Now Let Bush Defeat Recession

President Bush’s economic advisers have persuaded him to be as optimistic about a quick victory over the current recession as he was when his military advisers predicted a quick victory in the Persian Gulf.

His military advisers were clearly right, and Bush is trying hard to follow that with extensive peace plans for the Middle East.

His economic advisers too may be correct, but even if they are, the President’s very limited post-recession recovery plans aren’t going to help the financially troubled millions of low- and middle-income Americans.

The President’s Council of Economic Advisors says, “With sound economic polices in place, there is no fundamental obstacle to an expansion in the 1990s at least as long and strong as the record expansion of the 1980s.”

But they are apparently ignoring several fundamental obstacles such as the enormous federal debt and trade deficits and the heavy indebtedness of American families and business.

“At no time in U.S. history has such debt been so pervasive, and that seriously compromises the ability of family, business or government to come close to a healthy expansion,” contends Barry Bluestone, a University of Massachusetts economist.

Economists generally are a confusing and often confused bunch. George Bernard Shaw neatly summarized that point with his well-known observation, “If all the economists were laid end to end, they would not reach a conclusion.”

Unfortunately, the economists Bush listens to don’t show much interest in reaching a conclusion that helps workers.

They don’t worry about the fact that workers are worse off now than they were after that “record expansion” of the Reagan-Bush years.

They seem unconcerned that the income of the wealthiest 20% of American families grew by 29% in the Reagan-Bush years, or eight times faster than that of the bottom 80%, or that the top 1% increased their income by 74%, according to Lawrence Mishel of the Economic Policy Institute.

Our optimistic President isn’t offering any plan to improve our degraded ability to help the huge segment of the population that has been damaged by the de-industrialization of America.

For instance, the latest Bureau of Labor Statistics figures show that nearly 3 million fairly well-paid manufacturing jobs have been lost in the past decade while jobs in retail trades increased.

That’s a lousy trade-off for workers. The decreasing number of manufacturing jobs average $17.37 an hour in wages and benefits while the increasing number of jobs in retail trades pay less than half that.

Bush and his economic advisers are paying no attention to the continuing decline in real wages of workers--the amount of goods and services they can buy with their paychecks. The purchasing power of blue-collar wages today has plunged 11% below the peak reached in 1978.

Bush wants to deal with another long-standing economic problem--the massive federal deficit--by cutting domestic spending. That will hurt, not help, most workers, who need the jobs that could come from increased domestic spending on our deteriorating infrastructure.

The President’s proposal to reduce our gigantic trade deficit--about $100 billion--is to get rid of more trade barriers. But trade barriers are the only thing that can slow imports from countries where wages are too low for American workers to compete with them.

Rising unemployment is still a serious problem that the Administration offers no proposal to alleviate, other than to euphorically wait for an unplanned, unpredictable free-market economy to create more decent jobs.

Some conservative economists have sharply criticized their liberal counterparts such as Bluestone and his colleague, Bennett Harrison of Carnegie Mellon University, who worry about the harm done to American workers by what is called the de-industrialization of America.

The critics say there has been no de-industrialization because overall factory productivity remains good and factories are producing about the same proportion of the nation’s gross national product as in the 1960s.

However, as Bluestone and Harrison note, production of a few products such as computers and machine tools has helped keep total factory production up, but output in most labor-intensive manufacturing industries--such as autos, steel and textiles--has continued to decline, along with the jobs they provided.

Bush wasn’t afraid to use the power of the federal government to deal with Saddam Hussein. He should be equally bold in attacking the increasingly serious economic problems facing America’s workers.

Despite strong opposition from conservatives, the President ought to revive the industrial policy idea of New York investment banker Felix Rohatyn and others to create a cooperative framework for government, business and labor to help plan the direction of the nation’s economy.

The Japanese do that successfully through their Ministry of International Trade and Industry, which serves as a coordinating agency for business, government and labor. For instance, MITI brings them together to pool resources for major research projects that may take years to pay off, and it even helps avoid closing factories because the country needs them even though they are not highly profitable, at least not initially.

An American industrial policy too could help balance production for public need with the need for private profit.

If Bush wants to help workers, which isn’t likely, he would push for an industrial policy, but he would need almost as much courage as he displayed in challenging Hussein. It’s easier to rally support to fight a foreign aggressor than to challenge ardent conservatives at home and wealthy interests that don’t want government interference in their aggressive quest for success.