Avoid Rendell's mis'Ed'ucation About Our Future

Posted: Jan 26, 2006 3:21 PM

WASHINGTON -- Gov. Ed Rendell of Pennsylvania came here last week to offer a deeply pessimistic report on the state of the union. The facts, however, suggest otherwise.

America was losing its competitive edge in the world in just about every sector imaginable, the states were being forced to make deep budget cuts because they did not have enough revenue or federal assistance, largely due to President Bush's tax cuts, and all "the trend lines are getting worse," said the finance chairman of the Democratic Governors Association.

There didn't seem to be anything that was the bright, uplifting or optimistic in the picture of the nation's economic future Rendell painted at a news conference at the National Press Club.

We were losing our edge in global trade -- to China and other emerging economies. We were facing failure in technological innovations in a world where other countries were producing far more science, engineering and math graduates than we were. We remained behind just about all the other industrialized nations of the world in student test scores. We were falling behind on everything.

It was a starkly different picture than the one President Bush is expected to present to the nation in his State of the Union address Tuesday night. But Rendell's message that "America is losing its edge" in the world is the Democrats' latest attempt to convince voters that the United States is in decline, and the only thing that will pull us out of this spiral is more spending, paid for of course with higher taxes.

But let's take some of Rendell's America-Is-Falling-Into-The-Abyss trend lines one at a time:

He says state revenues have been drying up and the governors have been forced to make draconian cuts at every level of government.

In fact, the economic expansion has produced a windfall in higher tax revenue for the federal government (nearly $100 billion more than was expected last year) and for the states, too.

A study for the Cato Institute by tax policy analyst Chris Edwards said last week that state and local tax revenues have soared in the last two years.

State tax revenues increased 8.7 percent in 2004 and an estimated 8.0 percent last year, according to the Cato study.

Local tax revenues, driven up by a booming housing sector, rose 7.3 percent in 2004 and an estimated 7.1 percent in 2005. All these revenue numbers are based on data from the U.S. Bureau of the Census. So Rendell's poor mouthing of the states' fiscal picture isn't true.

On trade, Rendell had nothing good to say about America's remarkable performance in the global economy, focusing myopically on trade deficits, but ignoring expanding U.S. exports throughout the world. We sold more than $1 trillion worth of goods and services abroad in 2004, and last year's figures may well exceed that level.

Surely a country's sales abroad are a major measurement of whether it is competitive and U.S. exports have been growing, not shrinking. Boeing is selling more planes, Intel is selling more computer chips.

Yes, the trade deficit has risen, but that is more a reflection of growing U.S. affluence and, in part, weaker consumer economies elsewhere in the world. We buy a lot of imports because we are a rich nation, but we also import a lot, too, especially at the lower end of the consumer price scale. This is not a negative. It helps Americans save money so they have more to spend on other things.

Rendell kept comparing the U.S. economy to all the other industrialized nations of the world, but he did not compare numbers that show the United States was growing faster than any of them -- by far. The U.S. economy grew by 4 percent in the third quarter in 2005. Europe was growing by little more than 1 percent. Our gross domestic product since Bush took office has soared from about $10 trillion a year to nearly $12 trillion.

Our unemployment rate is at 4.9 percent, below average over the last 30 years. Europe's permanent jobless rate has remained stuck at more than 9 percent for many years.

As for losing the competitive edge technologically, it is hard to think of any new breakthrough technology in Europe in the last several years, or in the Pacific Rim countries, while we have been on the cutting edge in a number of new generation high tech inventions and products. Microsoft's Windows is still driving most of the world's PCs.

The U.S. economy, which is intensely competitive, remains the envy of the industrialized world at just about every level, but that isn't the country that Ed Rendell sees in his politically-driven assessment of America's future.

It is a world view that is sharply at odds with the latest U.S. consumer confidence polls which reflect a growing belief that America's greatest days are still ahead of us.