FW: Op-Ed in Today's LA Times

["Devine, James" <jdevine@xxxxxxx>]

FYI -- 

http://www.latimes.com/news/opinion/commentary/la-op-galbraith27jun27,1,545350.story?coll=la-news-comment-opinions


POLITICS
Keeping It Real for the Voters
If you look past misleading labels, you'll see genuine issues.
By James K. Galbraith
James K. Galbraith is chairman of Economists Allied for Arms Reduction
(www.ecaar.org) and holds the Lloyd M. Bentsen Jr. chair in
government/business relations at the Lyndon B. Johnson School of Publ

June 27, 2004

AUSTIN, Texas â Surprised though you may be to hear this, the presidential
campaign is just getting started.

Yes, we know the candidates. But what are the real issues? They are not so
clear.

And one reason they aren't is our national weakness for the misleading
phrase, for the sexy label that somewhat, but imperfectly, covers the case.
Herewith a brief guide to what is real and what is not.

â  Jobs, not outsourcing. The exodus of manufacturing and software jobs is
a hot-button topic. Some small things could be done about it. Adequate
enforcement of privacy rights and security interests, for example, would
curtail a fair amount of offshore computer programming. But generally
speaking, if the Indians want call centers and the Chinese want TV
factories, you can't stop them.

The challenge is to find useful work for all seeking a job here. We still
need at least 5 million new jobs. We could start by supporting state and
local governments with a revenue-sharing program, and their capital-
spending projects with a new federal capital budget and revolving fund. We
could add teachers, nurses, firefighters and police to the public payrolls.
Let's have an energy and transportation program to rebuild our country for
an oil-short world.

And let's look forward to the day â instead of fearing it â when we'll have
a lot more elderly retirees. Who will take care of them? How about a corps
of home healthcare assistants? You could create a lot of useful jobs that
way.

â  Future deficits, not those right now. Those who bemoan the lost
surpluses of the late-1990s miss the point. Today's deficits are large, but
they are necessary. The private sector will not borrow as it did five years
ago, neither for business investment nor for household consumption. So the
public sector must borrow, heavily, for the time being. To create enough
jobs when we need them, deficits may have to grow for a while.

Are deficits driving up interest rates, crowding out private investment?
No. Interest rates at historical lows didn't budge these last few years as
both actual deficits and the forecasts got worse. Long-term rates are
reacting now â but only to the clear signal that Federal Reserve Chairman
Alan Greenspan will soon raise short-term rates.

What about those frightening forecasts of huge deficits? They matter,
mainly for a political reason. Given the deficit phobia of our political
culture, the government will be unable to address national needs if it
doesn't show how future deficits can be brought under control. This is why
the back-loaded, top-heavy parts of President Bush's tax cuts should be
repealed.

â  Healthcare, not Social Security and Medicare. Social Security is in
pretty good shape â and will remain so. The drumbeat of Social Security
Cassandras has been heard for decades, mainly from people who would like to
get their hands on the cash flow. Want to help balance Social Security's
future books? Then let's reinstate the estate tax and credit it to the
trust fund.

On the other hand, the cost and waste in our healthcare system are a
travesty. The recent Medicare giveaway to the big drug companies will have
to be fixed. We should move toward an efficient, universal health insurance
system â and had it not been for politics we already would have.

But don't pay attention to those who throw around claims that the
government is about to go bankrupt over the baby boomers. It isn't. To the
contrary, with smart policy, the country can meet its needs and still be
much richer in 50 years than it is today.

â  Tax fairness, not tax hikes. Bush aimed his tax cuts at the super-
wealthy. Taxes on corporate profits have nearly disappeared. Meanwhile,
more than 20 years of regressive Social Security payroll taxes have risen
and, in the recent budget crisis, states and cities have been hiking their
property and sales taxes. Workers, the middle class and the poor pay those.
It's a horror that taxes have fallen so much for the very wealthy and risen
so much for the working poor and the middle class.

This issue is central to the kind of society we are now and are likely to
become. A plutocracy cannot also be a democracy â and the tax code is the
way that we choose between them.

â  The dollar, not the renminbi. There's been a lot of chatter about
China's currency manipulations. Of what does that consist? Well, China has
pegged the renminbi â to the dollar. Some manipulation.

But the dollar is in a lot of trouble. Though the rising euro has been good
for our stock market and our exports, the falling dollar is bad for
inflation and for our living standards. Watch out after the election. Part
of what is driving Greenspan is the urge to defend the dollar, which will
mean higher interest rates and probably the end of the credit boom and
housing bubble. There is no easy solution to this problem. The hard
solution is to rebuild a functioning, development-friendly international
financial system. The next president will have to face this issue, even if
today's candidates do not.

â  Will the recovery continue? Not: Has it started? We've got growth. Don't
you know there's a war on? Wars always goose total spending and the growth
rate.

But what will happen after the election, when interest rates go up (to
"fight inflation," as they will say) and domestic spending and Social
Security and Medicare come under fire? You do not have to be a genius or a
depressive to be worried.

â  Iraq. Misleading labels have bedeviled us in Iraq. Weapons of mass
destruction was one, covering a nuclear threat that didn't exist, alongside
chemical and biological weapons that wouldn't have amounted to much of a
threat even if they had existed. Are we fighting for "democracy" in Iraq?
If so, it will be a long, long war. Will we transfer "full sovereignty" to
the Iraqi government June 30? Not if that means control over military
operations. The "war on terror" is the worst of the bad labels. It is used
to confuse the necessary struggle against Al Qaeda, which actually did
attack us, with the ruinous distraction of Saddam Hussein, who was bottled
up in Baghdad. The real issue now is: Can we find our way out of Iraq,
somehow, and still win the fight with Al Qaeda?

Finally, let's note how some of these fungible phrases have moved back and
forth between war and economics. In 1994, Greenspan was talking about a
"preemptive strike" against inflation â an economic weapon of mass
destruction that also did not exist at the time. And we recently learned
that for Alberto R. Gonzales, the White House counsel, the "war on terror"
is a "new paradigm" that justified dismissing the Geneva Convention's
absolute prohibition against torture. It seems I remember that latter
phrase from the "new economy" boom. It was a bad thought in that context,
and worse in this.