Can the Economic Beacon of America Guide the World Into the 21st Century

Commentary by Pete du Pont

It's no wonder the 20th Century is called the "American Century." Not only was our nation triumphant in two World Wars, the 50-year Cold War, and the race into space, but it served as the beacon of hope and economic opportunity for the world.

It was America's reliance on free enterprise and individual freedom that fostered her economic superiority through the rebuilding of Europe and Japan and the collapse of communism and socialism. Centrally-planned bureaucracies just were no match for the U. S., or as Ronald Reagan said, "when was the last time you bought a car . . . or a videocassette recorder and the label read 'Made in the U.S.S.R.?'"

But, times have changed. Economic success in the 21st Century will flow to those who can operate effectively in the new global economy, where low cost technology and virtually free information allow many nations to compete where few once had.

Japan, South Korea, Singapore and Hong Kong are serious players in the world economy. China is beginning to open itself to the world and flexing the economic muscle that comes from having a population of one billion. While the former Soviet Union still struggles, it is conceivable that in a dozen years, the world may yet desire autos and VCRs produced in Russia or the Ukraine.

Contrary to the false populism of Pat Buchanan and Ross Perot, such economic globalization can actually be good for America - but only if we start making some changes. For America to emerge victorious from this new economic battlefield, we need an about-face from our decades-long rush toward increasing tax burdens and expensive social programs - an economic hardening of the arteries, if you will - that is destroying our competitiveness in the international economy.

Take tax rates. Over the last several decades, the competitive disadvantage of America's high tax rates has been blunted by the high rates found in Europe. But that may be ending. Politicians in Germany are now competing to offer lower and flatter tax plans. Think how much more formidable Germany will be as a economic competitor if Chancellor Helmut Kohl's economics spokesman, Gunnar Uldall, has his way and reduces Germany's top marginal income tax rate from around 60% to 28% - lower than our top rate.

Germany already joins Japan, Hong Kong, Taiwan and Singapore as countries that either exempt capital gains from tax or tax them at rates lower than we do - an economic plus for capital formation and economic growth in those countries compared to the United States.

Our nation also suffers from too many failing Washington-designed programs that sap our economic vitality. We spend about 6% of GDP on federal anti-poverty efforts, yet we see no fall in poverty. We are faced with Medicare and Social Security systems that already take 15% from the paychecks of our workers, yet both are slated to run out of money (Medicare in just five years) unless they are reformed.

As if these aren't enough of a weight hung around the neck of America's competitiveness, we also suffer from an educational system that just doesn't make the grade. In a test of the math proficiency of thirteen year olds in 14 nations, the United States ranked 13th, trailing such countries as Korea, Taiwan - and amazingly - the former Soviet Union. These results are the sad legacy of government control of our education system.

So, what can we do? Ironically, America's success in the changing competitive climate of the next century will hinge on whether it can re-emphasize the sense of individual freedom and personal responsibility that made it successful in this century - in a sense, we need to go back to the future.

Americans must respond with a simpler and fairer, single-rate tax system that recognizes effort, encourages savings and rewards entrepreneurial zeal. We must move welfare out of Washington and let the states reform it so that it no longer punishes people for getting married or finding a job. We must give people - including Medicare and Medicaid recipients - the ability to manage their own health care through the use of Medical Savings Accounts. We must allow the transfer of retirement savings from the pay-as-you-go Social Security system to individually-managed marketplace IRAs. And finally, we must take education decisions away from professional bureaucrats and give them to parents and teachers.

Our great nation remains the beacon of hope and economic opportunity for the world, but if we wish to keep that beacon shining brightly in the 21st Century, we better start making some changes. To sit still is to stagnate; to stagnate is to condemn our children to declining opportunity, prosperity, and quality of life.