New Democrat Update - January 2003
REINVIGORATING THE ECONOMY
In the last election, voters were convinced that neither political party had effective plans to revive the economy. Democrats attacked the Republican agenda without offering their own alternative. The GOP favored a crony-capitalism agenda that is dramatically slowing economic growth today. Conservatives also continue to refuse to deal with a host of very important issues affecting technology and innovation, from basic research to broadband development. The public deserves a much better debate.
Cutting tax rates, especially for high earners, has failed to spur an investment boom, long-term growth or risk-taking, especially in Colorado. Despite having one of the larger state tax cuts in the country, Colorado’s downturn is worse than the nation’s as a whole.
The state’s employment since 2000 has dropped 2.9 percent (60,000 fewer people are working), compared to a dip of 1.3 percent for the country. Two years ago, state employment growth ranked third, now it’s a miserable 48th. Income growth was zero last year, compared to an annual high of 8.8 percent between 1995 and 2000.
In reality, the level of state taxation is too low to have any real, positive effect on economic activity. Tax cuts, by definition a smaller portion of total taxes, represent an even more insignificant drop in the economy’s bucket.
The real result of Republican tax cuts has not been economic growth but rather, huge long-term structural budget deficits that have drained capital and sapped confidence. Gov. Owens’ permanent tax cuts were especially fiscally irresponsible because they were financed by exceptional economic conditions that have now ceased. The ten states that cut taxes the least in the 1990s had significantly smaller budget deficits than the ten states (of which Colorado is one) with the largest tax cuts.
Colorado and the nation need an entrepreneurial capitalism strategy to turn this economy around. In the real world, it is not lower tax rates, but productivity growth, spurred by innovation, that is key to raising real wages and living standards and expanding opportunity for all Americans. We must boost innovation and productivity across the board, rather than protect ever-shrinking slices of an old economic pie or reward special interests at the expense of overall progress.
Productivity can be boosted by implementing the agenda that made our economy so strong in the 1990s - fiscal discipline, technology and innovation, and investment in the knowledge and skills of our people. Nationally, that very formula helped create 22 million new jobs, dropped unemployment to its lowest level in 30 years, and cut inflation to its lowest levels since the early 1960s. Between 1993 and 2000, our annual growth rate was more than four percent - up 50 percent from the previous two decades.
Everyone must have access to the tools and resources necessary to get ahead and stay ahead. More than ever, individual and national success will be determined by our ability to learn and adapt. Toward that end, workers need continual and affordable lifelong learning, a new rapid re-employment system and investments in technology. Other economic opportunity initiatives will be covered in future New Democrat Updates.
Lifelong learning is essential in a knowledge-based economy, for these compelling reasons - a college education means you earn three times more, 60 percent of jobs will be information technology-driven and employees are changing jobs several times over their careers.
We must pursue initiatives that make going to college or going back to school more accessible and affordable. Initiatives that more closely link non-college bound high school students to employers, especially in high-tech manufacturing, must be strengthened. Finally, we must move toward making preschool programs available to every child so they can begin elementary school ready to learn.
We must create a rapid re-employment system, out of the ashes of the outdated unemployment insurance program. When today’s program was created, the goal was to give income support to full-time workers between when they were laid off and called back to work. Today, most workers are never called back to their previous jobs and many need to upgrade their skills.
The current program also fails the growing number of contingent and part-time workers who cannot qualify because they earn too little, work part-time, or are new to the labor force, including many workers who formerly collected welfare. In addition, it does not reward those companies that lay off fewer workers or ensure that those, who layoff more, pay their fair share.
Colorado’s unemployment insurance program is especially ineffective. At a time of skyrocketing layoffs, the state has decided not to use $143 million in federal aid it received more than eight months ago. The state system also makes it extremely difficult for new kinds of workers to qualify and does not provide benefits to laid-off workers who are upgrading their skills for new employment.
To help workers in an increasingly volatile economy, Gov. Owens should order the release of these funds. He and the legislature, in partnership with federal government, should also dramatically reform the system to reflect today’s realities. Finally, it would help immensely if the Bush administration would stop micro-managing the system, while trying to cut unemployment taxes and benefits.
Injecting more technology into the economy requires a distinctive new type of infrastructure that will spur more employment opportunities and productivity increases. Information technology alone has driven a third of all our economic growth.
Unfortunately, the state’s technology program is in shambles. Billed as "the first comprehensive government re-engineering effort in the age of the Internet," Owens’ New Century Colorado project has accomplished very little. For example, the state’s digital government efforts continue to seriously fall behind. A 2002 Brown University study ranks Colorado's web site 47th in the nation, a drop from 29th the prior year.
The governor’s Colorado Institute of Technology, aimed at boosting high-tech college graduates, has gone nowhere. In perhaps a related development, Owens’ chief technology officer, with no future career plans of his own, is resigning. His replacement must get state government’s technology act together.
The slow pace of the state’s technology program is inhibiting broader business and individual use of information technologies - the keys to more e-commerce and higher economic growth. The governor and Republican legislature could be giving the private sector an important boost by refocusing state government’s procurement power and providing a critical mass of online services, from renewing driver licenses to tax filing.
Dramatic reforms and modest investments in lifelong learning, a new re-employment system and the state’s technology initiatives will produce an enormous private-sector "bang" for minimal public "bucks." Democrats should be leading the way on advocating a strategy that will produce results, in sharp contrast to the GOP's all talk and no action.
PUTTING POLITICS FIRST
Republicans might be awful at managing the economy but they have politics down to a science. The latest edition of Blueprint details how President Bush, despite appearing to be bipartisan, has been quite the opposite. The 2000 GOP presidential candidate, who promised to change the tone in Washington, is actually running an extremely partisan administration willing and eager to use every political device at its disposal to gain political power and advantage. Writer Joshua Green characterizes it best - "Call it the triumph of Rovery: the art of acting in a thoroughly partisan manner while appearing to be above the political fray."
To find out how the Bush administration really operates and more, read the magazine online or get a hard copy by contacting Jim Gibson.