At Least Perot's Plan Was Courageous

Ross Perot may have abruptly quit the political stage in this bizarre election year, but his iconoclastic legacy lives on. His economic plan to balance the budget would have dared the American people to see the truth about the sacrifices they have to make to reduce, once and for all, the nation's humongous federal budget deficit, which has been growing nonstop at an alarming rate since 1982. But can they face the necessity of capping spending on entitlements and raising taxes on gasoline?

So far, the country has pretended that the evil twins, deficit and debt, didn't matter very much. The inability to jump-start this sputtering recovery and the continued rise of unemployment may finally change that. The deficit has such a tight stranglehold on fiscal policy that any whisper of increased government spending to spur the economyeven on needed infrastructure investments such as roads and bridgeswill send long-term interest rates higher, choking off the recovery. The very size of the deficit is already keeping real long rates at historically high levels. If the deficit were $150 billion and trending down, instead of $350 billion, 30-year mortage rates would be closer to 5 1/2% than 8%, and the bank prime would probably be at 4% rather than 6%. You want growth? That will give you growth.

Both President Bush and would-be President Clinton have avoided the deficit issue. Clinton's program properly emphasizes investing in human and physical capital to build a more globally competitive economy. The Republicans will soon be heard from. Yet so far neither has had the courage to embrace the brutal truth--America can't really grow without solving its deficit-and-debt legacy of the 1980s. And that will require sacrifice from all of us.

Before it's here, it's on the Bloomberg Terminal.