"It's the economy, stupid." That slogan, featured in Bill Clinton's 1992 presidential campaign, resonates today even in military circles. "The single greatest threat to our national security is our debt," declared Admiral Mike Mullen, chairman of the Joint Chiefs of Staff.
Ironically, the United States still leads every other nation in producing goods and services. But with an economy staggering under massive military budgets, its industries fleeing to foreign countries and its wealth heavily concentrated in the super rich, we have a country heading toward financial catastrophe: a $14.3 trillion government debt compounded yearly by $400 billion in interest, and a $497 billion trade deficit in 2010 alone.
To reverse course, said Leslie Gelb, a distinguished foreign relations scholar, Washington should "update the approach taken by Truman and Eisenhower" during the post-World War II years. Despite their political differences, both presidents believed that a vibrant democracy depends on a strong economy, even if it meant cutting military spending. Republican President Dwight Eisenhower, particularly, spotlighted the danger for America posed by the "military-industrial complex."
"Every gun that is made, every warship launched," he warned, "is a theft from those who hunger and are not fed spending the sweat of workers, the genius of its scientists, the hopes of its children."
Moreover, both presidents were influenced by President Franklin D. Roosevelt's New Deal followed by World War II to pull the country out of the Great Depression. The lessons learned: capitalism, driven by profit, must be regulated to protect the common good; and when private enterprise fails to share the wealth adequately, government must boost the people's buying power, primarily by job creation and support for the needy.
As World War II was winding down, fears of relapsing back into depression abounded as military contracts were drying up and millions of veterans were about to pour into a tight job market. In response, Roosevelt signed the GI Bill of Rights, creating millions of jobs by enabling veterans to attend colleges and purchase houses. His successor, Democratic President Harry Truman, extended the G.I. Bill to Korean War veterans. Eisenhower later made the New Deal a bipartisan system, setting the stage for Democratic President Lyndon Johnson's Great Society, followed by Republican Richard Nixon, dubbed by Noam Chomsky as "the last liberal president."
For four decades, American presidents were expanding the New Deal legacy, aimed toward sharing the American Dream with all Americans (e.g. African-Americans, students, the poor, the jobless, the elderly, the sick, etc.) creating a broad, prosperous middle class -- the backbone of America's dynamic economy.
By the late 1970s, however, the dream was evaporating under the impact of economic forces and government policies, driven by corporate leaders aligned with the Republican Party, and touting their "supply-side economics." That strategy, based on efficiency and lower-cost products, could have benefited everyone had there been mechanisms to share the benefits with the societies that supported them. But wedded to the GOP's "trickle-down" theory, "efficiency" meant producing more goods with fewer workers, moving industries to Third World countries pitting American workers against low-wage foreign workers, and providing huge profits for those at the top while depressing wages for many below.
Meanwhile American presidents, starting with Ronald Reagan in 1981, intensified the trend: providing subsidies and tax relief for multinationals, cutting taxes while increasing military budgets and short-changing social programs supporting the middle and lower classes. To rein in the unbridled debt unleashed by his predecessors, Clinton raised taxes, leaving a surplus to President George W. Bush, only to see him relapse into cutting taxes, plunging us into two bankrupting wars and presiding over America's greatest fiscal erosion since the 1930s.
When President Obama arrived at 1600 Pennsylvania Ave., he inherited a financial tsunami: the largest economic gap between the rich and lower classes since the 1929 stock market crash; financial institutions collapsing and millions of people losing their jobs and homes; the hollowing of America's industrial powerhouse; a soaring debt financed substantially by foreign creditors; and a Republican Party addicted to paying our bills by loans rather than taxes.
To be sure, America needs a party genuinely committed to conservative principles: the importance of moneyed investors and personal responsibility; a counter to government waste and red tape strangling entrepreneurial genius; a check to liberal excesses. But those principles should be complemented with a larger vision -- like that set forth by Pope John XXIII's encyclical, "Mater et Magister" (1961). "The economic prosperity of a people," he declared, "should be measured, not only by its aggregate wealth, but much more in terms of the real distribution of wealth, [oriented toward] the personal development of all the members of society."
