Has the age-old American dream of rising expectations -- and fulfillment -- come to an end? After decades of tremendous growth is the United States now caught in a web of inflation-recession-inflation from which there is no escape?
That is not a vision for America that any political candidate dares enunciate. It is not a vision Americans will or should accept. Indeed the presidential prize may go to the man best able to convey to the public that the nation's soundness and vitality can be restored and that, if sacrifices will be required, these are in the long-term interests of getting the economy functioning confidently once again.
The malady has been diagnosed often enough. One aspect is the rate of US productivity growth, which has been steadily declining for two decades. The results have been a weakening dollar abroad, a loss of competitive strength in world trade, and more inflation. The other is the rising world demand for oil, which by 1985 is expected to outstrip global production by 2 million barrels a day. The potential dangers to world stability which a scramble for oil could touch off are self-evident.
To cure these problems in a fundamental way, most economists agree there must be a "reindustrialization" or a "reinvigoration" of the economy -- ingredients of which must include reduced consumption and a higher rate of capital investment, greater incentives to innovation, a sturdy energy policy, more cooperation between labor and management, and restoration of worker and managerial pride in quality. The economic base has to be rebuilt. This is not to say that the social welfare programs of recent years are at an end. It is simply recognized, even by Democratic liberals, that the existing economic pie can only be sliced so many ways. The pie has to be made larger.
What is noteworthy about this year's election campaign is that there is in effect so little disagreement between the major parties about the basic problems or the broad middle-of-the-road approaches to them. To boost economic efficiency, the two main candidates favor more generous depreciation allowances to spur business investment, federal spending restraint, less government regulation, and an easing of individual tax burdens. Voters will have to thread their way through the nuances of fairly similar economic plans, basing their judgment as much on the qualities of the candidates and their records in office as on now largely indistinguishable issues.
Ronald Reagan, for instance, has stepped back from his most radical economic proposals. He still advocates generous tax cuts but no longer insists these will genrate enough growth to pay for themselves. He says that spending restraints must go hand in hand with tax reductions. But, significantly, Mr. Reagan, despite his jeremiad against "big government," makes no promises to eliminate or even drastically cut existing programs. All of which suggests he understands the limits of what can be done, especially with Congress controlling the purse strings.
Moreover, voters cannot overlook that "revisionism" sets in once a candidate is in office. Just as mr. Carter could not carry out his campaign pledge to reduce government and balance the budget, Mr. Regan as governor of California found he could not avoid big tax increases. Pragmatism and political realism are likely to dictate the policies of whoever is president. We suspect, in this connection, that Mr. Reagan, if elected, would soon find that his present formulas for substantially increasing defense spending, cutting taxes, and balancing the budget in five years are unrealistic and will need modifying.
One interesting philosophical point raised by the Carter and Reagan tax-cut program is whether such reductions should benefit largely business or individual citizens. Ironically, each candidate favors the reverse of what one would expect. Mr. Reagan takes a traditionally Democratic approach when he weights his cuts toward the individual and personal savings. Mr. Carter, on the other hand, pursuing a more conservative policy, tilts toward business in order to spur productivity and investment. In any case, the need in the next four years will be to make sure that tax-financed business or consumer spending does not ignite even more inflation.
Certainly President Carter must bear responsibility for the present poor state of the economy and the many vacillations of policy that have contributed to it. He made his first mistake after the 1976 election when he chose to push economic recovery too hard in order to ease unemployment, thereby spurring a return to double-digit inflation. The Federal Reserve Board seemed to bow to administration pressure in printing too much money.
It is true that OPEC price rises contributed to the inflation problem but these were not, as Mr. Carter claims, responsible for the entire huge leap in the inflation rate. Even recently the President again tried to interfere with the policy of monetary restraint by taking an unsuitable poke at the Fed, for obvious political reasons. He wants economic indices up as high as possible on election day.
However, when all is said and done, no one has a sacrifice-free recipe for solving the nation's economic ills. This is why it becomes increasinly urgent to get business, unions, and government working together on national economic policy. Radical changes may be needed in the 1980s. We already are beginning to see greater involvement of labor in management, for instance -- a practice which has had such successful results in West Germany but which can be duplicated in the US only if good will can be cultivated on all sides.
A new US industrial policy will also have to address the role of government in the private sector. Should the federal government bail out ailing industries -- a trend which many warn could lead to "socialism of the right" -- or should government be used, as it is in Japan, to stimulate new-growth sectors which will enable the US to compete effectively abroad? There may be an instructive lesson in the fact that Chrysler now is expected to require the entire $1.5 billion in government loan guarantees, and the loans will be paid back only by 1986 instead of 1982, as originally thought.
Still unanswered, in this connection, is how the US and other industrial nations can help the third world from falling apart economically. American labor is resistant to competition from cheaper products abroad, but the growing economic interdependence of nations cannot be wished away behind a new wall of protectionism. One quarter of US exports now go to the third world. If there is to be "growth" for Americans, there will have to be an expanding world economy and more trade for all countries. This means that the shrinkage of some labor-intensive US industries -- textiles, shoes, and so on -- in favor of new industries could in the long run be salutary for the country, despite the painful shortterm adjustment this entails.
At the same time the US must not slacken its commitments to energy sufficiency, which goes to the heart of economic soundness. The US will not be able to put its economic house in order until it further reduces its dependence on imported oil (accounting today for about 35 percent of total consumption). Everyone recognizes this. But neither of the leading candidates has come forth with bold new ideas, like the high gasoline tax advocated by John Anderson, which would drive home to Americans the stark realities and signal that the US really means business.
Mr. Reagan, puzzling to say, does not think conservation is an answer, even though US oil consumption in the first two-thirds of 1980 is down a creditable 8 percent from last year (partly because of the recession), and even though most energy experts see conservation as one indispensable prong of the two-pronged effort to solve the energy problem. The other of course, is production. Here Mr. Reagan, along with favoring more nuclear power development and coal use, would remove federal restrictions on land and offshore oil drilling in order to set industry "free" to achieve higher oil output.
All that will help. But expert opinion is that, given the size of estimated reserves, the most the US can do is to keep the level of oil production from declining further. Also, in view of the time needed to develop solar power, synthetic fuels, and other modern energy technologies -- these are not expected to end US reliance on foreign oil before the next century -- stronger conservation measures are still the fastest way to bring down demand. Conservation, we hasten to add, does not deprive Americans of something but simply makes for more efficient use of resources and therefore more efficient living.
President Carter, for his part, can take credit for the fact that the US at long last has the basic framework of a national energy policy. After much pushing and hauling by successive administrations, and footdragging by Congress there is now broad agreement on energy strategy: decontrol of prices and more oil and gas development; greater use of coal; a limited expansion of nuclear power; development of solar and other renewable energy sources; conservation; and continued commitment to environmental protection. It is safe to say that future arguments will revolve less around what to do than how to accomplish individual elements of the program. That is decided progress.
To make America sound, however, will take more than programs. It will require firing up the Americans people with an understanding and vision of what is possible for the country and for them if they put their shoulders to the wheel in a spirit of commitment, not to narrow self-interest but to the national good -- the good of all. This will be the test of the next American president.