Dear Mr. President-Elect
TYLER, GUS
Countdown '92 DEAR MR. PRESIDENT-ELECT BY GUS TYLER Dear Mr. President-elect, As a Rhodes scholar, you do not have to be reminded of George Santayana's admonition that those who do not learn...
...Of course, this is a different time...
...America needs strong unions to provide a strong foundation for its market economy...
...The effort will require much politicking and great patience...
...And no one is more fit to initiate this development than a person with the prestige of the American Presidency and with the outlook of a new generation that perceives the world through new eyes...
...To put it another way, while working over the long range for a global solution to the global problem, you will have to do something in the short range to see to it that the American economy is not washed away by a flood of imports...
...Now, again, a string of Republicans in the White House has resulted in a slump and the election of a Democrat...
...Once he brought the economy back to where it was before the Depression, FDR returned to his concern about balancing the budget...
...In those days, we called it public works—planting trees, developing valleys, building homes and hospitals, even writing books and staging plays...
...Japan and Europe, far from being helpless dependents any longer, are doing quite well...
...During the campaign, Roosevelt excoriated the incumbent, Herbert C. Hoover, for heading "the greatest spending Administration in peacetime history...
...in 1938, they were either not born or needed to be nurtured...
...At present, the debt is 60 per cent of the GNP...
...The unbalanced budget became more unbalanced...
...In contrast, the top 1 per cent saw its real income grow by 78 per cent before taxes and by a whopping 102 per cent after taxes...
...Currently the top 1 per cent gets about 14 per cent of the national income, or $84 billion...
...As President, you can propose legislation to unshackle the hands of labor...
...In 1947, two years after the War ended, the total national debt was greater than the Gross National Product...
...There were more urgent things to think about, like aiding the Allies and later actively winning the War...
...If our $6 trillion economy expands to $8 trillion, the top 1 per cent could still get $84 billion...
...But the Cold War is over...
...Thus, while the debt went up by 51 per cent, the national output increased by 331 per cent...
...Balancing the economy required a series of innovations and reforms that would correct what the good Lord John Maynard Keynes had described as "the outstanding faults of the economic society in which we live"—namely, "its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and income...
...by 1932, it was down to $141 billion...
...The parallels between 1992 and 1932 are striking...
...added close to $2 trillion to the national debt, enough to have stimulated gargantuan growth...
...In due time, the New Deal would develop such arrangements...
...The media will, naturally, record this as a setback for you...
...But here, too, previous experience is a useful guide...
...When he submitted his penny-pinching first budget to Congress, he explained that "too often in recent history, liberal governments have been wrecked on the rocks of loose fiscal policy...
...President-elect, As a Rhodes scholar, you do not have to be reminded of George Santayana's admonition that those who do not learn from past mistakes are condemned to repeat them...
...Expenditures were reduced by a billion dollars in 1938...
...The health, welfare and pension plans negotiated by unions with management are a major reservoir for long-term capital investment...
...Uncle Sam was pouring growth hormones into a leaky bucket...
...That is not to suggest old-fashioned protectionism, using trade barriers to shield a bloated monopoly at home...
...Increasingly, corporations dictate to governments the conditions under which multinationals' operations will be located in a given country...
...So the first critical question facing you as President will be how to spend (your preferred word is "invest") the money you borrow...
...Asa consequence, the GNP fell by $6 billion...
...This was not the case because imports exceeded exports by about a trillion dollars...
...Perhaps immodestly, I feel a compulsion to share the experience with you and all others who care to eavesdrop now that history appears to be repeating itself...
...This was a '30s version of trickle-down economics, and it worked no better in Hoover's day than in the Reagan-Bush era...
...You may, incidentally, assure the rich that their income and their standard of living will not be reduced...
...The President had acted too soon, trying to balance the budget before balancing the economy...
...Growth is the answer for the '90s, as it was for the '30s...
...Nor is it to urge old-fashioned free trade, which would make the United States an island of unprotected shores in a stormy protectionist ocean...
...The quintessential concept for reviving the economy was perhaps most aptly expressed in the malodorous metaphor of Oscar Ameringer, the socialist-populist "prairie preacher" and editor from Oklahoma: "Money is like manure...
...Each dollar of Federal money they spent spawned more jobs and more money...
