryone else less. We want candidates to lay out a plan forsimplifying the tax code. The looming expiration of the Bush taxcuts, along with the steady and unintended expansion of thealternative minimum tax, give the next president the opportunity toseek sweeping changes.
Years of trying to use tax law to promote certain kinds of behaviorand penalize others have led to a Byzantine system that promotescorporate accounting legerdemain, enabling the wealthy andresourceful to dodge levies that the average taxpayer cannot. Astempting as it may be to use the tax code to promote saving, asRepublican Mitt Romney has proposed, or encourage loans to start-ups, asDemocrat Bill Richardson suggests, it would be better to phase out deductionsand credits, broaden the tax base and lower rates, as did the Tax Reform Act of 1986. Although we wouldn't endorse whatRepublicans Fred Thompson and Mike Huckabee have proposed, we tip our hats to them for pushing theedge of the tax-simplification envelope with their respectiveproposals for a voluntary flat tax and a consumption tax.
Short of rigging the tax code, there's much the government can doto promote entrepreneurship and competitiveness. We'd like to hearcandidates discuss how they would improve the flow of capital,which has dried up for many commercial borrowers, and how theywould bring more talented foreign workers and entrepreneurs intothe United States. We also want them to offer a plan for raisingthe skill level of American workers, young and old. In theglobalized marketplace, where low-skilled jobs migrate to low-wagecountries, American workers must be able to take on more demandingtasks than their counterparts on the factory floors of China andVietnam.
Just as the increasingly digital economy needs workers with newtypes of skills, it also needs a new infrastructure. Much of thebackbone for the Internet is in place, thanks to sizableinvestments by government and telecommunications companies. Butthere is a disturbing shortage of bandwidth in rural areas, whichhave the most to gain from the Internet's ability to negatedistance and aggregate far-flung constituencies. Meanwhile, many ofthe high-speed Internet lines serving cities and suburbs aren't upto the challenge posed by the advent of high-definition video.Wiring America for truly high-speed data transmissions should benear the top of the next president's economic agenda.
The value of the dollar
The White House doesn't have much effect on monetary policy, whichis in the Federal Reserve's purview. But the president does overseeefforts to maintain the value of the currency, which can beundermined when a slowing economy leads the Fed to adopt policiesthat are looser than the rest of the world's.
The value of the dollar has fallen to its lowest point in more thantwo decades, a situation that has some short-term advantages (bymaking U.S. goods relatively cheap overseas, it promotes exportsand improves the balance of trade) but that poses long-term peril.In particular, countries such as China may be prompted to sell offsome or all of their substantial dollar reserves in search of amore stable currency, making it harder to finance the federalgovernment's $9-trillion debt. We'd like to hear what thecandidates would do to prevent such a run on the dollar.
Finally, as noted above, the Social Security trust fund isslowly steaming toward an iceberg. But one reform often touted byRepublican candidates -- letting workers shift a portion of theirpayroll taxes into private accounts -- is at best a solution insearch of a problem. At worst, it would only exacerbate the loomingshortfalls and impose the very sort of risks on retirees that theprogram was designed to avert. Social Security, after all, isinsurance, not savings, as private accounts would be.
Democrat Joseph R. Biden Jr. has noted that restoring the trust fund to solvency means one of two things:cutting benefits[pdf] or raising taxes. Most of the Democratic presidentialcandidates have opted for the latter, making an argument thatpayroll taxes should continue to be collected after the first$97,500 in income, the current cutoff. Having some kind of cutoffmakes sense, though, because Social Security -- in keeping with itsmission of providing a safety net against poverty -- scales backbenefits for higher-wage earners. Predictably, Republicancandidates praise private accounts and vow not to raise SocialSecurity taxes, but few offer any concrete plans for tackling thesolvency problem. Two intriguing exceptions are Thompson,who would slow the increase in benefits by indexing them to priceinflation instead of wage inflation, and Huckabee,who would seek savings by letting retirees convert their benefitsto a lump-sum payment or annuity.
The outsized baby boom generation starts hitting retirement agenext year. With life expectancies and healthcare costs increasing,each year's cohort of retirees is slated to cost the governmentsignificantly more than the previous year's. We cannot keep passingthat bill on to the next generation, which has a right to pursueproperty for its own benefit, not just its forebears'. We urgecandidates to offer a plan on retiree benefits that's fair to theyoung too.
Next: "The Powers of the Earth" explores climate change, energy andresources. The complete "American Values" series can be found at latimes.com/values08.