Bush's Plan Puts Him Back on the Pro-Growth Track
THE American electorate is faced with a clear choice in 12 days - movement back toward the pro-growth policies of the successful Reagan-Bush era or change toward even larger government, a smaller private sector, higher taxes, more regulations, and more mandated benefits, policies that brought stagnation in the past.
In choosing to run for a second term, President Bush was faced with the uncomfortable choice of defending his first-term domestic policies - which brought low annual real growth of only 0.7 percent during the past 3 1/2 years and minimal job growth - or returning to the successful growth policies of the Reagan years. He properly chose the latter.
During his first term, several major policy moves contributed to slower economic growth. Federal spending rose sharply despite the decline in defense spending. Federal spending is now about 25 percent of gross domestic product, a new high. Higher spending by the federal government draws labor and other resources from the productive private sector and frequently inhibits real growth. Furthermore, higher federal spending assures that taxes will remain high or even rise, thereby reducing incentives for work ing, investing, and saving - all necessary ingredients for growth. Taxes were increased sharply by the infamous 1990 budget accord.
Also during the first term, regulation of business soared, though recently a regulatory moratorium was imposed and extended for one year. Burdensome regulations and federally mandated employment benefits slow the productive process by substantially increasing costs, thereby inhibiting job growth.
Can we believe that Mr. Bush will aggressively pursue the rejuvenated policy approach during a second term? I believe the answer is yes. Presidents are properly concerned about their place in history, and Bush clearly wants to add domestic achievements to his accomplishments in the international arena. He has learned his new pro-growth policies the hard way, by personal experience.
Evidence pointing to change toward pro-growth policies includes the recent moratorium on costly regulations and his pledge to pursue more careful cost-benefit analysis on past regulations as well as regulations that may be proposed in the future. He has publicly renounced the 1990 budget agreement, which cost both political support and jobs.
During the first debate, Bush said that he was going to ask Chief of Staff James Baker III to "do in domestic affairs what you've done in foreign affairs." Mr. Baker is properly known as a doer who dislikes being associated with failed policies. Also, White House officials recently indicated that the president will have a new domestic-policy team in his second term. So the stage is well set for a return to pro-growth economic policies.
In his "agenda for American renewal," the president presents the policies to be pursued. Bush believes our greatest strengths flow not from government, but from the personal initiative of free men and women. He promises to "right-size" government by checking growth in federal spending and, in some important ways, to reverse it. He argues for a line-item veto and promises to cut salaries of highly paid federal employees. He will cap the growth of mandatory spending, excluding Social Security, and he will impose a freeze on domestic spending.
ITH respect to health insurance, he builds on the strengths of the present system of encouraging consumer choice, innovation, and state-of-the-art medicine, while fostering more competition to control costs. Expanded access will come from a sliding scale of vouchers or tax credits for low-income Americans. The president again pledges no increase in taxes while proposing a cut in the capital-gains tax to encourage growth in smaller business where most new jobs are created, as well as tax cuts across the b oard as spending is reduced.
He continues to support freer trade around the world. Bush wants to complete the stalled GATT agreement and gain support from Congress for his North American Free Trade Agreement. He plans to extend new trading and economic opportunities to Latin America and to work for a free-trade agreement with several Eastern European countries.
Bush opposes a national industrial policy, but he promises increased funding for basic research while complementing that work with a focus on applied research and development. He promises to reform the American civil justice system, with the objective of cutting the high cost of the litigation explosion.
In summary, Bush's agenda for change properly focuses on improved incentives for working, saving, and investing while spending, regulating, and taxing less at the federal level. Not only has such an approach worked well when tried, but it is working abroad as well. Many developed and developing countries have concluded larger government is not the solution, but is rather the problem.
It would be ironic and costly if US voters opt for a larger federal government, higher taxes, more regulations, mandated employment benefits, and only lukewarm endorsement of freer trade.
Bush proposes an agenda for change that assures a stronger and more productive America.