A Game Plan to Promote US Competitiveness

WHEN Commerce Secretary Robert Mosbacher recently called for a ``business-government partnership'' to promote an American high-definition television (HDTV) industry, the national news media started chortling. They figured that this was tantamount to an administration endorsement of a Dukakis-style ``industrial policy.'' While this clearly is not what Mr. Mosbacher intended, his comments have succeeded in giving hope to those with liberal ideas for managing the United States economy through government-industry consortiums, planning boards, and subsidies. This is, to put it mildly, unfortunate.

The notion that a handful of bureaucrats in Washington can allocate economic resources more efficiently than the millions of private individuals in the market doesn't stand up to experience - or even to just plain common sense.

While ``industrial policy'' in the statist-liberal sense simply doesn't work, it's becoming increasingly clear that the unprecedented competitive challenge from Japan, the Pacific Rim countries, and a soon-to-be-united Europe demands a US government response. We desperately need an ``industrial policy'' to increase US competitiveness, but that policy must be based on strengthening private incentives and reducing government-imposed costs on productive effort. There are important measures the US can take to promote the competitiveness of its industries without lapsing into discredited neo-statist policies. Congress should follow the following four-point program for competitiveness now:

Reject any and all new taxes. By now it should be apparent to most people that high taxes reduce productivity and impair competitiveness. Most politicians, however, view higher taxes as a means to expand politically popular spending programs. That's why the cry for more revenue continues to grow, despite the fact that total governmental tax collections are at an all-time high - $1.5 trillion. Increasing energy taxes, excise taxes, and tax rates is the current rage of the tax-hike crowd in Washington. Many revenue-hungry state governments want to violate the US Constitution by requiring out-of-state sellers to collect and remit state sales taxes.

Cut the capital-gains tax in half. Even after this cut, US tax on productive capital would remain higher than the average capital-gains tax imposed by the economies challenging the US on the competitive playing field. Many overseas competitors - including West Germany, the Netherlands, South Korea, Taiwan, and Italy - don't tax long-term capital gains at all.

There is no compelling reason for America to persist in shackling its risk-takers, savers, innovators, and entrepreneurs with such a high capital-gains tax. This tax hurts rich and poor Americans alike and prevents the US from becoming a truly competitive producer of goods and services.

Reform the product liability laws. It's time to get the tort lawyers off the backs of the US employers and out of the pockets of consumers. A recent study by the Committee for Economic Development points out that current tort laws, while enriching a few lawyers, are adding an $80 billion handicap to America's producers of wealth.

This tax on America's competitiveness prevents some new US products from ever coming into the marketplace, and hampers others with an expensive and irrational burden. Asking American industry to compete in the world marketplace with this handicap is like asking Olympic athletes to run races with trial lawyers strapped to their backs.

A fair system of product liability laws would help injured Americans, consumers, and industry alike by ensuring a fair process for adjudication of tort claims.

Repeal burdensome and anticompetitive laws and regulations. The Section 89 uniform-benefits provision is a good example of this kind of regulation, which, while well intentioned, poses an insurmountable and indefensible obstacle to US productivity. The US economy would be much better off if entrepreneurs could spend more time creating and innovating than they do filling out government paper work.

In his speech, Secretary Mosbacher made a number of these recommendations. But his point was missed by many because of the focus on the so-called ``business-government partnerships.''

On competitiveness, let's stick to the policies that have succeeded in creating current US prosperity. When you're in the Super Bowl, you can't hope to win unless you stick to the plays that got you there.