Jeff Faux, president of a Washington think tank for liberal economists, tells the story of a lunch he recently had with the vice president of a Fortune 500 company. The subject of the luncheon was trade policy, but the executive had something else on his mind.
"I think it's time for socialized medicine, don't you?" he blurted out.
Never mind that almost no one uses the term "socialized medicine" anymore. Faux's lunch guest was giving voice to the business community's new thinking about Washington.
Whether it's the $500 per automobile that Detroit says it spends on an inefficient health care system, the $25 billion a year corporations say they spend in remedial education for their employees or the untold billions in productivity lost to crumbling bridges, aging highways and crowded airports, the private sector has swung around to the view that the long-term performance of the U.S. economy is inextricably bound to investments that must now be made by the public sector.
A decade ago, this was blasphemy. When Ronald Reagan was sworn in on Jan. 20, 1981, all business wanted from government was that it get out of the way. Ten years of diminished global market share, backsliding educational performance and declining leads in productivity have changed a lot of minds.
"As recently as a few years ago, if you talked to business groups about a greater government role in, say, skills training or technology policy, you ran into real hostility," said Ira Magaziner, an international business consultant who has written and lectured widely on competitiveness. "Now, you have business people clamoring for it."
But if there's a new business axiom about the role government must play in spurring economic growth, it's shadowed by an old corollary: Washington is still seen as the gang that can't shoot straight.
"Ever since Vietnam and Watergate, there has been a sense that government is at best inept and at worst corrupt, and I don't see that changing," Magaziner said.
"There's certainly a lot of skepticism about whether the Congress is capable of making long-term decisions because it is so tied to special interests," agreed Kay Whitmore, chairman and chief executive of Eastman Kodak Co. "People think that the money they send to Washington is being squandered. It's one reason we don't tax ourselves to the level other countries do, even though a rational person can see we have needs that aren't being met."
"Our big problem is that we lack visionary leadership in all the key positions in government," said William J. Spencer, president and chief executive of Sematech, an Austin, Tex.-based high-technology research consortium funded by government and private companies. "If you look at what's fueling economic growth in the Pacific Rim and in Europe, it's an alliance between business, industry and the government. Here, there is a lot of mistrust that everyone has for everyone else."
This prevailing sense of political gridlock stems from various economic and political forces: 20 years of relatively little improvement in the standard of living for most Americans has made middle-class Americans feel poor and over-taxed; the partisan division between the branches of government has increased the bickering and diminished accountability in the public realm; cultural divisions on matters of race and morality have undermined consensus on matters of taxing and spending; and election campaigns in the media age have rewarded character attacks and trivialized political discourse.
All these forces were on full display in the last presidential campaign. One opinion poll after another showed that competitiveness issues were very much on voters' minds in 1988, and that there was broad public support for domestic investments that would strengthen the economy over the long term. But with the brief exception of Rep. Richard Gephardt (D-Mo.), no presidential hopeful in either party made much of a dent with these issues. The two finalists -- George Bush and Michael Dukakis -- shied away from them altogether. Their contest was waged over values and personalities.
"If all we accomplish in our presidential campaigns is to agree that we are against crime and for the flag, you don't create a political climate conducive to making long-term investments," said Kent H. Hughes, president of the Council on Competitiveness, a consortium of leaders from business, labor and academia based in Washington.
Even as president, Bush's long-term economic agenda has been hard to discern. On most domestic issues, he seems content to govern as an "in-box president," responding to the crisis of the moment.
But, said Hughes, "one of the things that's tough about the competitiveness agenda is that it's a 'no-crisis' crisis. There are no soup lines, no Pearl Harbor, no Sputnik."
A Web of Challenges "The trouble with the competitiveness issue is that you can't just send 400,000 troops into California and solve it," agreed Spencer at Sematech. "It involves a whole web of political, social, economic, management and technology challenges."
Many members of Congress would like to tackle some of these challenges, but Whitmore believes they are thwarted by an increasing addiction to special interest politics and special interest money. "It makes it awfully hard to do things for the greater good," he said. "For example, everybody knows there has to be some sort of cap on entitlements," benefits such as Social Security, Medicare and veterans pensions, "but the political system can't seem to come to terms with that."
Other critics note that in an era of cynical voters and attack politics, elected officials have grown risk-averse -- wary of pursuing any policy that does not have a short-term political payoff.
"The paradox of American politics is that at a time when reelection rates are the highest in history, political courage is harder to find than ever," said Fred Wertheimer, president of Common Cause, a Washington-based public interest group. "It was supposed to be that if incumbents felt safe, they'd display more courage."
