WASHINGTON - The recent recommendations of a bipartisan commission headed by Sen. Sam Nunn, D.-Ga., and Sen. Pete Domenici, R-N.M., offer a provocative formula for reshaping U.S. economic policy in the post-cold War era.
The proposals are contained in a detailed report by a 60-member commission of corporate executives, members of Congress, labor leaders, mayors, and academics brought together by the Center for Strategic and International Studies.
One important conclusion the commission reached is that if the United States wants to stay a global superpower it has to promote savings and investment and reduce the budget deficit. If the deficit is not addressed soon, the commission believes, the strength of U.S. society and the competitive position of the United States in a global marketplace are both at risk.
It is a message that carries weight, coming as it does from two powerful senators on opposite sides of the aisle. Nunn is chairman of the Armed Services Committee and Domenici is the ranking minority member of the Budget Committee. Both are veterans of the bitter and partisan budget fights that Congress has seen over the years.
This linking of domestic economic policies with the strategic position of the United States in global politics is an increasingly popular notion now that the Soviet Union has collapsed and the U.S. military is being downsized.
Economists and strategists are warning that to remain a global superpower the United States must improve education, sharpen worker skills, and promote capital formation. It is a domestic agenda for an international world, and it is a strategy that has been articulated frequently by Democratic presidential challenger Bill Clinton.
Perhaps nothing brings home the urgency of the task more forcefully than the fact that U.S. interest payments on the national debt now exceed defense spending.
The commission recommended reducing projected budget outlays by 8% and gradually raising taxes by 3% to bring the budget into balance by 2002. The goal would be to end the enormous federal appetite for additional debt that must be financed by U.S. and foreign investors, and to free up resources for investment in education, infrastructure, and health care.
The commission called for a ceiling on federal entitlement programs other than Social Security, and elimination of some specific programs - notably operating subsidies for mass transit and the National Aeronautics and Space Administration's space station.
On the revenue side of the equation, the commission called for phasing out the current federal income tax system in favor of a consumption-based tax system. Under the proposed method, a taxpayer would take annual income, add any gifts and bequests as well as net borrowings, and subtract all savings. The remainder would equal consumption and be subject to taxation, with rate tables and personal exemptions to assure fairness for low- and middle-income taxpayers.
Many economists see major advantages in a consumption-based tax, beginning with the savings and investment it would reward. Wages would not be treated differently than interest on bonds, stock dividends, or capital gains. Businesses would be taxed on a cash-flow basis and would no longer have to follow complex accounting rules for depreciating property and repaying debt.
A consumption tax is not on the political drawing boards now. Both Clinton and President Bush are committed to sticking with the current income tax system, with only minor changes.
But after the election there is likely to be a lot more talk about strengthening America by paying attention to domestic needs. That will inevitably mean finding ways to address those needs while assuring investors who foot the bill for U.S. debt that the deficit is not being allowed to spin out of control.