...You will need to keep one eye fastened on the stars to guide us to a promising distant future, and the other fastened on the ground so that on our way there we do not slip on a banana peel and break our neck...
...Fortunately, in his pursuit of the Oval Office he never said, "Read my lips, no new expenditures...
...The way that came to be is another of those historic happenings that have much to teach us...
...It would have been unpatriotic...
...Willy-nilly, you will have to think, and act, internationally in order to preserve and promote the U.S...
...Run by directors who are nationals of many different countries, the global corporation owes allegiance to no country...
...If tradition holds, the Democrats (the party in the White House) will lose seats...
...Faced with "starvation and dire need," Roosevelt borrowed and spent...
...In both cases, the Democrats won not because the voters were saying Yes to either a person or a program, but because they were saying No to a debilitating condition and to a candidate who denied any problem existed...
...In the absence of an international government to play the stabilizing role that nation states did in the post-Depression years, some new instrument has to be invented to preside over the global economy in a world that has become a global village...
...Pile it up in one place and it makes a big stink...
...Between 1977-89 (the latest figures available), the before-tax and after-tax income of the middle class shrank—in real dollars—by 4 per cent...
...So unless the economy is in tangibly better shape by the spring of 1996, you...
...More to the point, you will not have the sort of support in Congress that you enjoy now...
...Reform that is limited to post-tax income, though, will not be enough...
...Instead, the steadily growing imbalance between the two camps has given us a top-heavy economy—a pyramid standing on its apex, poised to topple at the first ill wind...
...Roosevelt was "priming the pump," a notion we now call "jump-starting" the economy...
...Multinational corporations, able to carry on their production almost anywhere in the world, can now—do now...
...Yet the fundamentals remain the same...
...Spread it out and it makes things grow...
...All of which brings me back to Santayana and history...
...Had he persisted on that course, he would have been a one-term President...
...Through his Reconstruction Finance Corporation, he disbursed funds to banks, railroads and the like...
...I was in the thick of it—as activist and analyst—when it happened the last time around in 1932...
...Similarly, the personal savings of wage and salaried families, made possible by their enhanced earnings, would add to the capital stock...
...The country was getting on its feet two years before World War II broke out in Europe...
...Roosevelt did pretty much what you have said you want to do...
...The government also has the power to improve pre-tax income, as Roosevelt demonstrated, and it should be strengthened...
...The original minimum wage of 25 cents an hour doubled and tripled the income of millions of people...
...Recognizing his error, Roosevelt reversed himself in 1939...
...The object was to put cash in the pockets of the people who needed it, and who would spend it to buy goods and fuel our market economy...
...he meant it...
...Right now, the system favors the top 1 percent at the expense of the middle class, the middle 60 per cent of the population...
...A revived labor movement would not only mean workers having the income to boost consumption, it would be a source of production capital...
...The idea is a good one and long overdue...
...When he ended his first term in 1936, the debt had risen to about $35 billion—a 7 5 per cent increase...
...My guess is that you have a better idea about what needs doing than did the revered Franklin D. Roosevelt...
...After a string of Republican Presidents in the '20s came an economic slump and the election of a Democrat...
...Besides those directly affected at the very bottom, workers receiving slightly above the minimum would benefit as well from a higher wage floor...
...In fact, he said quite the opposite: "If starvation and dire need on the part of any of our citizens make necessary the appropriation of additional funds which would keep the budget out of balance, I shall not hesitate to ask the people to authorize the expenditure of that additional amount...
...American foreign policy, including its economic phase, was determined in the postwar years by the need to deter Communism, as embodied in the Soviet Union...
...In 1929, our Gross National Product (GNP) was at an all-time high of $203 billion (in constant dollars...
...In pursuit of its profits, it seeks out sites where wages and taxes are lowest, where governments erect trade barriers to discourage competing imports and offer subsidies to encourage exports...
...In short...
...In eight years under Ronald Reagan, the U.S...
...spurring the market is more complicated today...
...That is not what has been happening recently...
...Their newfound dollars helped spark the economy...
...thumb their noses at governments that try to set standards such as minimum wages, child labor, worker's compensation, unemployment insurance, Social Security, occupational safety and health, environmental regulations...
...And in both cases, following the election, millions silently prayed that the incoming President would know what had to be done...
