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A Public Service Message from the American Income Life Insurance Co.Waco, TexasBernard Rapoport, Chairman of the Board and Chief Executive Officer The New Economic Agenda Part IV By Gar Alperovitz American Income Life Insurance Company is pleased to have the author’s permission to publish this position paper for the perusal of Texas Observer readers. Dr. Alperovitz is the Director of the National Center for Economic Alternatives, 2000 P St. N. W. #200, Washington, D.C. 20036, and Professor of Economics at Notre Dame University. \(This concludes the series which began in the March 11th issue. Readers who missed earlier installments may obtain a set free by 8.Economic Mobility. The American people are a kaleidoscope of backgrounds and talents. One of our greatest national achievements, Over the last 50 years in particular, has been to expand opportunities for fuller participation in our economic life. We created greater access to jobs without discrimination and wider sharing of the manifold benefits of our economy. We became a society more open than before to economic mobility. Economic mobiity has been one of the greatest incentives to hard work and progress in our historically exceptional economy. Now, economic decline threatens the openness of opportunity within our society. The Reagan Administration has engineered changes in the structures of the economy and in tax policies that will result in much greater concentrations of wealth without matching incentives for those who control or inherit great wealth to invest it in productive ventures that create economic growth and jobs. The greater transfer of wealth underway to already wealthy Americans is at the expense of middleincome and poor Americans. Suddenly, after decades of progress in creating a more open society, admired across the entire world, we are in danger of slipping back towards the old European model of a classridden society in which economic advancement is rarely achieved and the driving hope of economic advancement for ourselves and our children is squelched. Strong Presidential leadership and leadership by our economic institutions will be required to reverse this slippage. First, the conditions for economic growth must be restored, along with millions of new jobs. Second, a tax system that is simpler and more equitable must be devised so that everyone pays a fair share of the tax burden in keeping with the principle of progressive taxation. Third, only uses of wealth that contribute to economic growth in which all can share should be rewarded with tax credits. Finally, the President must defend the principles of equal opportunity and an open society, and faithfully execute the laws to these ends. 9.Balanced Budgets. Huge federal deficits, especially the enormous deficits projected beyond 1983, have a disruptive and numbering effect on the American economy. Large federal deficits push interest rates higher. They reduce funds available for industrial development. They diminish the confidence of the American people in the competence of their government and in the prospects for economic recovery. Funds borrowed to cover the deficit, and funds required to pay interest on the national debt now 13% of the entire federal budget could be far better used for other purposes. There is a strong consensus in the country that we must move toward balanced federal budgets. Quick fixes a bogus Constitutional Amendment or an unworkable supply-side mixture of radical and inequitable tax cuts, tight money policies, and vast increases in defense spending will not get this job done. The path to a balanced budget is through measures to assure economic growth, restore the revenue based on the federal government, and contain runaway expenditures. Restored economic growth will greatly reduce but not erase federal deficits. Additional steps are required: sharp cuts in the planned one trillion six-hundred-billion dollar increases in defense expenditures through 1986; lower interest rates to reduce the cost of interest on the national debt; more equitable tax policies with fewer loopholes; bettermanaged and more efficiently-delivered government programs. We cannot have long-term economic health and controlled deficits without a comprehensive national energy strategy. So long as our economy remains dependent on imported oil, economic recovery means we will face again an outflow of capital of from $70 to $200 billion each year to OPEC nations. From 1975 through 1981 the U.S. paid $279 billion for imported oil. The outflow costs jobs, investment capital, and growth and hence government revenue. Our long-range energy policy goal must be to convert our economy to domestically available, environmentally safe, renewable energy supplies. Total conversion will take many, many years, and the federal government must work consistently with state and local government, with the utilities industry, with energy technology and fuel suppliers, and with labor to promote our transition to a strong, energy-efficient economy. Ronald Reagan was basically right about balanced budgets, but his administration has presided over policies producing the largest deficits in our national history. He has exemplified the pitfalls of sticking to a fixed ideology long after it is plain for all to see that things are getting worse. The next President must move by realistic, pragmatic, and flexible steps toward a balanced federal budget. 10.Reducing the Arms Race. No single step is more important to our long-term economic health than reducing the arms competition between the United States and the Soviet Union. The nuclear arms race is more than the greatest threat to our national security in our entire history. Armaments and related defense expenditures eat up huge portions of our national health. The Reagan increases in defense expenditures will greatly expand the federal deficit. They will deepen the brain drain and diversion of capital investment from the very activities necessary to reconstruct the economy. Our expenditures on arms, Soviet expenditures, and the expenditures of allies on both sides constitute a seemingly bottomless drain on the wealth and human resources badly needed to construct a more prosperous, stable, and hopeful world. Every effort must be made by the next President to negotiate a verifiable nuclear freeze, a phasing down of nuclear weapons, and general reductions in conventional arms competition. Without such an effort on our side, and a response from the Soviet side, the prospects for prosperity on both sides and even the prospects for survival will remain dim. The Spirit of American Enterprise Even in the midst of our current economic turmoil, the United States still possesses the greatest stock of economic assets in human history. Dynamic models for our future economic success can be found all across the country. With large goals, pragmatic leadership, a new spirit of cooperation, and reorganization of our assets, we will be well on our way to mastery of the new economic conditions. But our success also depends upon a certain spirit of the American people that we are in need of repossessing, lying beyond policies and plans and even institutions. Many years ago, Alexis de Tocqueville determined that the “true cause” of American economic superiority “is wholly attributable to moral and intellectual qualities.” He came to observe our commerce in the 1830s and find the causes of American superiority in sea trade during the era of the tall ships. When he compared American and European ships, he found that American ships cost as much to build, were not built better, and did not last as long. The pay of American sailors was higher. Tocqueville wrote about the essential difference: The European sailor navigates with prudence; he sets sail only when the weather is favorable; if an unforeseen accident befalls him, he puts into port . . . The American neglects these precautions and braves these dangers. He weighs anchor before the tempest is over; by night and by day he spreads his sails to the wind; such damage as his vessel may have sustained from the storm, he repairs as he goes along . . . He has been in a continual contest with the sea . . . but upon his return he can sell a pound of tea for a half a penny less than the English merchant, and his purpose is accomplished. 22 APRIL 22, 1983