Elections and the Economy

by James W. Skillen

The "oil shock" of 2004 that reached a peak in mid-August worried economists and presidential candidates as well as consumers. Higher fuel prices affect the entire economy and thus heighten concern about future economic growth, jobs, prices, and America's relations with energy-producing countries. In fact, the oil shock, in conjunction with the war in Iraq, brings into focus one of the central questions about government: what is its responsibility for economic well-being? Or, to put it in other words, how should government act to do justice to the economy?

The general consensus among Americans, including the two major presidential candidates, is that the chief measure of economic well-being is growth. Only through growth can new jobs be added and more goods supplied. Only through economic growth can unemployment be kept down and the poor find job opportunities. When growth slows or stops, jobs disappear, tax collections go down, and government debt goes up.

President Bush's treasury secretary, John Snow, keeps repeating the administration's mantra: "The president's tax cuts have worked . . . . We're on solid footing, our upward trend [meaning economic growth] is strong" (Washington Post 8/24/04). And John Kerry keeps repeating his slogan as a challenge to Bush: "Jobs, jobs, jobs."

Yet even if we agree that economic growth is a good thing, is it really the chief economic goal of government? What if the economy doesn't grow adequately to keep adding new jobs even if government is doing everything it can to cut taxes, promote investment, and create jobs? Are we willing to say that government has fulfilled its economic responsibility because it has tried to foster economic growth? What do we say if, in order to promote growth in the short term, government acts in ways that disadvantage some citizens or endanger the natural environment to the detriment of future generations? Is that still the right thing to do, because government must try at all costs to promote economic growth?

Energy and the Economy

Look for a moment at the energy bill that Congress crafted a year ago but has not yet passed. The initial impetus behind the bill was the desire to solve electrical grid problems that caused the big blackout in the Northeast more than a year ago and to bring some balance to energy supplies so that the U.S. would not remain so dependent on imported oil. In the end, what Congress put into the bill would do little to require changes to assure protection against another blackout. What the bill will do, if passed and signed into law, is to provide tens of billions of public dollars (or tax incentives) to coal, oil, gas, and ethanol companies to encourage more energy production. As the writing of the bill developed, it became a means to promote jobs, not to conserve energy.

Promoting growth in the same old energy sectors in order to add jobs, however, will encourage more energy consumption, which cannot be satisfied by domestic production alone even if such production is significantly increased. Nor can growth alone, even in the traditional energy-supply sectors, guarantee against another oil shock. If energy supplies from the Middle East or Russia, for example, are reduced or cut off, there is little the U.S. government can do to meet energy demands at sufficiently low prices to guarantee economic growth.

Here again, the presidential candidates substitute slogans for meaningful arguments. Secretary Snow urges Congress to pass the energy bill, saying, "The president's plan will lead to lower costs . . . [and] make the economy less dependent on foreign oil" (Washington Post 8/24/04). John Kerry, on the other hand, speaking during the Olympics, said of the Bush administration, "You don't get gold medals for record oil prices, record deficits or record health care costs. This is what happens when you have a White House that lacks a viable strategy for the economy or reducing our dependence on Middle Eastern oil" (Washington Post 8/20/04). Both Bush and Kerry imply that there is a way to achieve the agreed upon aim of more growth, less dependence on foreign oil, and lower energy costs. But the president has not accomplished this and there is little evidence to suggest that Kerry has a program to achieve it.

The main point is that government may try to promote economic growth, but there are so many aspects of the economy that government doesn't control, it simply cannot guarantee growth—or at least not sound growth. In the meantime, the question of justice continues to arise. The most important question we should be asking, therefore, is how government should act so that all citizens and the national economy experience fair treatment, whether or not the economy is growing. Government, after all, is not in business, but bears responsibility to govern. And there is more to governing than trying to promote economic growth. Whether the economy is booming or in slowdown mode, the question of how government collects its taxes, directs its spending, and offers tax breaks and unemployment insurance will have an impact on the overall well-being of the country, including the economy. Economic justice, in other words, has to do with how government's economically related actions advance justice for all—the common good, the commonwealth.

Serving and Managing

One way to understand what's at stake here is by grasping the distinction between government being at the service of society and government directly managing the public trust or commonwealth. Insofar as corporations are independent of government, they are like families, nonprofit organizations, and private universities, which are not the direct responsibility of government. Government's economic responsibility in this regard is one of service: to act in ways that encourage independent organizations, including businesses, to fulfill their own responsibilities for the common good. Government does this, for example, by giving families tax deductions for their dependent children; by giving tax incentives to businesses to operate in areas of rural and urban poverty; or by offering loans to students who attend universities.

In contrast to government's service to nongovernment organizations and institutions, it bears direct responsibility to manage or govern the public order—the political community—itself. Government is directly responsible for police forces, courts, and military forces, for much of the public infrastructure, and certainly for the protection of air, water, and certain other resources. No private organization should be allowed to monopolize or dominate "the commons" for its own benefit. This is where government has an obligation to do more than merely be at the service of commercial and industrial enterprises in order to promote economic growth.

Government must manage justly the public realm of the economy for the good of all. These responsibilities include controlling the money supply; establishing interest rates as well as trade and environmental regulations; writing government's taxing and spending policies; and even defining the legal identity of the corporation. It is not enough for government to consider whether its laws will encourage economic growth; government is responsible to ask whether its management of the public trust—the commonwealth—is fair to everyone and will do justice to society and the economy over time.

Keeping the distinction between service and management in mind, we can better understand the perspectives of the two major presidential candidates. President Bush acts and speaks primarily about government as a service provider. Sen. Kerry speaks more often about government's direct management or governance of the commonwealth. One of Bush's recent themes has been the "ownership agenda." He wants "to encourage people to own something; own their own home, own their own business, own their own health care plan or own a piece of their retirement" (Washington Post 8/24/04). One wouldn't guess from this litany that there is any direct governance responsibility that the administration should exercise to bring about a greater public commitment to the commonwealth of the country and to its economic stability for future generations. Even when referring to government's tax, health, and pension policies, the president promised in his acceptance speech at the Republican National Convention to "transform these systems so that all citizens are equipped, prepared and thus truly free to make your own choices and pursue your own dreams." "Government," he said, "should help people improve their lives, not run their lives."

Sen. Kerry, on the other hand, while also emphasizing many of government's service responsibilities, speaks more often than Bush about government's direct management responsibilities. In his acceptance speech at the Democratic Convention, Kerry said, "I will cut middle-class taxes. I will reduce the tax burden on small business. And I will roll back the tax cuts for the wealthiest individuals who make over $200,000 a year, so we can invest in job creation, health care and education" (New York Times 7/30/04). Kerry's plan to deal with the health care crisis calls for a far more energetic government effort (and spending) than does Bush's plan.

The fact is that a healthy economy requires a fair and just political community and society. And this requires, among other things, achieving a balance between taxing and spending, between government's service to society and its management of the commonwealth. It is with regard to the proper distribution of government's service responsibilities and its direct public management responsibilities that we must carefully examine and weigh the candidates' aims and actions.