THE CUTTING EDGE: SPECIAL REPORT : Tax Proposal Seeks to Meet the Future by Degrees

The information age came to tax policy Thursday night, as President Clinton called for tax-deductible tuition for college, vocational and graduate school and for grants to individual Americans to help them retrain and cope with constantly changing job markets.

The proposal was generous--up to $10,000 tax-deductible tuition and $2,000 tax-deferred individual retirement accounts that could be used to pay for education, among other items. Whether it can be squared with budget limitations or a Republican Congress remains a question for next year.

But the emphasis on schooling was significant. Clinton was responding to the fears of many Americans, including those of Labor Secretary Robert Reich, that the coming of “information industry” will divide workers between the high-tech plutocrats and low-skill proletarians.

Reich voiced such fears in a recent speech: “We are on the way to becoming a two-tiered society composed of a few winners and a larger group left behind,” he told a Democratic party group. One reason, he said, was “technology--largely computer based--which has either eradicated or devalued every routine job which can be done by a software program and simultaneously enriched every job utilizing the problem-solving skills of human brains.”

The rhetoric, voiced soon after the Democrats’ mid-term election defeats, was a bit emotional and misguided. Software programs have created and enriched more jobs for clerical workers than for executives--including many of the 5 million new jobs opened in the last two years.

In fact, perhaps 60% of all 120 million U.S. workers today are in an information industry, says Robert Kling, a professor of computer science at UC Irvine. That’s another way of saying that crops are planted, cars are built, bank deposits accepted, movies made and tickets dispensed with computerized machinery.

And the people doing that computerized work range from messengers and office helpers to architects and neurosurgeons. The U.S. work force, more than any other, has become adept at using computer technology.

Yet Clinton and Reich are correct in addressing fears and prescribing education--or more inclusively life-long learning--as the antidote for those fears. Because the prospects for technological change are sobering.

The cutting edge today among computer experts is electronic commerce, or the prospect of vastly expanded business on the Internet. The Internet is a federation of 3.2 million computers in 48,000 networks around the world. It was developed by the Pentagon and U.S. universities in the 1970s as a communications network without a center (which could have been vulnerable to attack) and theoretically without limits, like the universe itself.

The Internet long ago outgrew government uses and now is expected to link 100 million computers in millions of local networks within the next five years. It is becoming literally a global marketplace in which companies are displaying entire product lines for industrial customers who may log on from anywhere. Cost of display is extremely low--General Electric put 1,500 pages of its plastics division’s specifications on the Net.

And the costs of transacting business can be cut more than 50% just because a lot of middlemen are eliminated. Such a powerful cost-reduction tool is at least as significant as the Interstate Highway System begun in the 1950s, which has changed the face of America.

The impact of change on such a scale is unpredictable. The interstate system hurt small towns it bypassed, but it greatly expanded the U.S. economy.

And, important for individuals coping with change, the interstate highway system developed gradually, and so will the electronic highway--on which commercial traffic is still surprisingly light. Forrester Research, a San Francisco firm, estimates that commerce on the Internet will grow to $5 billion by 1998. That’s less business than will be done in America’s shopping malls this weekend.

So in thinking about technology, don’t be frightened by big words. Just look at what information industry really is. Federal Express, the package courier, started out by giving customers small computer terminals for tracking packages--the ones it features in TV ads.

Now FedEx is giving customers diskettes they can use with any computer. And on the diskette along with package tracking are individual customer lists and capabilities for printing waybills and shipping labels. FedEx is using information to help its customers’ business and so boost its own, creating jobs both at home and overseas.

But the computer’s effect on jobs is clearer up close. Barbara Parkman of Milwaukee is starting a business on her own, searching the Internet for clients too busy to sit for hours trying to isolate useful items from oceans of information--GE’s 1,500 pages, for example. Parkman’s “job” is electronic librarian.

Yet more important than her computer skills for that business is the basic education she received at the University of Wisconsin at Milwaukee, which trained her ability to analyze information and make discriminating choices.

And note, she didn’t have to take a degree in library science or cope with a big company’s employment practices. She’s in business for herself. The world to come, in which information will be inexpensively available to all, inevitably will be more democratic.

Which brings us back to Clinton’s proposed deductions for education: Will they really spur people to develop their knowledge and productivity? “Or will they become yet another entitlement?” asks Michael Duffy, who teaches tax policy at USC’s graduate Business School.

Clinton’s proposals were greeted with immediate criticism: that tax breaks for schooling and families reach only a “minority” of the population today, although deductions and grants for education apparently would be available to everybody.

The subject is worthy of debate. And Clinton himself referred to his model in the post-World War II GI Bill of Rights, which also reached a small minority but had a profound effect on the nation and its economy.

The GI Bill, between 1944 and ‘54, gave higher education to many who never would have had it, and therefore helped in the expansion of U.S. universities, which became a foundation for U.S. discoveries in computing and the growth of its advanced industries.

This seems a more fearful and myopic time. But if Congress could re-create a GI Bill, we might see again that the economic benefits a country reaps from cultivating the minds of its citizens are unpredictable, but also unlimited--like the universe, or the Internet.