Charting America's Future: Responses-4
LECHT, LEONARD A. & PROTHRO, JAMES W. & GARRISON, CHARLES B.
CHARTING AMERICAS FUTURE RESPONSES-4 Below we present contributions by readers to the NL's year-long series aimed at stimulating debate on setting a new course for the country. LEONARD A....
...One last nail in the coffin: Personal saving declined from 1976-78 without weakening investment performance...
...public services shall be maintained...
...He appears to regard concern with the recent slow productivity growth as mainly a stalking horse to obtain more generous tax breaks for high-income individuals and for business...
...To prove their case, thesupply-siders point to the 1964 Kennedy-Johnson tax cut...
...At the individual level, Key saw a no-party system failing in several ways: "It does not give citizens stable or reliable clues for evaluating issues or candidates...
...For this reason, Tyler's analysis has limited relevance as a guide to charting priorities for the 1980s...
...How shall the burden of taxation for their support be distributed...
...Key, the most renowned political scientist of our time, explained in his classic analysis of Southern Politics that a one-party system really amounts to a no-party system: The notion of party implies opposition...
...Again, the corresponding 1976-78 figures match nearly exactly...
...He points out that the average output per employee in the United States is higher than in such countries as Japan or West Germany, and is unimpressed by the differentials in productivity growth between the U.S...
...Tyler's case for a "redistribution of the national income to the people who form the foundation of our economic structure" ("Supply-Side Trickle-Up," NL, April 19) is, 1 think, persuasive...
...For instance, the growth rate in output per employee hour in manufacturing in Japan in the period 1973-79 was almost five times that of theU.S., whilein West Germany it was nearly four times as great...
...Slow productivity growth in the American economy translates into losses of markets and jobs...
...LEONARD A. LECHT Economic Consultant As Gus Tyler has noted, his "Charting America's Future" essays survey the economic and political scene with a wide-angle lens...
...There was a tax cut in 1975, but it was distributed through rebates and an increase in the standard deduction, rather than the supply-siders' sine qua non, a drop in marginal rates...
...political competition without opposing parties is a struggle among ad hoc, candidate-centered coalitions...
...But it will not receive organized national support under our present electoral and party system...
...They have no mechanism through which to act and their wishes find expression in fitful rebellions led by transient demagogues who gain their confidence but often have neither the technical competence nor the necessary stable base of political power to effectuate a program...
...What in fact happened is what one expects in an economic upswing: government purchases as a percentage of total output dropped by a full point...
...Moreover, IRS returns (one of the supply-siders' favorite types of data) show that only 12.2 per cent of America's income advancement in those years went to the $50,000-and-up households...
...Particularly interesting is his debunking the tenet that cutting taxes for high income individuals is vital, because they alone save a sizable fraction of their after-tax income and thus provide the bulk of financing for business investment...
...Households with adjusted gross incomes greater than $50,000, for example, paid $5.4 billion in Federal income tax in 1963, and $7.4 billion in 1965...
...Further, it obscures the significance of recent slow productivity growth by treating the problem as largely a political rather than an economic issue ("The Politics of Productivity," NL, March 22...
...Tyler plays down the productivity problem...
...Consequently, if the fortunate families had saved fully half of their incomes in 1965, their deposits would have represented one-fifth of all personal saving and one-tenth of business fixed investment financing...
...What can we expect if our parties become largely irrelevant...
...Just as a healthy party system is weighted in favor of the majority, a no-party system has an antima-joritarian bias...
...One reason for this rapid growth was that the rejection rates of the Japanese produced units were one-half or less than the comparable rates for the domestically produced units...
...To me, it is apparent that he also adds a filter, enabling him to screen out inconvenient facts and facilitating an interpretation of history and a vision of the future from a single strategic perspective????The class struggle...
...It is easy to identify economic interest with class interest, and the identity frequently makes sense...
...In addition, Tyler omits any consideration of the role of poor product quality as representing the equivalent of a deterioration in productivity...
...Ignoring or assigning a minor role to the factors causing an erosion of much of the economy's industrial base makes it difficult to propose remedies...
...CHARLES B. GARRISON Professor of Economics, College of Business Administration, University of Tennessee In "Supply-Side Trickle-Up" Gus Tyler rightly rejects several crucial propositions of supply-side economics...
...it is essential, however, for the promotion of a sustained program in behalf of the have-nots...
...It follows that the grand objective of the haves is obstruction, at least of the haves who take only a short-term view...
...This is widely recognized by political pundits, with almost unanimous regret...
...Organization is not always necessary to obstruct...
...In 1949 the late V.O...
...Anyway, income surges for the well-off do not exclusively follow a relaxation of marginal taxes...
...To cite an example, Japanese exports of semiconductors to this country rose from $20 million in 1973 to over $250 million in 1979...
...Among them, only one has recently declined in importance: political parties...
...This happens as increased after-tax interest returns on savings move citizens to slacken their consumption...
...Second, even though the earnings of the wealthy mushroomed in 1964-65, this was still a meager share of the country's total...
...Tyler presents strong evidence to the contrary in showing that pension funds, which draw contributions from "America's large middle class of wage and salaried workers," are a major source of external capital for U.S...
...Neither scholars nor journalists seem to have recognized that the original one-party South offers the best available answer...