Drawing from several analysts, I present a tentative agenda in pursuit of a more just and prosperous American society, premised substantially on restoring a broad, vibrant middle class.
Revise tax policies. By restoring the pre-Bush tax rates for the rich and eventually the middle class, we provide customers and educated workers essential for capitalist enterprise and taxpayers to chip away our monstrous debt -- a rising tide lifting all boats, even the yachts of the super rich. For starters, target the corporate giants benefiting from loopholes and government subsidies while paying zero taxes.
Before we whittle away at Social Security and Medicare, eliminate the Social Security cap. Under current rules, most Americans pay the full 6.2 percent rate with no deductions; millionaires, a fraction of 1 percent.
Tell Washington that World War II and the Cold War are history. In a fierce global competitive arena, we are squandering our wealth on weapons and wars in a global arena where economic strength, not military power, is the prime weapon for success. During World War II, Americans turned idle factories into arsenals. Today, we must transfer substantial resources from our warrior economy to civilian enterprises, putting millions of Americans to work replenishing our crumbling infrastructures, developing green energy industries, restoring our manufacturing sector and promoting education and research to promote our high-tech economy.
Compete in the global economy. First, discard our "free trade" mythology and subordinate corporate strategy to America's vital economic interests. If we are in a "trade war," then "fight to win," urges Andrew Grove, former Intel CEO. Washington, he insists, should end the "off-shoring game" played by American firms, including Intel, by taxing products offshore and diverting the returns to home-town manufacturers.
Among other strategies for Washington: when subsidizing research for corporations, make binding contracts obliging companies to manufacture new products in America; put ceilings on U.S. trade deficits, requiring foreign countries either to limit their exports to the United States or increase American exports to them; exploit Washington's unparalleled buying power to boost fledgling enterprises (like green energies) to drive down prices through mass production, enabling them to compete in the domestic and foreign markets.
Improve labor relations. America needs healthy unions -- the major engines that lifted workers from sweat-shop status to middle-class comfort. Granted, powerful unions have won extravagant contracts hastening the exodus of corporations to greener lands and pushing state governments to the brink of bankruptcy. In a tough global economy, workers and bosses are learning to pull together to save their jobs, a trend dramatized recently when union leaders and managers collaborated to persuade General Motors and New Era Cap to maintain operations in Western New York. Indeed, New Era Cap pulled operations back from Alabama to Derby, increasing the work force here. As for public unions, when collective bargaining ends in stalemate, settle it by arbitrators representing equally, workers, business owners and taxpayers.
Repair, don't repeal, Obamacare. After midwifing his health care program, Obama must address the budget-busting costs that could doom his baby. For starters, use the government's bargaining power to reduce pharmaceutical costs, enact tort reform to reduce legal costs and encourage states to take charge of the health care program under national standards. Ultimately, go for the "public option," using Medicare, perhaps, to cover basic medicine for all people while allowing room for insurance companies to cover other maladies -- arrangements already used by many seniors.
In recent months, Republican leaders have been denouncing Democrats for not "listening to the American people." In reality, GOP leaders are listening to their anti-tax tea party allies and their ultra wealthy donors. As for "listening to the people," the Republicans are stone deaf, as indicated by recent polls: solid majorities support Medicare, Social Security and other social programs, collective bargaining rights for unions, increased taxes for the rich, cuts to military spending and shifting subsidies from oil companies to green energy enterprises.
As campaign 2012 approaches, public opinion is substantially in sync with Democratic policies. But lurking behind our current conflicts is a larger problem. Call it the "Franklin challenge." After our Founding Fathers completed the U.S. Constitution, a woman asked Benjamin Franklin, "What have we got?" He replied, "A republic, if you can keep it."
Since 1787, our ancestors have preserved and improved our republic in the face of bitter sectional divisions, civil war, depression and world war. Our challenge today is to save our democracy from plutocracy -- government by the rich.
The burning issue in campaign 2012, I submit, is not who wins, but whether the winners are willing to make hard choices toward restoring a vibrant middle-class republic or to continue our march toward that government of the rich, by the rich and for the rich.