Bush policy strikes out

April 05, 2004|By Edward Goldberg

NEW YORK - Every kid who has ever traded a baseball card knows that trade is good thing. Of course, in the grown-up world, baseball is like free trade: It's neither free nor necessarily fair.

The New York Yankees invest more in their team than Tampa Bay and consequently most kids (the ones who are often the true judge of value in baseball) would prefer a Derek Jeter card to that of the current Devil Rays shortstop. To try to give the sport a more level playing field, major-league baseball has developed a plan in which the teams that invest the most in players pay a so-called luxury tax to the teams that invest less.

Regardless of the latest unemployment figures released Friday showing that the economy added 308,000 jobs in March, in a bizarre way, the Bush tax cuts have emulated baseball in respect to job creation. The tax cuts helped to stimulate the economy of other nations while doing little for job growth in the United States.

We were in a recession when the tax cuts were enacted, and the correct policy was to stimulate the economy through deficit spending. The question is, should these deficits have been created to finance investments in the U.S. economy or to stimulate spending in the globalized economy? If the Bush administration could have seen beyond its own ideology, it would have known that many of the rewards from a consumer-based tax cut would go to the purchase of goods manufactured overseas.

The Bush policies have turned baseball's strange scheme inside-out. They have facilitated America's ability to indirectly pay a luxury tax without benefiting from an investment in a better team.

In order to invest in the United States and create jobs that could not be outsourced, the administration would have had to use the deficit to increase funding for such things as infrastructure, schools, education and scientific research. Or give tax incentives to companies to develop energy alternatives within the United States.

As the presidential election approaches, the failure of leadership has allowed trade and globalization to become the enemy in a political world that spins ideology as leadership. Trade is not the perpetrator or outsourcing the villain responsible for low job creation in the United States. Trade is as natural as kids exchanging baseball cards. The culprit is the Bush administration's insistence on ignoring the pragmatic and holding economic policy to the dogmatic grail of tax cuts.

Outsourcing is not a new phenomenon in the United States. Some of the same call center jobs that are now moving to India moved from the Northeast to the Dakotas 15 years ago. Textile jobs moved from New England to the Carolinas 100 years ago, and shoe manufacturing jobs began migrating to China 25 years ago.

Outsourcing is an economic reality whose human costs are being compounded in America today by the lack of an industrial dream. When the shoe industry moved to Asia, thousands of workers lost their jobs. Yet these workers could still believe that their children's lives would be better than their own. They knew that a new industry called technology had evolved. Their children would not have to be factory workers but could learn to become computer programmers. But when the programmers are outsourced to India, what becomes of the dream?

Although new industries are largely derived from innovation and risk, government policy in America traditionally has fostered the economic environment in which these ideas could blossom. American history is full of such examples, whether it was New York Gov. DeWitt Clinton building the Erie Canal or the federal government supporting the early airline industry through airmail.

The Bush administration appears to sees its role differently. Apparently believing that the tax rate on the highest earners during the 1990s, one of the greatest periods of technological innovation in the history of the country, stifled entrepreneurship, the administration continues to insist that tax cuts are the panacea for job creation. Tax cuts are wonderful for elections, and they definitely are great to receive. But as a tool for economic stimulus in the age of globalization, their full value is very suspect.

Governments are elected to make choices, and unlike a winning baseball team, this government does not see the need to invest directly in the home team. Instead, it came into office committed to the philosophy of tax cuts. When the economic situation deteriorated, it disregarded any thought of deviating from its ideology - any thought that direct investment might be a better job-creating tool than spending - and moved forward convinced that its own rhetoric was the truth.

Edward Goldberg, who represented the State Department at a conference about globalization in St. Petersburg, Russia, is president of a global trading company.

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