The small, clean, cool, quiet world of the microchip has made Northern California's "Silicon Valley" a symbol of America rearing to "go for it." But Pennsylvania's Monongahela Valley -- the hot, muscular world of blast furnaces -- is not yet gone. Not yet.
Pittsburgh was recently rated first among America's 329 metropolitan areas as the best place to live. The air is now clean because so many smokestacks are cold, and the largest employer is not U.S. Steel; it is the University of Pittsburgh. The transformation of Pittsburgh is a tribute to the suppleness of American society. But in the mean streets of Braddock just outside Pittsburgh, you see the weary flesh and blank faces of the people who are casualties of the wrenching readjustment -- the poor, who break when more supple people merely bend.
The steel region is no stranger to suffering. William Manchester says that in 1934 the average steelworker toiled in dangerous settings to earn $369 -- a year, supporting six people. When the movie "Modern Times" came to Pittsburgh, "blue-collar audiences did not laugh at Charlie Chaplin's parody of a workman's five-minute break, in which his hands continued to mime the machinery at first and then slowed down just long enough to allow him to grab a glass of water."
Today, Social Darwinists, living in cocoons of abstractions, say, with icy complacency, that the United Steelworkers union did its work too well, pricing labor, and hence American steel, out of competition. There is a bit of truth to that, but it takes a tougher moralist than I to lament the physical safety and economic gains the USW brought to workers in the Mon Valley.
Besides, the steel industry's primary problem is that it is competing not with foreign corporations similarly disciplined by market forces, but with foreign governments that have flooded the world with excess capacity and are running nationalized steel plants as jobs programs. For Americans too young to have experienced the Depression -- most of us -- this valley is a stunning classroom in which to learn about the death of the spirit that follows the death of industries.
Here in Braddock, a slimmed-down labor force in a modernized plant is making steel in a drama of fire and sweat that any American could profit from watching. But the plant is an island of wholesome roar in an ocean of deadly silence, an ocean of idled humanity that laps up to the plant gate. Much of American industry is back and standing tall, but steel is flat on its back, woozy and worried that the tax-reform plan will deliver another roundhouse punch.
How big America's steel industry should be is debatable, but the need for an efficient core of that industry is not. American steelmakers can compete if, but only if, they modernize their plants. The tax proposal would make such investment less attractive. The plan would lower rates for individuals and raise revenues from businesses even while lowering the business tax rate from 46 to 33 percent.
It would manage that by (among other things) repealing the investment tax credit and making depreciation schedules less generous than those in many other industrial nations. This would raise production costs and diminish U.S. relative productivity in heavy-investment industries at a moment when the strong dollar is handicapping U.S. companies in international competition.
The federal tax code collects approximately one-fifth of GNP -- one of every five dollars generated by the economy of this complex industrial nation. Such a code cannot help but embody an industrial policy. Under the president's plan, the increase in the tax burden on those industries that demand constant heavy capital purchases, such as the steel and auto industries, would help pay also for a three-year extension of the research and development tax credit, and a cut in the maximum capital-gains rate. These are boons to venture capitalists and the high- technology industries they currently favor. Under the tax plan as proposed, Ronald Reagan's hard-charging yuppie entrepreneurs would do better than Lane Kirkland's struggling blue-collar manufacturing workers. But many Democrats know that the rising blight of rust is ruining their neighborhoods. So before concluding that the tax treatment of business -- the Reagan industrial policy -- is settled, remember:
Rep. Dan Rostenkowski, chairman of the House Ways and Means Committee, is as Democratic as is his hometown (Chicago). And he resembles a yuppie about as much as Pittsburgh's Iron City beer resembles Perrier.