...Clearly, the economy has to be expanded...
...The Keynesian formula that effectively contained the ravages of recurrent depressions for half a century has to be applied to the "global economy...
...FDR's assault on Hoover's spendthrift ways was not merely so much political pap...
...Alas, labor's progress was halted by legislative restraints that Republicancontrolled Congresses passed (the TaftHartley and Landrum-Griffin acts), and by anti-labor judges that a succession of GOP Presidents appointed to the Federal bench, including the Supreme Court...
...Even more important will be your choosing fair-minded individuals for the National Labor Relations Board in Washington and its regional offices, not to mention the Federal courts...
...On the contrary, it actually rose from $252 billion in 1947 to $382 billion in 1970...
...there would simply be a little more pie to go around for everyone else...
...With a little bit of luck, things may be in place as you are ending your second term...
...A truly progressive graduated income tax would be a good start...
...The debt became easier to bear not because taxes were raised or expenditures were reduced, but because the economy grew...
...It is time for us to pursue trade policies appropriate to the times in the short run, otherwise we will not be a significant factor in the long run...
...Hoover borrowed and spent, but he gave the money to the wrong people...
...Unfortunately, that cannot be said of subsequent increases in the legal minimum, because each one has required new legislation involving painful, value-diminishing delays...
...That is, assuming you win a second term...
...and the U.S.—will be in trouble...
...During the War years (1941-45) nobody mentioned the budget...
...The debt did not shrink...
...Then it began to recede as a percentage of the GNP, until it was down to only 37 per cent by 1970...
...There is a second difference between the '30s and the '90s: Governments have less control over the private business sector...
...Your Democratic Party platform advocates indexing the minimum wage, having it automatically keep pace with the rising cost of living...
...The corporate reallocation of operations from high-standard to low- (or no-) standard nations will reduce the earnings and buying power of workers in the former without substantially elevating the income or purchasing power of workers in the latter...
...The U.S., at considerable cost to itself, put Japan and Europe on their feet again to head off the kind of economic despair that might make them easy prey for Moscow...
...What some academics called "free trade" was really a political ploy to purchase a few pals...
...In the 1930s, foreign trade represented a negligible portion of our GNP...
...Through the National Labor Relations Act, empowering workers to join "unions of their own choosing" and obliging employers to "bargain in good faith," FDR set in motion a dynamic to hike earnings, beef up aggregate demand and enlarge the domestic market...
...For if achieving a better consumption/production ratio is central to economic recovery, then restoring a level playing field for labor-management relations is vital...
...The inevitable result must be a global imbalance between the world's capacity to produce and its propensity to consume—a perfect prescription for a global collapse of the market economy...
...That's why I am taking the liberty of writing to you...
...he invested in education, job training and the infrastructure...
...In two years, there will be a Congressional election...
...economy...
...Rather, it is to say that we must use our considerable economic strength to establish fair ground rules for the present stage of the competitive global game...
...From that time on, balancing the budget became a nonissue...
...In one respect, he was more like Ross Perot than like you: He was obsessed with the idea of balancing the budget...
...The slice of the pie enjoyed by the affluent would be as big as ever...
...Good luck...
...We were headed for another economic nosedive...
...FDR inherited a Federal debt of about $20 billion...
...Lifting the real earnings of the wage and salaried employees who constitute the bulk of the middle class is a tougher task...
...Yours is not an enviable position...
...The tax system contributes to a maldistribution that is morally reprehensible and economically suicidal...
...Fear of Communism spreading also prompted us to buy friends by giving them large chunks of the American economy...
...Consequently, American unions have not been able to fulfill their historic role as a "countervailing power" to the concentrated power of capital...
...But as I mentioned earlier, things are more complicated today than they were in the New Deal days...
...The GNP rose far faster, however, from $235 billion in 1947 to $1 trillion in 1970...
...by 1937, it was back up to $203 billion...
...The income that American workers received through government funded programs went to buy goods made in the U.S.A...
...Respectfully, Gus Tyler Gus Tyler, a frequent contributor, is Assistant President of the ILGWU...
...There are many ways to "spread it out...
...In retrospect we know that his readiness to almost double the debt was a desirable first step toward recovery...
Vol. 75 • November 1992 • No. 15
