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©2004 Copley News Service, 7/5/2004
The economy is the strongest it's been in a very long time. Factories are busier, families are earning more, homeownership continues to rise and people are finding work. If you doubt that President Bush's tax and economic policies are working, look at the jobs figures. Nearly 1 million new jobs have been created during the last 100 days alone. Since the beginning of the year, more than 237,000 new jobs a month have come into existence. Can we do better? Certainly we can, and indeed we must.
The national unemployment rate, 5.6 percent in May, is lower than the average of the 1970s, 1980s and 1990s. Job creation was up in 44 of the 50 states in the last year, and the unemployment rate was down in all regions and in 46 of the 50 states. More than 1.4 million new jobs have been created since August. Belying the braying about a "decline in manufacturing" in America, national manufacturing employment has risen for four consecutive months, with more than 90,000 new jobs created.
The only concern about the economy right now is that the Federal Reserve Board may allow inflation to creep higher by targeting interest rates to rise gradually rather than stopping inflation in its tracks by buying and selling bonds with an eye toward price stability as measured by price-sensitive commodities and, as David Malpass wrote in The Wall Street Journal recently, the price of gold. As the Fed typically does when the economy hits the skids, it infused too much liquidity into financial markets for too long in order to ensure that the economic recovery got off the ground. In the process, it has baked probably 3 percent inflation into the economic cake for a period of time to come.
If the central bank were to cease gradually hiking the overnight interest rate and instead simply sell Treasury bonds to the market until the price of gold and other price-sensitive commodities stabilized, we could experience sustained, rapid, non-inflationary economic growth. If, however, the Fed insists on continuing its clumsy, gradualist interest-rate targeting, it will remain behind the curve and inflation will accelerate.
With all of the good news on the economy, why is John Kerry tied with George W. Bush in several public opinion polls? The only reason Kerry is even close in the polls is primarily due to the fact that 1) Iraq has dominated the headlines, and 2) elections are about the future, not the past. Neither candidate has stepped forward with a bold, positive economic agenda for the next four years.
Kerry is pushing protectionism, tax increases and increased government spending. Bush has called for making his tax cuts permanent, but that alone is not enough. The president needs a big idea to take to the country on a referendum basis much like Ronald Reagan did in 1980.
If there is one big economic issue that could change the debate in this campaign and break the deadlock in this election, it's reforming Social Security with large personal retirement accounts. Social Security is broken, and it must be fixed.
Birth rates are falling and life expectancy is rising, leaving fewer and fewer workers to support each retiree. The ratio of workers to retirees was more than 40-to-1 when Social Security began in 1935. Today it's 3-to-1, and soon it will fall to 2-to-1. There simply aren't going to be enough workers around to support all the retired people in a pay-as-you-go system. That's why we must begin transforming our nation's retirement system into a real pre-funded personal investment retirement system - just like federal employees and members of Congress have - to permit workers to build themselves a real nest egg.
Yes, it's going to cost some money to complete the transformation. That's because Social Security is doomed to insolvency and sinking into bankruptcy. Our only hope is to restrain the growth of all other federal spending and borrow some money to keep current retirees in their Social Security lifeboats while we rebuild the system on a solid foundation of investment.
So far, Kerry has essentially closed off any meaningful options on reforming Social Security other than the status quo, even though everyone knows Social Security must be fixed. Bush opened the door in the 2000 election and resurrected the issue in his 2004 State of the Union address to the nation but has not said much since then.
In the next few weeks, legislation will be introduced in both the House and the Senate with a couple dozen co-sponsors who would reform Social Security with large personal retirement accounts that guarantee all workers at least what they are currently promised under Social Security without tax increases or benefit cuts.
To learn more, visit the Alliance for Retirement Prosperity at www.arpnow.org.
If the president seizes this issue and supports the approach taken in this legislation as his own, I think he will be rewarded with four more years. More importantly, it would give Social Security a new lease on life, ensure retirement prosperity and security for all America's retirees, and help democratize our capitalistic system.