IT IS 1984 and Walter Mondale is running for president against Ronald Reagan. We are at a rally -- maybe it was an airport stop -- and Mondale has launched into his stump speech. Mondale, to Reagan's sheer glee, is calling once again for a tax increase and says we are saddling our grandchildren with an unconscionable burden. I turn my back on the rally and start to walk to the press plane. Who cares about our grandchildren, I think to myself. They haven't done anything for us.
Now, though, I am fiscally what I could never be biologically: my own grandchild. I am being asked to pay some $500 billion to rescue savings and loans. The Medicaid program for sick indigents is a mess. The education system works to no one's satisfaction. The nation's infrastructure is crumbling. We have an infant mortality rate that's higher -- and a life expectancy that's lower -- than almost any Western nation. In addition, the government is deeply in debt and so undermanned that certain agencies look like East German villages after the Wall came down: no one left but those nearing retirement.
How did this happen? Well, the immediate answer is Ronald Reagan, president of the United States for eight years and a fervent believer in something called supply-side economics. If taxes were cut and defense spending raised, the government could, in almost no time at all, balance its books. Aside from the editorial board of The Wall Street Journal, almost no one took Reagan seriously, including, of course, George Bush, then seeking the GOP presidential nomination himself. But in a sea of skeptics, one notable fish swallowed the bait: the voters. We believed.
And why not? Here was someone saying that he would cut taxes and -- don't ask how -- the government would take in even more money. This was something marvelous, like safe sex or non-fattening chocolate -- a fiscal plan out of late-night cable TV, hawked by someone not only self-evidently sincere but with unimpeachable credentials: governor of California, Republican presidential candidate and then president. Reagan held out the blank for a monstrous MasterCard and we signed. Oh, the goodies we got.
But consider. Think of the government as a house. You bought it 15 years ago for $100,000. It's now worth $300,000. In addition to what you've already paid off, you've got another $200,000 in equity. You can borrow on it. You can fix up the house so it's worth even more or maybe not touch your equity and use the money to send your kids to college. But instead you borrow and buy a car and a pool. You take some vacations and purchase oodles of things made in Japan or Germany. Pretty soon the money's gone. Your kid can't go to college. Your house is in need of repair. That's what we did as a nation. Back in 1956, John F. Kennedy published "Profiles in Courage." It was about American politicians who risked their careers to do what they thought was right. A book written about the current crop of American politicians would have to be called "Profiles in Profiles." What you would have is descriptions of public figures who never looked their constituents in the eye, full-face, and told them the truth: The government is taking in too little money, spending too much money and mortgaging the house to do it all. The mortgage is called the national debt and it grew during the Reagan years more than it did in all the years of our national history before Reagan.
It could be argued that these politicians fooled us. Nonsense. That, as Marion Barry has said in a different context, is the disease talking -- the disease of thinking we can get something for nothing. The truth is that we've been fooling ourselves. At one and the same time we've said it's okay with us if the bloated, incompetent, ever-leeching government is shrunk -- but don't touch Social Security, Medicaid, Medicare, roads, education and even -- may God forgive me -- the IRS. I mean, if I pay taxes, why shouldn't everyone else?
But from 1978 to 1987, the proportion of tax returns the IRS annually audits dropped nearly by half. That means the government is not collecting the money it ought to. The same penny-wise and pound-foolish approach contributed to the scandals at the Department of Housing and Urban Development. During the Reagan years, some 4,000 people -- some of them the very people who monitored the troubled programs -- were lopped from its payroll for, one presumes, a nifty savings. Whatever that savings was, to be real it would have to be greater than $2 billion -- about what was lost through fraud and abuse in mortgage rehabilitation and insurance programs.
In fact, you can take almost any agency of government and find -- with two exceptions -- that they were simply forced to shirk their responsibilities. The two exceptions are Justice and Defense. The former expanded to make war on drugs and the latter to make war on just about anything that moved. Elsewhere, though, the growth in the federal budget went to cover the cost of entitlement programs for the elderly and disabled, the very ones Americans have come to cherish with about the same passion they reserve for keeping taxes low. What that means is that greater and greater amounts of money are being expended by agencies that have fewer and fewer people to monitor their programs. This, as any savings and loan gonif will concede, is a prescription for disaster.
