Public Agenda organized diverse viewpoints on the economy into three basic perspectives, which are summarized in the text and the chart below.
The lack of growth in family income occupies a prominent place on America's public agenda.
As the 1996 campaign begins, polls show many Americans are pessimistic about the economy. At first glance, considering the signs of economic revival, this is puzzling.
A few years ago, economic debate was driven by the fear that American firms were losing the competitive edge in a cutthroat global economy. But that fear has subsided. Measures taken in recent years by American industries to cut costs and become more productive have made the U.S. more competitive. Many firms are showing healthy profits and hiring workers. The Swiss-based World Economic Forum recently concluded that our prospects for economic success are the best among industrial nations.
But there's a catch. In the past, economic growth usually led to higher income for most families. That is not happening today. While U.S. companies are prospering and many college-educated workers are doing well, growth in the inflation-adjusted income of most American families has stalled. Stagnating incomes are a troubling fact of American life. The question is how to boost income growth and relieve the insecurity that millions of Americans experience.
For several generations, Americans assumed economic growth would permit each generation to have a higher standard of living than the preceding one. Over the last 20 years, well-educated Americans at the high end of the income scale have fared well, but many families at the middle and bottom of the income scale have suffered real pocketbook pressures.
A majority of Americans, according to September 1994 survey by Yankelovich Partners, are convinced things are getting worse for the middle class. The prospect that today's young adults may not achieve as high a standard of living as their parents is distressingly real.
How well the economy performs depends on how efficiently the work force turns out goods and services. Productivity growth has been slower in recent years than in the 1960s, but it's growing. Between 1977 an 1992, the productivity of American businesses increased by more than 30 percent.
But the income of a typical U.S. family today, adjusted for inflation, is just 5 percent higher than it was in 1973. Many Americans have been forced to work longer hours, or work at two or more jobs, to keep their income from declining.
While most agree the rate of income growth for middle-class Americans has slowed, people differ about how worrisome the trend is, why it has happened, and what should be done about it.
A summary of the three basic perspectives on these questions:
FREE MARKET Americans believe in rewarding effort, providing incentives for new economic ventures, and letting people get rich when they work at it. The best way to increase everyone's share is to make sure the economic pie keeps growing.
The income of many Americans has stagnated because overall economic growth hasn't been sufficiently rapid since the 1970s. Government actions - including heavy taxation of savings and investments, tax hikes, over-regulation of business - have been a serious obstacle to faster growth.
If government policies were changed to encourage economic growth and help businesses take advantage of recent technological advances, the United States should be able to achieve growth rates to rival those of the post-war period.
Rapid economic growth will generate new jobs and higher wages and salaries for most Americans. The free market system, long a success at providing a high standard of living for millions of Americans, is the most promising strategy.
THIS WOULD MEAN:
* Lowering taxes, especially on savings and investment. This would encourage investment in existing businesses and new ventures.
* Balancing the federal budget so government borrows less. That would make more funds available, at lower interest rates, to businesses and consumers.
* Reducing regulations.
SUPPORTING ARGUMENTS:
* The market-based system has provided thehighest standard of living in history. Why tamper with success?
* Americans think about fairness in practical terms. If you stay in school and get advanced training, you deserve to earn more. It's fair for those who save and invest and work hard to make a profit.
* Without the prospect of substantial economic gains, people would have no incentive to put time, money and energy into new ventures that are the key to an expanding economic pie.
OPPOSING ARGUMENTS:
* Economic growth is meaningless to most Americans if family income doesn't increase.
* It's unrealistic to promise growth rates that rival those of the post-war years.
* Income inequality justified in the name of efficiency and incentives has become excessive and morally indefensible.
* Getting government out of the way sounds appealing. But public expenditures on schools, training programs, and services to children are needed to make equal opportunity a reality.
FAIR SHARE Family income has stagnated largely because of economic rules that favor affluent Americans over everyone else. Top performers monopolize pay and prestige, and the rich get richer.
But most of the labor force - the people who work the machines, provide services, and keep the economy going day to day - are not sharing in the gains. According to the World Bank, income is more unevenly distributed in the United States than in any other wealthy industrial nation.
While some inequality is necessary as a spur to individual effort, excessive inequality is socially corrosive and morally wrong. Over the long run, extreme inequality will put the United States at a severe economic disadvantage. Sharp differences in income generate social unrest and economic uncertainty. To enhance economic justice andas economic efficiency, the benefits of growth must be more evenly shared.
* Making the tax structure more progressive (that is, taking more taxes from higher-income people.)
