Running on empty

Tom Wicker

November 29, 1990|By Tom Wicker

NEW YORK — HERE ARE three reports from the American Dream:

* Young people "fresh out of high school" are having a hard time finding "good wages and steady work," a New York Times survey discovered. Household incomes where the principal earner is under 25 fell by 19 percent in the decade ending in 1988.

* Ulster County, N.Y., officials have proposed an 82 percent property tax increase for 1991, on top of a 42 percent increase in 1990. Taxpayers, predictably, are up in arms.

* The Times reported recently that numerous working people in New York City, like many in Moscow, are having to share apartments or houses, being unable to find or afford their own.

Similarly grim examples are common everywhere, and you don't need three guesses to find the common denominator among them: a stumbling U.S. economy that even George Bush admits is "sluggish."

That's a mild word for an engine performing at far less than capacity, in which unemployment nearing 6 percent has come to be regarded as normal. Not too many years ago, 4 percent employment was the national goal; 3 percent was sometimes achieved, and many wage employees earned high incomes. Now the overall economy not only is producing too few jobs; the new service-dominated economy is providing too few good jobs at substantial wages.

One consequence is that too little revenue is being raised to finance governments confronted with strong, in some cases rising, demands for public services. A second consequence is that insufficient savings for the future are being accumulated -- and the cost of a good education system should be counted as a savings for the future.

Attempting to remedy this situation by reducing the federal budget deficit puts the cart before the horse, despite claims from both parties and from president and Congress. What is needed, instead, is a bold program to expand aggregate demand -- to increase the purchasing power of the American people. That means jobs, putting people back to work.

To hear recent presidents and Congresses tell it, the only economic enemies to be feared are inflation and budget deficits. Little is said about unemployment and underemployment and the millions of Americans too discouraged to seek a job. Yet these are the chief causes of shrinking demand and the consequent "sluggish" economy.

A program to expand employment and increase demand would get the horse out front where it belongs, pulling the cart along; because in the long run it would also reduce the federal deficit, probably more than the recent "deal" or any other in prospect. That result would not be immediate, but neither will negotiated deficit reduction; anyway, the American insistence on quick fixes and overnight results is one of the nation's most prevalent


As employment and demand increase, a stimulated economy will begin to produce greater revenues -- not only for the federal government but for starved states and cities. That will make possible expanded public investment in improved education -- perhaps the single greatest need for the American future -- and in such other necessities as redeemed and expanded infrastructure (highways, bridges, sewage and water systems, etc.).

Investment in such necessities -- they are more than merely desirable -- will be useful beyond its effect on revenues. Expanded job opportunities for young people may have some good effect on crime rates. Better health care, particularly for children (in a country where an eighth of the population has no medical insurance and millions get no or inadequate treatment) will mean a healthier work force, just as better education means a more capable work force; and both will contribute to greater productivity and renewed American competitiveness.

Apologists for the recent budget deal claim that it should cause increased private investment because of a reduction in interest rates expected to follow reduced federal borrowing. But there's been little evidence since the budget deal that the Federal Reserve can or will reduce rates sufficiently to produce the promised effect; and there's no proof, anyway, that lower rates, if realized, will cause business to invest in a sluggish economy.

What will cause increased private investment, as numerous economic studies show, is strong and growing demand. That can only come from high employment, good wages, a productive people.

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