The scene is finally being set for the 1992 election drama. And with every passing week, it appears more and more likely that the center-stage spotlight will shine on the condition of the domestic economy.
But are the Democrats ready to address that issue effectively? As far as I can tell, not yet.
The evidence about public concern with the economy seems unequivocal. Thanks to the recession, Americans had already begun by early 1991 to rate "the economy" as the most important problem facing the country, dwarfing the runners-up--poverty and drug abuse--by a margin of more than 2 to 1.
Now, as the recession lingers, the public mood gets gloomier and gloomier. In a recent New York Times/CBS News poll, 66% of those polled rated the "condition of the economy" as very bad or fairly bad. (Only 1% responded that it was very good.) "Most striking," the New York Times concluded in its report on the survey, "was that in every question about the economy, people offer more pessimistic assessments than in the most recent survey early in the summer."
Further, a sizable majority is apparently prepared to hold the incumbent Administration responsible for the current economic morass. In the same New York Times/CBS News poll, for example, only 33% approved of President Bush's handling of the economy, while 57% disapproved.
Some of these polling results reflect the short-term effects of the recession, of course, and may not carry over into the election year. But some of them undoubtedly reflect the much longer-term erosion of the well-being of the vast majority of U.S. households and the continuing stagnation of the macro-economy itself. And it is on those longer-term trends and problems that the Democrats should primarily focus their attention. Unless they do, of course, they run the risk that the economy will have pulled out of the recession by mid-1992 and that the worst memories of recession will have begun to recede.
Several indicators of those longer-term problems seem most revealing:
- Real hourly wage-and-salary earnings have declined by roughly 10% since the late 1970s, forcing working households to put in more hours just to sustain their standards of living.
- Far from stimulating investment through massive tax cuts and concessions to the wealthy, Reagan-Bush economic policy has dealt investment a further devastating blow. Compared to the previous business cycle in 1973-1979, the pace of real net productive investment during the most recent 1979-1989 business cycle declined by a quarter. And productivity growth in the United States continues to lag far behind productivity growth among almost all of the leading competing economies.
- As tepid as economic performance has been since the late 1970s, it would have been even worse had we not borrowed so heavily from the future. Corporations and households are heavily in debt, the United States is itself now the world's larger debtor economy, and we've been running down our human, infrastructural and environmental resources. The kind of growth we've experienced over the past decade is not sustainable; even if nothing else changed, we must soon begin paying the tab we've been running up with future generations.
These longer-term trends are neither accidental nor unconnected. They have resulted from the repressive trickle-down economic policies that have reigned virtually unchallenged since the late 1970s.
From the beginning of that period, conservatives went on the offensive, insisting that we cut taxes, slash safety nets and curb wage demands. In return, they promised, the rich would serve their country by investing their enhanced wealth and profits in productive investment. Eventually, economic growth would accelerate and the proceeds would trickle down to the rest of us.
Belying those promises, the rich kept their enhanced wealth and profits, spending them on their own luxury consumption, buying up each others' companies, speculating on everything from gold to pork bellies. The growth spigots, whose flow was supposed to trickle down, were never even turned on.
Some Democrats in Congress, finally beginning to sense the tremors of discontent from their constituents, have begun to murmur about economic relief. But it would be glorifying their proposals to call them Band-Aids.
For example, former vice presidential candidate Sen. Lloyd Bentsen (D-Tex.) recently proposed some tax relief for the middle class, timed to help speed the economy's recovery from recession. The proposal was aimed at least partly to counter the President's appeal for a cut in the capital-gains tax, with Bentsen hoping to demonstrate that the Democrats care more about the middle class than a President ever tending to the needs of his wealthy supporters.
Such tax relief for the middle class might conceivably help nudge the economy a bit more quickly out of the recession. But it would fail to even scratch the surface of the longer-term problems identified above.
It would in no way address the persistent erosion of workers' real hourly earnings. Suppose that tax-paying families received a tax credit of $350 per child. Would that in any way arrest the weakening bargaining power of workers, the hostility of most corporations toward employers and unions, or the corrosive effects of intensifying international competition?
Nor would it invigorate languid investment. Nor, finally, would such token policy gestures help cure our addiction to borrowing from the future. Until we begin to improve the underlying performance of the U.S. economy, addressing the sources of stagnation in investment and productivity, the borrowing probably will continue. A little tax relief for the middle class will hardly begin to correct those structural faults. These token gestures amount to little more than political posturing. What is really needed are economic policy proposals that can reverse the erosion of popular well-being and revive macroeconomic performance.