"What we have is a whole set of politicians who dare to be cautious," said Don Sipple, a Republican media consultant in Washington. "In the politics of the 1980s, the rules changed. You got more and more people in government who got elected by beating the hell out of an opponent on a given vote. That leaves them in a box. Since they did it to someone, they understand how it can be done to them. It has a chilling effect. They tend to look at votes and ask, 'What kind of 30-second spot can be made out of this?' "
Privately, many politicians throw some blame back at their constituents. Voters, they say, want both high service and low taxes, and this "free lunch" psychology lies behind a unique feature of late 20th-century American governance: an unprecedented stretch of partisan division between the executive and legislative branches. "We elect Democrats to Congress to give us stuff," Richmond Times columnist Charles McDowell once quipped, "and Republicans to the White House to make sure we won't have to pay for it."
Politicians say it's difficult to govern when levels of cynicism are rampant. "As a society, we don't trust anybody anymore," said Rep. Al Swift (D-Wash.). "All the priests you don't know are hypocrites, all the teachers you don't know are incompetent, all the politicians you don't know are corrupt. There is an enormous belief that none of our institutions is working."
Economy to Blame? While the blame game goes round and round, some scholars believe that the real culprit is in the economy, not the political system.
"Our problems have much more to do with 'high politics' -- big changes in the economy -- than with 'low politics' -- the way the election game is played," said Thomas Mann, director of government studies at Brookings Institution in Washington. "For 30 years before the early 1970s, we had regular and sustained economic growth, and that created a kind of politics where the choices were all painless. Now we have just the reverse and none of the choices is painless."
To make matters worse, there has been the heavy accumulation of deficits and debt over the past decade, creating a political mind-set that the cash register is empty. "The real trouble with the debt is that it has stopped political thought," said Faux, president of the Economic Policy Institute, which advocates greater public sector investment.
What are the prospects that government will break out of its current gridlock so that competitiveness issues will be debated as seriously and expeditiously as, say, the war in the Persian Gulf?
In recent years, progress has come in fits and starts. For every Sematech -- the government-funded research consortium charged with helping the nation regain a lead in computer-chip technology -- there is a high-definition television, a key emerging technology into which the Japanese and German governments are pouring 10 to 20 times more public dollars than is the U.S. government.
"Even though more people realize our public sector has to get more involved, industrial policy is still a four-letter word to lots of business people and government officials," said William Archey, international vice president of the U.S. Chamber of Commerce, based in Washington.
Archey said one problem is that government investments alone cannot cure what impinges on the long-term health of the U.S. economy. He said he believes broad changes are needed in what the culture values.
"Every message our society has sent to teachers for the past generation is that we don't value them. Is it any surprise that the students who graduate in the bottom of their classes are the ones who wind up going into teaching?" he asked.
"By the same token, we're the only society in the world which says to a high school graduate who doesn't plan to go on to college, 'So long. See you later. Let us know if it works out all right.' Germany's economic growth has been fueled by an apprenticeship program that creates a highly skilled blue-collar work force. Somehow, we have to change the status of work here."
Archey said he believes that changes of this sort will come about only if politicians start talking more about U.S. competitiveness and the actions government can take to strengthen it. Despite all of the attention now riveted on the Persian Gulf, he believes this might happen in 1992.
"The reason, in a word, is fear," he said. "Business people who have to compete day in and day out in the global market know what's going on, and they're scared. They're way ahead of the politicians. So are the voters. By 1992, for the first time in my adult lifetime, I think we are going to have a presidential campaign about economic competitiveness."
Focusing Debate The war in the Persian Gulf may actually help focus such a debate on the domestic economy. The surge in national self-esteem so many Americans expressed in the opening days of the war, after all, have been prompted by TV pictures of laser-guided bombs slithering into doorways and air vents of Iraqi military installations -- products made in America and developed as part of an active, ongoing collaboration between industry and government.
"We invested $2.3 trillion in the defense industry in the past decade and we're seeing the payoff," said Rep. Mike Synar (D-Okla.). "You put that much money into trying to make our economy competitive with Japan and Germany and imagine what results you can get. I'm looking forward to having that debate as soon as the shooting stops."
When the shooting stops, it's likely the United States will still be in a recession, perhaps compounded by a record federal budget deficit. But maybe, said Synar, it also will have inherited an antidote: a sense of common purpose Americans haven't felt in decades.