President Builds New Programs Heading to a Second Honeymoon

It’s time for George Bush to revive an old romance. Nineteen years ago, after he lost a Senate race in Texas, Bush was looking for work. Come to the White House as congressional liaison, suggested Richard M. Nixon, who had encouraged the race. No thanks, said Bush, uninterested in a staff job. Well, how about U.S. ambassador to the United Nations? OK, said Bush, and he launched an international career that put him on the road to the presidency.

But what did Bush himself want in those days? Sources from the Nixon White House say that he had a different path in mind, far from diplomacy and maybe even politics. His first choice was a top post at the Treasury Department, drawing on his days as an oilman and as member of the House Ways and Means Committee. Bush hoped that Nixon would eventually make him Treasury secretary.

Though he hasn’t been a close student of the economy since then, Bush could serve the country well if he returned to his old interest in economic affairs. By fall, he should unveil a plan for economic renewal. For both Bush and the economy, this is an ideal time to strike.

In the last four weeks, Bush has vaulted into his strongest political position since taking office. His arms proposal in Europe seemed to liberate him from a cautious past. Suddenly he gained his bearings--with his handling of the China crisis, a clean air proposal, blockage of a minimum wage proposal and House passage of most of his savings-and-loan bailout. An early June Gallup poll showed his popularity climbing 14 points to 70%, highest of the year. And that was before his call for cleaner air--a sure winner. After a dangerously slow start, Bush may now begin a second honeymoon.

He has seized the high ground just as Congress is falling off the charts in public esteem. While the Democrats have now elected stronger leaders in the House, they are likely to be far more conciliatory than anyone imagined six months ago. For the first time since the Vietnam War, the flow of power away from the White House to the Congress may end. Ronald Reagan was more formidable than Bush in his first year, but he could never reverse the tide. Bush might--if he sets a more ambitious agenda for the nation.

With the tectonic plates shifting in geopolitics, Bush might be tempted to spend his time in the diplomatic arena. He clearly feels more at home there. And he enjoys the company of his foreign policy team. Recently, he has been on the phone as many as a dozen times a day with his pal, Secretary of State James A. Baker III.

Yet while the United States must pay close heed to the breakup of the communist empire, the White House has an equally large stake in troubles brewing back home. The U.S. economy may seem strong today--and the Administration has the statistics to prove it--but, in private, serious thinkers in the government admit the foundations are rusting and need repair. America’s position as the preeminent economic power is eroding.

The case should not be overstated. U.S. workers are still the most productive. The U.S. economy remains more than twice the size of the Japanese. During the 1980s, while the number of jobs in Western Europe increased by two million, the United States created nearly 16 million new jobs--and more than half are high-paying. Yet, some basic trend lines are moving in the wrong direction. As studies point out, U.S. productivity levels have been rising less rapidly during the 1980s than many nations in Asia and Europe. The U.S. savings rate, traditionally anemic, has sunk to a level four times below the Japanese. The federal debt is now so large that all personal tax collections west of the Mississippi were barely enough to pay last year’s interest payments on the national debt. And where did those payments go? About $30 billion were sent to foreign creditors, twice as much as Washington spent on housing in a nation where a scandalous number of people sleep on sidewalk grates.

The 1990s promise not much better. A private document prepared by the Japanese Economic Planning Agency projects the Japanese economy will grow at a rate nearly twice that of America’s from now through the year 2000, and Japanese per capita income will surpass that of the United States. The Japanese also expect Western Europe to grow more rapidly than America. Among prominent U.S. economists, C. Fred Bergsten now expects that because of the renewed strength of the dollar, the U.S. trade deficit will widen to $200 billion a year during the early 1990s and overall U.S. debt overseas will exceed $1 trillion by 1991.

The perception is now spreading in Asia and Western Europe that the United States cannot manage its own affairs. Business leaders return from Japan complaining about being treated with a new arrogance. One chief executive officer of a major corporation recently visited Tokyo to see old Japanese friends from the Harvard Business School. At dinner, he said, they were as jovial as in student days, but in their offices the next morning, they were all icy condescension and lectured him on U.S. business practices.

Implications stretch far beyond individual relationships. During most of the postwar period, the United States called the shots because of its overwhelming military and economic might. But as the United States and Soviet Union dismantle forces, military strength will no longer command the same obeisance. Economic might will be decisive and economic rivalries will displace military ones.

