‘Pursuit of happiness’

In a treatise on government published in 1690, British philosopher John Locke laid out an argument for property rights that would resonate on the far side of the Atlantic. Although God gave the fruit of the land to all people in common, Locke wrote, individuals have dominion over the property that is their bodies. And by extension, they own what their minds and hands produce and have the liberty to do with it as they please.

The Declaration of Independence and the Constitution later echoed Locke’s notion that government has no rights to an individual’s property, nor can it dictate what that person does to earn it. As a result, we take for granted the freedom to pursue our fortunes as we see fit. Yet, as Locke noted, one person’s pursuit often conflicts with another’s, so government intervenes to strike a balance. Today, our free enterprise system is regulated in many ways by the exercise of government power, including taxes, industry subsidies and monetary policy. A defining feature of the next president’s economic strategy will be how he or she uses government power to tilt the balance in the economy -- not just among interest groups and their pursuit of property, but among generations.

The federal budget

A hallmark of the Bush administration has been its willingness to shift the cost of today’s government programs onto future taxpayers. Like his predecessor, President Bush sought to stimulate the economy shortly after taking office. But President Clinton and the Republican Congress eventually stopped the deficit spending, allowing the growing economy to yield the first federal budget surpluses since the 1960s. Bush has yet to take his foot off the gas, and now the growth nurtured by lower taxes and greater spending is being threatened by the sub-prime mortgage meltdown, the credit crunch and related problems.

If the country sinks into a recession, as some analysts have been predicting, the next president will have a hard time selling fiscal discipline to Congress. But the time has come to stop billing future generations for the services we enjoy today. The burden on younger workers will soon be increasing anyway as baby boomers retire in ever increasing numbers. The Social Security system has been masking the federal deficit by collecting more in taxes than it pays in benefits, but around 2014, those flows will start to reverse. For the first time in its history, it will start paying more to retirees than it collects. And if there is no change in the system, the Social Security reserves will be gone by 2042, forcing dramatic reductions in benefits.

We want candidates to drop the facile pledges of budget discipline and to talk about how they plan to scale the role of government to the size of its wallet. Carrying on about “waste, fraud and abuse” in Washington is akin to complaining about the rust on the car that ran you over. Similarly, lawmakers’ earmarks (a.k.a. “pork-barrel spending”) may be a favorite target of candidates, but they don’t raise the government’s expenditures so much as they micromanage them. The real challenge is to confront the steady increase in spending on programs that probably have a good reason for existing. They do something for somebody, somewhere. And once they get started, they’re hard to stop. But just as individuals have to set priorities, so does government. A good place to begin would be to create a system to track whether programs are accomplishing what they set out to accomplish, as Republican Rudolph W. Giuliani has proposed.

Prime targets for trimming include trade-distorting subsidies for U.S. industries, such as the price-and-supply-manipulating farm program. The freedom to pursue a way of life shouldn’t be backed by government guarantees, especially when we’re struggling to persuade foreign governments to abandon their own protectionist impulses. We seek candidates who declare their support for international competition and lower trade barriers rather than pandering to those who feel threatened by the global marketplace.

The tax code

On the taxation front, candidates from both parties have largely stuck to time-worn scripts. Republicans say they won’t raise taxes until hell freezes over. Democrats say the rich should pay more and everyone else less. We want candidates to lay out a plan for simplifying the tax code. The looming expiration of the Bush tax cuts, along with the steady and unintended expansion of the alternative minimum tax, give the next president the opportunity to seek sweeping changes.

Years of trying to use tax law to promote certain kinds of behavior and penalize others have led to a Byzantine system that promotes corporate accounting legerdemain, enabling the wealthy and resourceful to dodge levies that the average taxpayer cannot. As tempting as it may be to use the tax code to promote saving, as Republican Mitt Romney has proposed, or encourage loans to start-ups, as Democrat Bill Richardson suggests, it would be better to phase out deductions and credits, broaden the tax base and lower rates, as did the Tax Reform Act of 1986. Although we wouldn’t endorse what Republicans Fred Thompson and Mike Huckabee have proposed, we tip our hats to them for pushing the edge of the tax-simplification envelope with their respective proposals for a voluntary flat tax and a consumption tax.

The workforce

Short of rigging the tax code, there’s much the government can do to promote entrepreneurship and competitiveness. We’d like to hear candidates discuss how they would improve the flow of capital, which has dried up for many commercial borrowers, and how they would bring more talented foreign workers and entrepreneurs into the United States. We also want them to offer a plan for raising the skill level of American workers, young and old. In the globalized marketplace, where low-skilled jobs migrate to low-wage countries, American workers must be able to take on more demanding tasks than their counterparts on the factory floors of China and Vietnam.

Just as the increasingly digital economy needs workers with new types of skills, it also needs a new infrastructure. Much of the backbone for the Internet is in place, thanks to sizable investments by government and telecommunications companies. But there is a disturbing shortage of bandwidth in rural areas, which have the most to gain from the Internet’s ability to negate distance and aggregate far-flung constituencies. Meanwhile, many of the high-speed Internet lines serving cities and suburbs aren’t up to the challenge posed by the advent of high-definition video. Wiring America for truly high-speed data transmissions should be near the top of the next president’s economic agenda.

The value of the dollar

The White House doesn’t have much effect on monetary policy, which is in the Federal Reserve’s purview. But the president does oversee efforts to maintain the value of the currency, which can be undermined when a slowing economy leads the Fed to adopt policies that are looser than the rest of the world’s.

The value of the dollar has fallen to its lowest point in more than two decades, a situation that has some short-term advantages (by making U.S. goods relatively cheap overseas, it promotes exports and improves the balance of trade) but that poses long-term peril. In particular, countries such as China may be prompted to sell off some or all of their substantial dollar reserves in search of a more stable currency, making it harder to finance the federal government’s $9-trillion debt. We’d like to hear what the candidates would do to prevent such a run on the dollar.

Social Security

Finally, as noted above, the Social Security trust fund is slowly steaming toward an iceberg. But one reform often touted by Republican candidates -- letting workers shift a portion of their payroll taxes into private accounts -- is at best a solution in search of a problem. At worst, it would only exacerbate the looming shortfalls and impose the very sort of risks on retirees that the program was designed to avert. Social Security, after all, is insurance, not savings, as private accounts would be.

Democrat Joseph R. Biden Jr. has noted that restoring the trust fund to solvency means one of two things: cutting benefits or raising taxes. Most of the Democratic presidential candidates have opted for the latter, making an argument that payroll taxes should continue to be collected after the first $97,500 in income, the current cutoff. Having some kind of cutoff makes sense, though, because Social Security -- in keeping with its mission of providing a safety net against poverty -- scales back benefits for higher-wage earners. Predictably, Republican candidates praise private accounts and vow not to raise Social Security taxes, but few offer any concrete plans for tackling the solvency problem. Two intriguing exceptions are Thompson, who would slow the increase in benefits by indexing them to price inflation instead of wage inflation, and Huckabee, who would seek savings by letting retirees convert their benefits to a lump-sum payment or annuity.

The outsized baby boom generation starts hitting retirement age next year. With life expectancies and healthcare costs increasing, each year’s cohort of retirees is slated to cost the government significantly more than the previous year’s. We cannot keep passing that bill on to the next generation, which has a right to pursue property for its own benefit, not just its forebears’. We urge candidates to offer a plan on retiree benefits that’s fair to the young too.

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Next: “The Powers of the Earth” explores climate change, energy and resources. The complete “American Values” series can be found at latimes.com/values08.