Next US president's lot won't be an easy one, study warns

What will the next US president face? As the presidential candidates gingerly avoid grappling with the issues, a group of policy analysts warns that the United States faces major challenges in the decade ahead which will demand ``special qualities of leadership.'' They pinpoint these overriding issues:

The nation's ability to compete in global markets and maintain its high standard of living, while keeping defense strong.

The responsibility to pass on a better life to the next generation - i.e., to reduce the budget deficits, invest in education and care of children, and curb the growing cost of health care and retirement while at the same time meeting the needs of the elderly poor.

The obligation to help the lower rungs of society in light of the growing economic and social gap between the rich and the poor.

The need to balance individual freedom against the public good as society copes with such issues as AIDS and new life-sustaining medical technologies.

A number of problems inherited by the Reagan administration have been partly resolved, Isabel V. Sawhill writes in a new study by the Urban Institute, a nonprofit research group based in Washington. Among the President's achievements are a decline in inflation, the longest peacetime economic expansion on record, a rebuilt military, overhaul of the tax system, and a curb on government growth.

But, says Dr. Sawhill, President Reagan also leaves ``enormous problems'': a mountain of debt that will curb future standards of living; an increase in inequality; a poverty rate higher than in the 1970s; an erosion of confidence in government because of the Iran-contra affair and a lack of significant compromise on the budget; and increased divisiveness between the executive and Congress.

The new Urban Institute volume, titled ``Challenge to Leadership: Economic and Social Issues for the Next Decade,'' is part of an eight-year project called Changing Domestic Priorities, which has focused largely on assessing the policies and programs of the Reagan administration. The study looks ahead and includes analyses by a number of experts on subjects ranging from economic growth and international trade to health care and poverty.

Sawhill, the editor of the study, observes an erosion of national self-confidence in the economic arena as US living standards have begun to grow less rapidly than in the past and more slowly than in other countries.

But, she writes in an introductory chapter, the goal of maintaining that standard is not inconsistent with welcoming faster growth in low-income countries. ``In fact, the faster the growth of less-affluent countries, the better our export markets will be, the more rapidly current income disparities among rich and poor nations will disappear, and the more political stability will be enhanced.''

Sawhill also disputes fears that Japan will displace the US as the major economic power, given the huge US population and the tendency of growth rates to converge over time. But, she notes, other countries are catching up, and, if the US share of world production continues to drop sharply, ``it could profoundly alter not only relative standards of living but also the balance of military power and influence around the world.''

Hence, a major task for the next administration will be to reassess US military commitments around the world in light of reduced economic resources and perhaps reach agreement with the Soviets to cut back conventional forces. ``There is little point in winning the arms race if one loses the economic marathon,'' she says.

Economist Charles F. Stone also challenges concerns that other nations will surge ahead of the US or that the US is being ``deindustrialized.'' Stressing the importance of a free-trade system to boosting living standards, he argues that the US should avoid trade protectionism and develop policies that help US workers displaced by foreign competition.

In a chapter on family incomes, Joseph J. Minarik says US living standards are not improving as fast as in the past. He also finds there is more inequality than at any time in the post-World War II period, with low-income families experiencing virtually no real income growth since the late '60s and the richest 5 percent of all families experiencing an increase of more than 31 percent.

(These findings are supported in a new study by the Congressional Budget Office, which also concludes that there has been a ``widening of the gap between high - and low-income families'' since 1970.)

Turning to health care and retirement, analyst John L. Palmer sees a growing share of the national income going toward programs for the elderly, which will require higher taxes on the working-age population. One option, he suggests, is to modify medicare and social security so that the elderly, many of whom are financially better off today, shoulder more of the burden of financing their retirement and health care.

Persisting poverty in the US (13.6 percent in 1986) also receives attention.

Noting that an ``underclass'' is emerging in the nation's cities, Sawhill observes that, if this group is permitted to grow, ``it could impose large costs on society, threaten our sense of social cohesion, and exacerbate racial tensions.'' The need, she says, is to address the root causes: weak families, joblessness, and poor education.

In the decade ahead AIDS and the ``right to die'' are two issues likely to be debated in the context of individual freedom vs. the public interest. Abortion, school prayer, drug abuse, pornography, homosexuality, surrogate motherhood, and smoking in public places are also expected to generate conflict between social policy and moral and religious principles.

Examining the AIDS problem, for example, Thomas Schelling points to the controversy over whether to make clean needles available to intravenous drug users, whether to test prostitutes, and whether to encourage safer sex among young people.

The Urban Institute study also points to the ``constraints'' on leadership that will complicate solutions of the problems it raises. Combating the next recession (seen to be ``inevitable''), for example, will be difficult because of the huge deficits and the automatic operation of financial safety nets.

The burden of dealing with the recession will fall to the Federal Reserve, Sawhill says, yet the Fed will be torn between keeping interest rates low enough to fight recession and high enough to prevent a further decline in the value of the dollar and higher inflation if imports became more expensive.

The budget deficits, moreover, will inhibit new spending programs or tax subsidies. In the face of growing demands for government action in various areas, she says, a new national consensus will have to be forged if taxes are to be raised or social security cut.

There will also be political constraints, the study suggests. A new president, if he does not have a strong popular mandate (as did Reagan in 1980), may not have enough political capital to govern effectively. The fragmentation of political power, as seen in the rise of interest groups, weakening of the political parties, and the dispersion of power in Congress, may add to his handicaps.

But Sawhill suggests that these constraints will ``give us time to think about what kind of nation and government we really want and who is to pay for it, before rushing off in some new direction.''

Needed, she stresses, is a president capable of fostering a public dialogue on these challenges and developing a consensus on common goals.

``Without a new consensus on the issues that define us as a nation there can be no firm or sustained basis for future action, only muddle and drift,'' the study concludes.

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