Still time for Grand Bargains

IN 1990, while Gorbachev's Soviet Union still existed, several Western economists proposed a "Grand Bargain." The Soviet Union would become democratic and capitalist; in return the West would finance its reconstruction.

That Grand Bargain, of course, never came to pass. Instead, the U.S.S.R. has disintegrated politically and economically. At this rate, it will soon be economically destitute, and become a terrifying political blend of despotism and chaos.


There is still barely time for a variation on that grand bargain -- Western reconstruction aid in exchange for the prayer that the entire former Soviet empire not go the way of Sarajevo.

The Grand Bargain is a good metaphor for what needs to be done at home as well. As in the former U.S.S.R., reform in the United States has been deferred, critical ills have accumulated, and President-elect Bill Clinton needs to move with deliberate speed.


Grand Bargain I: Recovery.

Here, Mr. Clinton needs to enlist all the major players -- congressional leaders, the Federal Reserve, business and labor -- in a grand bargain to restore economic growth. The idea is a joint commitment to economic stimulus now, deficit-reduction when growth is back on track and a low-inflation pact that allows the Federal Reserve to keep interest rates down.

Grand Bargain II: Health Reform.

Health costs are inflating at triple the general rate of inflation, even as 37 million Americans are without coverage. A health system with a universal budget would save money, since it is the only way to comprehensively cap costs.

But since the present system is financed partly out of pocket, partly by insurance, partly by employers and partly by government, it is difficult to imagine how to finance comprehensive reform. The answer is a Grand Bargain for a value-added tax (VAT), earmarked half for deficit reduction and half for universal health care.

Business should support this Grand Bargain, since it will save some $200 billion in annual costs paid by employers. The middle class should back it, since it will end the worry of evaporating coverage and reduce out-of-pocket costs. Health providers should go along, because it will finally end the endless paper chase and wrangling with insurers over permissible treatments.

Grand Bargain III: Reform Welfare by Making Work Pay.

Most taxpayers are sick of welfare. So are most welfare $l recipients. Left and right agree that the present system creates a trap in which welfare rules break up families, and people who want to take jobs are often deterred by the prospect of becoming even poorer by losing income support, Medicaid, child benefits and housing.


The Grand Bargain here would limit the entitlement to welfare aid, in exchange for the assurance that a paid job would produce an income sufficient to alleviate poverty. That takes a higher minimum wage, plus a larger earned-income tax credit for low-income working parents.

Grand Bargain IV: Sustainable Growth.

The Bush and Reagan administrations believed that we had to choose between a strong economy and a sound environment. That view is so much ozone.

Vice President Gore personifies the leader who is committed to growth that is environmentally sustainable. Other countries have demonstrated that the search for cleaner technologies and renewable forms of energy can produce better living standards at lower environmental cost. This Grand Bargain should be a priority of the new administration.

And one last Grand Bargain, this one involving the media. For my middle-aged generation of journalists, early adulthood began with the Kennedy assassination, the Vietnam War and Watergate. Middle age spanned 12 years of cardboard administrations that ruled by spin-control, cue cards, slogans and cheap manipulation of symbols. These experiences have left most of my media colleagues profoundly cynical about life in general and public life in particular.

We've almost forgotten how to recognize idealism when we see it. President-elect Clinton does not walk on water, but my plea is this: Let's suspend disbelief, if only for a few months, and entertain the possibility that Bill Clinton just might be a genuine idealist and a talented leader, not a composite invented by his handlers; that Hillary Clinton just might be a strong woman of intellect and conviction, not a media construct.


By all means, we need to hold the new administration accountable. But let's not cover everything as merely image and tactic. In return, the Clintons just might rise to our hopes.

God knows, after three decades of deepening cynicism, the country could use a little idealism, and some leaders worthy of our respect. Now that would be a Grand Bargain!

Robert Kuttner writes a column on economic matters.