PRESIDENT Bush's State of the Union address last Wednesday struck at the heart of the potential problems for America's economic future, and it offered the solutions necessary to generate both strength and prosperity in the future. Ensuring a sound U.S. economy requires that it remains competitive in the world, which in turn requires that it continue to invest, grow and evolve.
First and foremost, the President recognized that continued growth and prosperity requires security and a belief that returns on investments will be protected. To ensure this, the president promised to retool the American budget away from inefficient programs towards defense. The United States is in the middle of a war, and wars require troops, equipment, and, above all, money. It is absolutely essential for a stable economy that the U.S. military be capable of defending the nation and of providing security to its citizens.
Security of self and of investments are absolutely necessary for economic growth. Irwin Stelzer of the Hudson Institute writes that "like markets, consumers abhor uncertainty." Fortunately, the uncertainty over how to pay for security is at an end. No doubt reacting to critics of wartime spending, the president agreed with them that "keeping America competitive requires us to be good stewards of tax dollars."
To curb deficit spending, the president said his budget would greatly reduce discretionary spending and "pork barrel" earmarks by Congress that inflate the federal budget, as well as "reduce or eliminate more than 140 programs that are performing poorly or not fulfilling essential priorities."
Reducing such programs would provide the funds necessary to keep America strong, to keep the economy growing and to begin reducing the deficit.
One of the more controversial parts of the president's proposed budget cuts was in the area of Social Security, Medicare and Medicaid. Noting that baby-boomers are beginning to be eligible for benefits, the president forecasted that these programs would consist of "almost 60 percent of the entire federal budget" by 2030. Though already drawing fire from Democratic leaders such as Senate Minority Leader, Harry Reid, it is still unclear exactly what the President plans for Social Security -- perhaps moving towards privatization or changing eligibility. What is clear, however, is that it is absolutely necessary that changes be made now, before they overwhelm the system's ability to cope.
Most importantly of all, the President pointed out that "Keeping America competitive begins with keeping our economy growing." Democrats and other critics have continually attacked Republican lawmakers for approving large budget deficits. What they apparently do not realize is that such deficits are not inherently a bad thing.
Indeed, borrowing is the foundation of investment, which is the foundation of economic growth. The United States has experiencedhigh levels of economic growth over the past several years, largely due to foreign investors who seek high returns from placing their money in U.S. businesses. We must eventually pay this money back, but by continuing to expand the U.S. economy, this process can be done as painlessly as possible. As long as the U.S. economy continues to grow, such borrowing is a sign of strength, not weakness.
It is therefore important that U.S. policy continue to work towards economic growth while curbing its excesses. Republican-sponsored tax cuts have been an easy target for criticism when running a deficit, but these tax cuts have put money back in the hands of investors and businesses -- creating over four and a half million new jobs since 2003 alone. By placing money in the hands of consumers and investors, it is being placed directly and efficiently back into the U.S. economy. There it is used to modernize, expand production, create new jobs and to keep up with competing foreign firms and workers. In the long run these tax cuts will allow the U.S. economy will expand and to more than compensate for the immediate costs.
The last major component of President Bush's plan to keep the economy going is expanding our commitment to education. Education is key to economic growth, because it facilitates both the invention of new technologies and application of existing ones. Expanding math, science, advanced-placement classes and, above all, working to make teachers more qualified is a critical parallel to ensure further growth.
Former congressman, Jack Kemp of the Competitive Enterprise Institute put it best when he said: "Its About Economic Growth, Stupid!" The United States will continue to prosper best if its economy continues to grow and expand. To do this the government must promote education and research, scale back excesses and inefficient programs anx ensure a safe and secure investment environment.
Allan Cruickshanks is a Cavalier Daily associate editor. He can be reached atacruickshanks@cavalierdaily.com
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