Rebuilding America


FORTY-FOUR years ago, Gen. George C. Marshall called for the United States to rebuild a war-torn Europe. Now, with the U.S. economy at least four times larger than what it was in 1947, and with the Cold War and the Persian Gulf war safely behind us, it's time to rebuild America.

America's core economic problem isn't competition from Mexico other developing nations. Nor RobertReichis it America's trade imbalance, nor Japanese purchases of American companies. Nor it even America's low savings rate.

All of these issues are beside the point, because capital is now global. Corporations of every nationality are doing their routine production anywhere in the world they can find cheap, unskilled labor. They are doing advanced research and complex fabrication wherever they can find talented and insightful workers.

Meanwhile, Americans, like the citizens of other nations, are investing their savings around the world. American savings no longer "trickle down" to the less fortunate of any given nation; they "trickle out" to wherever around the globe they can earn the highest return.

The only factor of production that's relatively immobile internationally, and upon which the future standard of living of a nation's people uniquely depends, is its brainpower, plus the transportation and communications systems linking citizens with one another and to the global economy.

Herein lies the real problem America faces: While a small fraction of Americans has the conceptual skills to add substantial value to this new world economy, most Americans do not.

As a result, most Americans are experiencing declining real incomes. Controlled for inflation, the wages of America's non-supervisory workers (about two-thirds of the work force) are now 16 percent below what they were in 1973 and are just about at the level of the late 1950s. They've fallen 2 percent since George Bush became president.

The only way most Americans have managed to prop up their family income is by sending another family member into the work force and having fewer kids. Meanwhile, average wages in the former West Germany are already 20 percent higher than in the United States, and if present trends continue Americans will fall further behind.

The only way to reverse this trend is to invest in the future productive capacities of Americans. But the U.S. has been doing exactly the opposite. Consider:

1. Education: George Bush may want to be remembered as the "education president," but the federal government is now spending less on education than it did when Bush took over, continuing a trend that began in 1980. Then, federal spending on education claimed more than half of 1 percent of the gross national product (GNP). It's now down to around a third of 1 percent.

2. Job training. Federal funding to train and retrain American workers has dropped more than 50 percent from its level in 1980, from $13.2 billion to $5.6 billion. Most other industrialized nations devote a much higher percentage of their GNP to workplace training.

3. Research and development. Even America's researchers and

technicians are losing ground in the global race. American defense contractors crow about how well their complex technologies worked in the gulf war, but military systems are so complex and specialized that they have almost no bearing on technological prowess in commercial sectors of the economy.

While America poured billions of dollars into Patriots and Tomahawks, other nations poured billions into ensuring that their workers are competent to make advanced semiconductors, superconducting materials, high-definition televisions, monoclonal antibodies and other commercial technologies.

Government support for non-military R&D; in the U.S. has dropped to about a third of 1 percent of the gross national product -- its smallest proportion in 20 years. All told, non-defense R&D; accounts for 2 percent of GNP, compared with almost 3 percent in Japan and 2.6 percent in the former West Germany.

4. Infrastructure. Meanwhile, America's infrastructure is crumbling. Americans are becoming used to dangerous bridges, crumbling highways and rush-hour traffic jams extending for miles. Sewage treatment facilities are overflowing. Parts of the nation can no longer count on adequate supplies of clean water. As Western Europe and Japan lay plans for "smart" roads, high-speed trains and national information networks, America lies dormant. The nation has not even built a new airport since 1974.

Why can't America rebuild itself? Bush says that America has "more will than wallet" when it comes to investing in its future. But as the events in the gulf showed, America seems to have as much wallet as is needed when the will is there.

Here's where America can find the wallet:

First, it institutes a more progressive income tax. Last year, the top fifth of America's income earners took home more money than everyone else combined. If the personal income tax was as progressive as it was in 1978, the top fifth would have paid at least $95 billion more in federal taxes this year.

Second, the government limits entitlements to those who need them. If there were no cap on the income on which the personal and disability portions of Social Security payroll taxes were levied, and if all Social Security benefits were treated as taxable income, another $600 billion would be freed during the decade.

Third, America cuts its defense budget. If defense spending were to fall during the decade by only 15 percent (a fairly modest, and by most accounts realistic, decrease), the nation would have an additional $450 billion.

The grand total: more than $2 trillion for the 1990s -- a significant down payment on the productivity of all Americans in the 21st century.

America's future capacity both to pay off its debt and to assure its children and grandchildren a high standard of living depends largely on the public investments made today. Clearly, America has the wallet to get ready for the 21st century. Does it have the will?

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

Copyright © 2020, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad