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Keeping It Real for the Voters

If you look past misleading labels, you'll see genuine issues.

June 27, 2004|James K. Galbraith | James K. Galbraith is chairman of Economists Allied for Arms Reduction ( and holds the Lloyd M. Bentsen Jr. chair in government/business relations at the Lyndon B. Johnson School of Public Affairs, University of Texas.

AUSTIN, Texas — Surprised though you may be to hear this, the presidential campaign is just getting started.

Yes, we know the candidates. But what are the real issues? They are not so clear.

And one reason they aren't is our national weakness for the misleading phrase, for the sexy label that somewhat, but imperfectly, covers the case. Herewith a brief guide to what is real and what is not.

* Jobs, not outsourcing. The exodus of manufacturing and software jobs is a hot-button topic. Some small things could be done about it. Adequate enforcement of privacy rights and security interests, for example, would curtail a fair amount of offshore computer programming. But generally speaking, if the Indians want call centers and the Chinese want TV factories, you can't stop them.

The challenge is to find useful work for all seeking a job here. We still need at least 5 million new jobs. We could start by supporting state and local governments with a revenue-sharing program, and their capital-spending projects with a new federal capital budget and revolving fund. We could add teachers, nurses, firefighters and police to the public payrolls. Let's have an energy and transportation program to rebuild our country for an oil-short world.

And let's look forward to the day -- instead of fearing it -- when we'll have a lot more elderly retirees. Who will take care of them? How about a corps of home healthcare assistants? You could create a lot of useful jobs that way.

* Future deficits, not those right now. Those who bemoan the lost surpluses of the late-1990s miss the point. Today's deficits are large, but they are necessary. The private sector will not borrow as it did five years ago, neither for business investment nor for household consumption. So the public sector must borrow, heavily, for the time being. To create enough jobs when we need them, deficits may have to grow for a while.

Are deficits driving up interest rates, crowding out private investment? No. Interest rates at historical lows didn't budge these last few years as both actual deficits and the forecasts got worse. Long-term rates are reacting now -- but only to the clear signal that Federal Reserve Chairman Alan Greenspan will soon raise short-term rates.

What about those frightening forecasts of huge deficits? They matter, mainly for a political reason. Given the deficit phobia of our political culture, the government will be unable to address national needs if it doesn't show how future deficits can be brought under control. This is why the back-loaded, top-heavy parts of President Bush's tax cuts should be repealed.

* Healthcare, not Social Security and Medicare. Social Security is in pretty good shape -- and will remain so. The drumbeat of Social Security Cassandras has been heard for decades, mainly from people who would like to get their hands on the cash flow. Want to help balance Social Security's future books? Then let's reinstate the estate tax and credit it to the trust fund.

On the other hand, the cost and waste in our healthcare system are a travesty. The recent Medicare giveaway to the big drug companies will have to be fixed. We should move toward an efficient, universal health insurance system -- and had it not been for politics we already would have.

But don't pay attention to those who throw around claims that the government is about to go bankrupt over the baby boomers. It isn't. To the contrary, with smart policy, the country can meet its needs and still be much richer in 50 years than it is today.

* Tax fairness, not tax hikes. Bush aimed his tax cuts at the super-wealthy. Taxes on corporate profits have nearly disappeared. Meanwhile, more than 20 years of regressive Social Security payroll taxes have risen and, in the recent budget crisis, states and cities have been hiking their property and sales taxes. Workers, the middle class and the poor pay those. It's a horror that taxes have fallen so much for the very wealthy and risen so much for the working poor and the middle class.

This issue is central to the kind of society we are now and are likely to become. A plutocracy cannot also be a democracy -- and the tax code is the way that we choose between them.

* The dollar, not the renminbi. There's been a lot of chatter about China's currency manipulations. Of what does that consist? Well, China has pegged the renminbi ... to the dollar. Some manipulation.

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