"Most of it doesn't add up to much."
The line comes from a Jack Nicholson film in which an oil rigger describes his failed career, a series of piecemeal efforts that led to nothing. The phrase also fits the description critics are giving of George W. Bush's economic career as president. Mr Bush has not had a clear plan - or accomplished much - in his first term, the critics say. What is more, he does not have a plan for the next term - assuming he wins one. And he has failed to do that most important of jobs - controlling the budget deficit. On Thursday, in his big speech at the convention, the president will make a few new claims, paw the stage with his left boot, and offer up some pro forma proposals. More incoherence from the hard hat.
Nice screenplay, but it is not an accurate one. The Bush team did target a specific economic goal, from the campaign in 2000 on: to sustain America's relative competitiveness. In the three-and-a-half years he has held office, Mr Bush, with the help of Congress, has pushed the nation repeatedly towards this goal.
Some of us have not agreed with all his tactics: steel protectionism, nationalising education standards, letting the dollar drop to help certain exports. There have been outright inconsistencies, such as an outrageous drug entitlement, a gift to Florida's senior citizens. And certainly, there have been problems - the deficit. Still, completing unfinished business is what second terms are for. We can even outline what Mr Bush might aim for in the next four years. Sticking to the theme of that Nicholson film, we will call the plan "competitiveness in five easy pieces".
First comes reform of America's national insurance programme. Social Security is a public finance time bomb, as Alan Greenspan, the Federal Reserve chairman, acidly noted over the weekend. Mr Bush can privatise Social Security by replacing the New Deal collective system with individual retirement accounts. This helps move America away from being an entitlement society and towards being a shareholder society, another stated Bush goal. It also removes Social Security payments, one of the biggest unfunded liabilities, from the government balance sheet. These future liabilities matter more than the annual budget deficits you hear Mr Bush's opponents rattling on about. Mr Bush can show he is truly serious - more serious than Democrats - by taking on an issue they dare not touch.
Next, taxes. The single most important thing a developed country can do to stay competitive is to cut taxes, and Mr Bush has done it repeatedly. His reduction in the capital gains tax was especially important. Now he can make two further tax efforts. The first - and he should even do this in the next few months - is to make permanent some temporary tax cuts from his first term. This is crucial because it demonstrates consistency. And next term could bring a thorough overhaul that finishes the transition from a system based on income to one based on consumption. If you think tax reform is passé, you haven't been in Washington lately. Everyone has a scheme to replace the current system. The best and easiest is the flat tax.
Healthcare: when chief executives visit Washington to talk about hiring, they complain about rising healthcare costs. At the core of the problem is the fact that third parties, currently insurance companies and government offices, make the payments. Mr Bush would return responsibility to citizens by strengthening Health Savings Accounts, making people responsible for their own insurance, which would be deductible for tax purposes. John Kerry, like Hillary Clinton in the 1990s, would increase the power of third parties by endowing government offices and other healthcare managers with higher subsidies.
Fourth comes the lawsuit problem. Next term will be the time to push through federal legislation that reforms tort law. American businesses and foreign investors tend to console themselves with vague daydreams that eventually asbestos claims will subside and that the next round of suits will be easier to handle. This is nonsense. The next asbestos is - asbestos, bigger and more costly than ever. Nobody is an angel in the legal story, and nearly all politicians are beholden to lawyers. Still, Mr Bush can make clear what is true: that under a Kerry-Edwards administration, US voters will not only have leaders who took campaign contributions from trial lawyers, they will have a leader who is a trial lawyer.
Fifth, restraining government spending. Here is where Mr Bush has failed most often. The price of his first-campaign philosophy, compassionate conservatism, was higher spending. The war made things worse: to get support for his military legislation, the White House made considerable concessions to various constituencies involving increases in non-defence spending.
Of course there is no guarantee that Mr Bush will mention all these goals, let alone manage to achieve them. Though he did not plan it, he is, as he says, a war president. Most of what he does on the domestic side will be affected by the trading he has to do to achieve his defence goals. What is more, the contest of 2004 is not merely a contest between the Democratic party and the Republican party. It is also a contest between two cultures - the culture of entitlement and the culture of the shareholder-owner. Both parties play to elements of both cultures. Republican strategists this week are arguing that the typical Republican voter today is leaning towards entitlements, and Mr Bush is hearing their message.
Still, one can argue that voters, especially Republicans, are merely awaiting a stronger commitment to the ownership message, one that does not permit exceptions such as cynical drug buyouts for the elderly in swing states. They are also looking for a reminder of what they know is true: that annual deficits matter less when growth is robust. Let Mr Bush talk about eight years of pro-growth policy. There is nothing piecemeal about that.
© Copyright 2004 Financial Times
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