Democrats Seek to Ignite Economy

THE cold war is over, but Americans now are locked in a fight for their economic future. The battleground can be found in department stores, auto showrooms, electronics stores - anywhere people shop.

The economic war isn't going well. So, on June 30 Senate Democrats unveiled a high-technology strategy that they say will put the United States firmly back on top.

Much is at stake. Sen. Joseph Lieberman (D) of Connecticut warns that America's No. 1 position in world manufacturing may be lost to Japan by 1996 without greater action by Washington.

The Democratic plan - meant to prod President Bush into action - includes a 30-part strategy designed to create a flow of well-designed, well-built goods from American factories.

Democrats insist the cost of their plan is small compared to the benefits. Some of the programs are already being funded. But with new and expanded efforts, overall spending for the Democratic plan would grow by $2.2 billion in fiscal year 1993, and eventually rise by $5.9 billion in 1997. Much of the funding would come from defense cuts.

What caused the current crisis? Senator Lieberman, a close ally of the presumptive Democratic presidential nominee, Bill Clinton, says the problems are well-known. There is "too little investment, too little savings," he says. "We're not converting our exceptional research into products that people want to buy."

Ten years of devastating competition with Japan, Germany, and other nations have taken a harsh toll. The Democratic Policy Committee reports: "Real wages for US workers are declining for all but the upper one-fifth of the work force. America has gone from the world's greatest creditor to the world's greatest debtor nation. We continue to run a major trade deficit - $1 trillion over the last decade. The rate of savings and investment in future US productivity is lower than all of our major economic compet itors."

The US remains a leader in basic research, but fails to turn that research into top-flight products. Foreign companies now win more US patents every year than US companies.

The importance of all this is seen in the numbers. Since 1973, the productivity of American workers has grown by only 0.8 percent a year. In the previous 25 years, it grew at a rate of 2.5 percent a year. In dollar terms, if US productivity had grown in the 1970s and 1980s the way it did in earlier years, families with incomes of $35,000 today would be making $47,000.

Even in basic research, where America shines, there is danger. Sen. John Rockefeller IV (D) of West Virginia, one of the creators of the new Democratic plan, warns that, if the US stops making things, the country "will run out of money to do R&D [research and development]."

The new plan, which Democratic leaders will back strongly, could spark a major struggle between Republicans and Democrats.

By and large, Republicans are bitterly opposed to most kinds of "industrial policy," in which government and industry combine to pick winners and losers. Republicans argue that it isn't the job of bureaucrats to decide whether more should be invested in commercializing electronic toys, personal computers, or any other products. That is a job for private enterprise, they say.

Yet Japan's government does work closely with its industries to target specific products, such as autos and computer chips. The result is a one-two punch, backed by government funds, which has hurt many American manufacturers, including giants like IBM and General Motors.

The Democrats don't endorse Japan's system. But they suggest a modified plan which will be directed at five areas needing help to produce better goods. They include applied research, commercialization, manufacturing processes, education of the work force, and trade promotion.

The Democratic plan includes 30 government programs, including 10 new ones, and 20 current programs that would be enhanced. The need for better commercializing is obvious. For example, the US invented the video cassette recorder. Yet it was the Japanese who developed better manufacturing processes and made the VCR a huge commercial success.

Sen. Jeff Bingaman (D) of New Mexico says that the government needs new ways of thinking about these things.

In the past, it was assumed that if Washington helped fund the research, business would take care of exploiting the products that came from that research.

"That's clearly not true any more," Senator Bingaman says. "We're up against other countries which have very explicit policies of helping their own industries succeed in the commercialization of technology. Our own government needs to step up and do some of those same things."

Senator Rockefeller concedes that "there's no silver bullet" that will solve all these problems overnight. But he says developing a coherent plan, which touches all five areas needed to succeed commercially, can make a difference.

For example, Rockefeller quotes experts who say there are 25 critical technologies needed for economic success in the 21st century. "We're not going anywhere without ... these things," he says. "But are we going to do anything about it [without something like the Democratic plan]? Basically not, outside of the military."

Democrats insist this isn't just throwing money at problems. The strategy calls for competition, cost-sharing, and other devices to get a big bang for the buck.

The Democratic strategy has four major parts: Use government funds as a catalyst for private sector research; direct government help toward industries engaged in international competition; make sure US trading rights are protected; and increase assistance to education and training of tomorrow's work force.