The United States has already moved from clear dominance in the West to a position of first among equals. As Bush said in Europe, the United States should welcome a sharing of leadership with others. After all, the rise of Western Europe and Japan has been a U.S. goal since the war. But sharing No. 1 is a far cry from being No. 2. Japan and West Germany are already causing jitters as they grow more independent.

For reasons both historic and apparently racial, the rise of Japan most upsets America. A poll last year found, by 57% to 37%, Americans feel that Japanese economic competition poses a greater threat to U.S. national security than Soviet military power. In the Pentagon, there are reportedly whispers about plans for a potential fight with the Japanese. In a recent Atlantic magazine cover article, James Fallows, who has been living in Asia, called for a U.S. “containment” policy toward Japan, echoing the famous article George F. Kennan wrote four decades ago about the Soviet Union.

These are sentiments that a U.S. President must channel into more constructive directions. There are some around Bush who would prefer not to rock the boat. They see an economic recovery rolling through its seventh year. So why take on a bold project that can misfire? The answer is easy: That’s why we have a President. His first responsibility is to attend to the nation’s largest needs.

Bush would capture the country if he went before a joint session of Congress with a plan of economic renewal. Borrowing a title from an organization started a few years ago, he could rally the public behind a crusade to “Rebuild America.” And he could insure Democratic support if he then took Democratic congressional leaders along with GOP leaders to Camp David to develop a legislative attack. How could the Democrats resist his call to “keep America No. 1”?

The summer months provide a useful time for the Bush team to assemble its package. As with the North Atlantic Treaty Organization plan, Bush could call on key advisers, headed perhaps by Treasury Secretary Nicholas F. Brady and Budget Director Richard G. Darman, to piece together the proposal.

--Resolution of the Budget Crisis . With tax revenues flowing into Washington at an unexpectedly high rate, some congressional leaders believe it may be possible to bring the budget deficit down without a tax increase. But inside the Administration, skeptics think it will require a combination of higher taxes and painful spending cuts to force Bush to break his no-tax pledge.

Ironically, Bush’s stand against higher taxes should give him bargaining leverage in persuading congressional Democrats to cut long-term capital gains and trim back entitlement programs. Bush can gain more support for a budget plan if he earmarks part of the tax increase for education or an anti-drug campaign.

-- Increasing savings and investment . Reducing the deficit will automatically increase the country’s savings rate. But even then, savings would be too low for long-term economic health. While economists dispute how well government can lure people to save more, evidence suggests that individual retirement accounts have been effective. Two of Bush’s top lieutenants, chief economist Michael J. Boskin and domestic adviser Roger B. Porter, have studied ways to improve savings, and the President should direct them to come up with a new proposal.

--Educational overhaul. Secondary school systems in most major cities have collapsed. Parents across the country are looking for help. The Bush Administration says it doesn’t have any money--which is true. In the early days of the Reagan Administration, however, Education Secretary Terrel H. Bell proved a hard-hitting campaign led by a President and fired-up citizens could help schools without a lot more cash. If Bush truly wants to become an education President, he needs to gear up a massive campaign.

--Strategic industries . Commerce Secretary Robert A. Mosbacher recognizes that the United States must encourage key industries--especially high technology--that will provide the necessary muscle for new economic growth. He is looking at alternatives to spur a high-definition TV industry. Bush ought to jump into the middle of this debate.

--Modernizing transportation. The Government Accounting Office has estimated it will cost over $300 billion to renew roads, bridges, airports and other sinews of an efficient economy. Bush should ask Transportation Secretary Samuel K. Skinner to accelerate current efforts to draw up a national transportation plan.

There are many other candidates for a renewal package: health care, child care or a revision of anti-trust laws. But the critical point is for Bush to get started. Polls show that by overwhelming majorities, Americans would welcome a greater emphasis on domestic needs. The President should direct that energy toward a more competitive economy.

Western Europe and Japan are engaged in enormous enterprises to build their economies. If the United States coasts, it could drift into potentially dangerous splits with both. But if America pulls itself up as well, the three forces acting together could create a vast, open market--with over 600 million consumers--that could remake the world.