...JAMES W. PROTHRO Distinguished Professor of Political Science, University of North Carolina The "great debate" stimulated by Gus Tyler's excellent essays continues to focus on policy choices to the neglect of Thomas Payne's argument ("Responses -1," NL, February 8) that our problems are "the inevitable outgrowth of the system's structural deficiencies, not the result of a paucity of available solutions...
...The distinction between "making goods" and "making money" has become sharper in the U.S...
...It is also unique in being the only democratic system among advanced societies without some kind of socialist or labor party to organize and speak explicitly for the class interests of the disadvantaged...
...The UAW, certainly one of the most progressive of trade unions, found it in its interest to join with the automobile manufacturers in pressing the Administration for "voluntary" quotas limiting the number of Japanese cars imported into the United States...
...over the long run the have-nots lose in a disorganized politics...
...Further, the diminished levies reinvigorated the will to work...
...In state politics the crucial issues tend to turn around taxation and expenditure...
...What level of...
...It similarly fails, through lack of clarity and continuity, to stimulate interest in, and information about, public affairs...
...And although the causes of the phenomenon in the South were vastly different from those currently diminishing the importance of parties across the country, Key's comments on the effects of a regional no-party politics suggest where we may be going...
...The key elements in American elections are political parties, issues, candidates, PACs, polls, money, and the mass media...
...It is difficult to argue, however, that raising the price of automobiles by limiting their supply was in the interest of the overall working class...
...Little-known and complicated politics is obviously more nearly mastered by people who have the training to unravel its complexities or the money to hire lawyers, lobbyists and public relations experts...
...Yet Tyler never directly addresses another essential supply-side contention that runs as follows: Personal income tax reductions are the necessary incentive for a significant rise in personal saving, and more saving not only eases financing but an ascending ratio of saving to total output frees resources from the production of consumer goods to the production of capital investment goods...
...The American system is unique in producing the lowest voter turnout among all the world's democracies...
...Economic interest has often prompted groups from different classes to get together to pursue a common goal, and it can lead to conflicts within the same class...
...Personal tax reduction stimulates consumption spending and corporate profits, which in turn prod business investment...
...In its fluidity and discontinuity, government under no-party politics eludes the control of ordinary citizens...
...The goal of higher investment does not justify confining tax breaks to high income groups...
...roughly the same pattern emerged in 1976-78...
...The ensuing rally, then, was undeniably demand-induced, yet profits rose as strongly as in 1963-65...
...In sum, Tyler's analysis of the economy is closer to the mark than the supply-siders...
...The rejection rate for American made semiconductors has declined of late, but poor product quality helps to explain losses of markets in the past decade for American produced automobiles, consumer electronics and other items...
...But there is no one-to-one relationship, and the discrepancies between the two are important as well...
...as professional managers with backgrounds in finance and marketing, instead of engineering and production, have become the leaders in many large firms...
...It thereby discourages voter turnout, especially among less educated and poorer people...
...corporations...
...This] places a premium on demagogy and appeals of personality...
...Politics generally comes down...
...Consumption's share of GNP dipped from a 60.4 per cent average in 1961-63 to 60.1 per cent in 1964-65????scarcely enough to accommodate the 1.4 per cent boost in business fixed investment's portion...
...The collaboration was supported by the union in the expectation, largely unfounded, that this would protect members' jobs...
...After all, no democracy has ever existed without some kind of party system...
...The saving rate did rise after 1964, yet so did consumption spending????by an impressive $57 billion from 1963-65...
...and these competitor nations...
...At the national level today, we are approaching the point of no-party politics...
...Tyler's one-dimensional filtering takes it for granted that economic interests and class interests are different sides of the same coin...
...upper bracketers increased their earnings so substantially that they paid more taxes after the tax cut...
...What Key said about a few states over 30 years ago comes chillingly close to describing the present national political scene: "The significant question is, who benefits from political disorganization...
...If we are to reduce the upper-class bias in public policy, we must seek first to promote party structures that give the disadvantaged some incentive to participate...
...At the system level, Key found no-party politics equally injurious: "With the emphasis on individual candidates, political strife is so unstructured that the 'outs' and 'ins' cannot even attack each other as groups with any collective spirit or responsibility...
...The rest came from corporate internal funds generated by escalating profits????and it is instructive to compare 1963-65 profit behavior with a different time of growth, 1976-78...
...Without some change in the system, we run the risk of moving, like the crayfish of the Deep South, backward into the muck, of seeing the nation become as oligarchic as the South of the pre-civil rights era...
...First, although the jump in personal saving was indeed considerable, it financed less than half the increase in investment...
...Although poorly made and unreliable products may initially create "cash cows" to be milked by their producers, their longer term effect has been to contribute to the slow growth that characterized the stagflation of the 1970s...
...to a conflict between those who have and those who have less...
...What about tax incentives producing a massive shift of resources from consumer tocapital investment goods...
...A closer examination of economic activity from 1963-65, however, far from supporting the supply-side theory, virtually destroys it...
...This, they observe, resulted in personal saving rising from $21.9 billion in 1963 to $33.7 billion in 1965, while business fixed investment's share of the GNP grew from an average of 8.9 per cent in 1961-63 to 10 per cent in 1964-65...
Vol. 65 • September 1982 • No. 16