* Expanding government programs to help the poor, such as unemployment benefits and child-care payments.
* Expanding the Earned Income Tax Credit, which helps low-income workers.
* Raising the minimum wage, currently $4.25, and bolstering unions.
* Since all workers contribute to the growth of the economy, it is unfair that so few are moving ahead economically.
* Declining income for millions of Americans corrodes the nation's social welfare.
* Other nations have shown it's possible to maintain a successful capitalist system while keeping inequality in check.
* In a free market system, wages are supposed to reflect the value a worker brings to the job.
* What's most important to Americans is not equal incomes but the freedom and opportunity to succeed.
* Because official reports overlook factors such as noncash benefits and unreported income, they give a misleadingly bleak picture of low-income Americans.
* The income gap is widening in every industrial nation because of worldwide trends which we cannot control. Unskilled labor is abundant and cheap.
* Efforts to redistribute income dampen economic growth.
* Income redistribution requires a more intrusive, expansive, and expensive government than most Americans want.
EQUAL OPPORTUNITY Income stagnation is a result of our failure to prepare people to compete for good jobs. In today's labor market, job opportunities and pay increases occur mainly in highly skilled professional positions. Most youths don't have an opportunity to develop the skills they need to enter those positions. Millions of children from low- and middle-income families attend underfunded, second-rate schools. At the same time, the soaring cost of higher education has made college prohibitively expensive.
The promise of America is equal opportunity, not equal outcomes. What's needed is a greatly expanded effort to improve America's schools. Some insist educational reform does not require spending significantly more for the nation's schools. Other reform advoare convinced it will.
* Expanding child nutrition programs and expanding Head Start.
* Equalizing funding for public schools, and subsidizing the cost of higher education so that those from low- and middle-income families have an equal chance.
* Expanding training and apprenticeship programs to propel more high-school graduates into well-paid jobs.
* Reforming the schools through measures such as school choice.
* The kind of equality we should be concerned about is whether everyone has an equal opportunity to succeed. Right now, millions of American youths don't get that,
* Because of the soaring cost of higher education, many Americans are shut out of the best-paying jobs and careers.
* America wastes a lot of talent by failing to train a large part of the workforce to its potential.
* This perspective overestimates how much income inequality results from unequal educational opportunity. It underestimates the role of intelligence and ambition.
* More funds are unlikely to substantially improve the public schools. How money is spent is more important than how much.
* No matter how skilled the working population becomes, there will continue to be a large number of low-paying positions.
KEY TRENDS You don't need to be an expert or an economist to enter this discussion. But you do need to know a few facts, terms and trends:
Growth: The rate of economic growth has slowed significantly since the 1960s, when the gross national product increased more than 4 percent per year.
Productivity: Americans are producing more per worker than ever. Since 1990, productivity gains have averaged almost 2 percent per year, roughly double the rate during the 1980s.
Income distribution: Income distribution appears to have shifted toward higher-income Americans. According to the Census Bureau, income differences between the wealthiest fifth of Americans and the poorest fifth are at their highest level in 50 years. There is some disagreement about how to interpret these data.
Tax share: The wealthiest Americans pay the largest share of federal taxes. Almost 80 percent of federal taxes are paid by the wealthiest quarter of taxpayers.
The role of education: According to a Commerce Department study, the only group whose income has increased since 1973 is people with college degrees.
ABOUT THIS REPORT Citizen Voices '96 is an experiment in a different kind of political conversation called the deliberative forum. It presumes that citizens are able and want to think carefully about public problems. Forum participants must be willing to assess fairly what other people are saying, to weigh different points of view, and to think realistically about the costs and consequences of different sorts of action.
Two nonprofit organizations, the Kettering Foundation of Dayton, Ohio, and Public Agenda, of New York City, have been leaders in a movement to nurture deliberative democracy through events such as the National Issues Forums and National Issues Convention.
The materials on this page were written by Keith Melville, senior vice president of Public Agenda. The ``issues map'' is drawn from Public Agenda's magazine-length report on ``Pocketbook Pressures,'' which is used in National Issues Forums; the text is drawn from a shorter report prepared for last month's National Issues Convention.
To order a copy of this or other Public Agenda reports, call McGraw-Hill at 1-800-338-3987. For more information on National Issues Forums, call 1-800-433-7834.
PHILADELPHIA ONLINE * The full text of the Public Agenda briefing paper for the National Issues Convention is available from Philadelphia Online, The Inquirer's site on the Internet,
http://www.phillynews.com/issues/
