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Democrats' best issue: a more productive economy

By Robert B. Reich / April 18, 1988



DEMOCRATS should stop fretting about which candidate has the best message, the most charisma, the broadest following, the biggest war chest, or the fanciest organization, and start worrying about which candidate makes the most sense. They should be asking themselves: Who is likely to do best at rebuilding America? Whoever we elect will have to cope - first and foremost - with the long-term deterioration in the United States capacity to generate new wealth. We are now $425 billion in debt to the rest of the world. Almost half the commercial real estate in downtown Los Angeles, among other cities, has already been sold off to foreigners - as have many of our companies.

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Economics and politics are entwined. A nation living beyond its means faces a stark political choice: Either it can grow poorer, or it can become more productive. Under the present administration, the US has been quietly exercising the first option. The steadily declining dollar has rendered more expensive everything we purchase from abroad. Young people are having difficulty affording houses nearly as nice as the homes they grew up in; for the first time since the 1930s the percentage of Americans who own their own homes is declining. More than one-fifth of our children are now born into poverty. The average American family is no better off today than it was 15 years ago, even though the US is now living off borrowed funds. Were the borrowing to stop, our standard of living would fall precipitously.

As the work force matures, moreover, the growing-poorer option becomes ever more likely. The number of American young people is declining, while retirees are increasing. By the year 2030, when the proportion of our population 65 years of age and older will have nearly doubled from what it is now, the number of workers supporting each retiree will have dropped from 3.3 to a bit over 2. Unless each remaining worker becomes far more productive than now (or unless retirees continue to work long after retirement age, or unless we allow into the US large numbers of new, young immigrants), the average citizen will have to get by on a much smaller income.

Panaceas offered by the White House and Republican candidates are alternative means of growing poorer - by, for example, letting the dollar drop even further, reducing environmental and safety regulations, slashing welfare expenditures, and making it easier for companies to lay off workers and cut wages. Some of the solutions offered by Democratic candidates - like protecting US goods from foreign competition or controlling capital flows - would have the same dire consequences.

The second option - becoming more productive - has been pursued less vigorously. It doesn't fit easily on a bumper sticker. It's not likely to send a crowd into a tizzy. But it's the Democrats' best issue.

Our indebtedness to the rest of the world would not be alarming, were the proceeds invested in our future productivity; but such has not been the case. Net investment in plant and equipment, as a percentage of gross national product, has been no higher in the 1980s than in the perilous 1970s, supply-side prognostications to the contrary notwithstanding. Meanwhile, public investments have lagged. Government spending on commercial research and development has plummeted 80 percent from its level two decades ago. Even when added to private-sector research and development, the total is still less than 2 percent of GNP, lower than comparable research-and-development expenditures in all other advanced industrial nations.

Spending to upgrade and expand the nation's infrastructure - the roads, bridges, ports, tunnels, and communications facilities through which our commerce travels - has dropped from 2.3 percent of GNP two decades ago to four-tenths of 1 percent today. Per-pupil expenditures on public elementary and secondary education have shown no gain in real terms. As a percentage of GNP they have declined, and this during an era of increasing demands on public education because of broken homes, unwed mothers, and a rising population of poor. The federal government has retreated from the field of public education, leaving the states and localities - many of them severely handicapped by low tax bases - with almost the entire job. Not surprisingly, an estimated 20 percent of American 18-year-olds are now functionally illiterate; one-quarter of today's high school students drop out before graduation. This is not the sort of population likely to generate high productivity in future years.

Democrats should support a candidate who will invest in our nation's future productivity, who has a public record of having moved forcefully in this direction, and who has the skill and savvy to get the rest of us to go along. Frontrunner Michael Dukakis fits this bill perfectly.

Robert B. Reich teaches political economy and management at Harvard University's John F. Kennedy School of Government.