It is Jan. 20, 1989. The 41st President of the United States is escorted into the House chamber in the Capitol where the 101st U.S. Congress, the Supreme Court and hundreds of foreign dignitaries and observers are crowded into the upper galleries. After acknowledging several moments of tumultuous applause and with a touching glance toward his wife and family, our new chief executive begins to outline his vision of America for the next four years.
One of the cliches of this 1988 presidential election is that candidates Michael S. Dukakis and George Bush have evaded debating the true issues, that they have substituted character assassination and vague buzzword signals to special interest groups and that the average voter can hardly tell the difference between the two contenders.
That really is an unfair complaint, at least when it comes to economic policy issues. On that score, the American voter does--or should--have a pretty fair idea of what differences there would be between a Bush and Dukakis presidency.
There are literally pounds of position papers, hours of interviews with key economic gurus and snippets of hints, leaks and trial balloons lofted by the candidates themselves and senior helpers.
So who would the candidates appoint to key economic policy positions, and what would they do to help along the economy? Here is a rough idea of how Dukakis and Bush might proceed after the swearing-in:
Likely White House and Cabinet appointments affecting the economy: investment banker Felix Rohatyn, Treasury secretary; Michigan Gov. James J. Blanchard, Labor secretary; Pennsylvania Rep. William H. Gray III, director of the Office of Management and Budget; Lawrence Summers, head of the Council of Economic Advisers; former Arizona Gov. Bruce Babbitt, Commerce secretary; Dukakis campaign manager Susan Estrich, attorney general; former Carter aide Stuart Eisenstadt, trade representative; Maryland Sen. Paul S. Sarbanes, secretary of State.
Taxes: In his State of the Union address, President Dukakis will hold out the threat of a massive corporate tax increase if Congress fails to cut the budget deficit by $50 billion within the year. Bills to raise excise taxes on tobacco, alcoholic beverages and gasoline will be introduced, along with an oil import surcharge. Combined, the new taxes will raise $25 billion; Dukakis will declare, “We’re halfway there.” A 90-day tax amnesty on cheaters will be declared. After that, new funds will be given to the Internal Revenue Service to crack down on tax avoiders.
Trade: An omnibus trade bill will expand tax credits and funnel cheaper Export-Import Bank loans to medium-size firms. There also will be tougher sanctions against foreign nations that unfairly subsidize their sales into the United States. American firms that want to move production to cheaper labor markets will face a six-month “cooling-off” restraint along with a new “jobs training and relocation” obligation.
Economic growth: For the first time, “full employment” will be defined as below 4%. A bill will be sponsored to force the Federal Reserve to push interest rates lower and to encourage homeownership through lower mortgage rates. The Dukakis “Invest in America” plan will appropriate $500 million for regional industrial development. Another bill will index the minimum wage with inflation, and new funds will be set aside for job training for high-technology skills among the young and for retraining older workers.
Likely White House and Cabinet appointments affecting the economy: Nicholas F. Brady, staying on as Treasury secretary; New Hampshire Gov. John H. Sununu, Commerce secretary; Stanford’s Michael J. Boskin, chief economic adviser; Dick Thornburgh, staying on as attorney general; former Treasury deputy secretary Richard G. Darman, trade representative; Bush campaign chairman and former Treasury Secretary James A. Baker III, secretary of State.
Taxes: President Bush will tell Congress that his “flexible-freeze” proposal will cut the deficit to $18 billion by letting economic growth catch up to government spending. He will pledge to “veto, veto, veto” any spending increase that exceeds the inflation rate. Sharp cuts in defense spending will be promised; specific Pentagon projects (two aircraft carriers, the Sgt. York missile) will be shelved, and total cuts and delays will save $58 billion through 1993. President Bush will calculate that lower interest rates will save another $60 billion in financing costs of the federal debt through his first Administration.
Bush will endorse cutting the capital gains tax rate but rule out restoration of the investment tax credit. Excise taxes that are smaller than Dukakis’ will be held in reserve to finance education and health initiatives. With the $100 billion in budget savings anticipated, Bush intends to fund a pilot program in child care, a catastrophic health-care program mainly funded by the insurance industry and an “excellence in education” drive to spur state government and business investments in high-technology excellence.
Trade: The special trade negotiator will seek to expand free trade rules under the General Agreements on Tariffs and Trade in Geneva. Expanded American access to foreign financial and securities markets will boost U.S. capital strength at home. Protectionist bills to shield older U.S. industries from foreign competitors and investors will be blocked.
Economic growth: The dollar will be devalued further in 1989 as Federal Reserve easy credit policies spur U.S. exports for the third straight year.