Behind any crackpot program is a crackpot idea that, often, is gussied up in the glad rags of scientific terminology. Reaganism was mostly animated by a loathing of government and taxes and was based on Reagan once having found himself in the since-vanished 90 percent marginal tax bracket. But simply to say "my money is mine" is not an ideology because, among other things, it does not lend itself to the drawing of graphs. It simply smacks of selfishness. So a theory was concocted and it held that the public sector is not only non-productive, but a drain on the rest of society. The private sector (rah! rah!) is where all wealth is created. Let's starve the former to feed the latter. Now, for sure, the private sector does create wealth. But so does the public sector. Immigration, for instance, can be seen as the simple movement of peoples from one country to another or as a transfer of wealth. A person is a repository of training and knowledge. The country that has educated that person, even poorly, has made an investment. When that person ups and leaves, his new country reaps the benefit of another country's investment.
So what kind of investment have we been making in our own people? Education critics, a term that is fast becoming a redundancy, have many ways of measuring our shortcomings, but the market is crassly precise. The value of a person is determined by what he or she can earn. In 1989 that figure was about the same as in 1961 -- and had declined significantly from its peak in the early 1970s. Wages decline for many reasons, but one of them, surely, is that workers who are poorly educated or trained simply are not worth all that much. In constant dollars, they were worth about $5.38 an hour in 1973; in 1988, they were worth about 54 cents less.
The same argument can be made when it comes to infrastructure. At the moment, the Bush administration has conceded what any traveler already knows: Things are a mess. Whether we're talking airport congestion, an inadequate air traffic control system or aging and overwhelmed highways, it's clear that much has to be done. Most of us think of a traffic jam as an inconvenience. It's that, for sure, but it's something else as well: lost productivity. A salesman stuck in an airport lounge or a truck-full of goods stuck on the highway is simply not making money for anyone.
Infrastructure, too, is an investment -- an investment that the federal government has not been making. The Bush administration has a plan of sorts to deal with this problem: It's told the states to do something. The federal government -- the chief highway builder of the past -- has passed the buck. The states have been told to shoulder the burden -- as if the term interstate highways did not in itself suggest that the problem, and its solution, are national in nature. This is no way to create wealth.
Economists of differing ideologies may quibble with these arguments, but few of them would reject them outright. Nor would most politicians. And yet, few of them have had the guts to simply state the problem and recommend solutions. Instead, Congress and the administration go through an annual charade in which, like a Stalin-era show trial, a legitimate format is used to produce an illegitimate outcome. For instance, last year Congress went though great, but mock, agony to produce a budget that was only $100 billion in the red -- the Gramm-Rudman ceiling. What happened? Well, the actual deficit for fiscal year 1990 may well reach $203 billion.
For the next fiscal year, the Gramm-Rudman target is a $64 billion deficit. (Please remember, we're talking deficits.) For the Bush administration, this presented no problem. It came up with a budget based on the most optimistic of projections -- low interest rates, high corporate profits, a scenario so rosy it might well have included the discovery of Captain Kidd's treasure in Richard Darman's backyard. Only recently did the administration own up to its miscalculations. Ye Gods -- the Congressional Budget Office, private economists and everyone else in the world was right! Corporate profits were much lower. Interest rates were much higher. The president acted and called a budget summit at which he announced his firm intention to meet the problem head on by not going on television and not telling the American people that, well, taxes might have to be raised. Read his lips? Not any more. They're not even moving.
If nature abhors a vacuum, then Washington abhors the word lie. We talk, instead, of bad forecasting, duplicity or plain ol' politics. But call it what you want, the fact remains that for too long the American people have been told that government doesn't matter, what it does is non-productive, that taxes don't have to be raised -- and that, in short, the bill never comes due. Back in 1984, Walter Mondale's insistence that the facts were otherwise might have cost him the election. He's not alone. It's cost the rest of us something, too.
Richard Cohen is a Washington Post columnist.