GOP ECONOMICS
July 28, 2000

Gov. George Bush's economic adviser explains how the GOP economic plan will help Philadelphia, site of the Republican Convention.

Online Special: GOP Convention 2000 Online Special: Election 2000 July 27, 2000: Protestors plan their actions at the conventions. July 26, 2000: Dick Cheney's record July 25, 2000: Shields and Gigot on the Cheney Choice. July 24, 2000: Courting the Latino vote. July 21, 2000: A look at the so-called Veepstakes. July 7, 2000: A look at Vice President Al Gore's education record. July 6, 2000: A look at Texas Gov. George W. Bush's education record. June 26, 2000: The Green Party nominates Ralph Nader. April 27, 2000: Texas Governor George W. Bush. March 14, 2000: Vice President Al Gore Browse the NewsHour's coverage of politics Full NewsHour coverage of Law	PAUL SOLMAN: In Philadelphia next week, the Republican convention. And four days before the opening gavel, there was ample evidence of the party's high hopes for the election. The question: Will the GOP's ideas fly in the fall, especially the party's slogan this year: Prosperity with a purpose. So we began our day with George W. Bush's economic advisor Lawrence Lindsey by asking, hasn't there been prosperity and economic growth with Democrats in the White House? LAWRENCE LINDSEY: Sure, the private sector is booming, and the question is what have we done with that prosperity? You know, is our education system better than it was eight years ago? I don't think so. In Social Security better off? No, the trustees said it's $1.4 trillion more broke than it was when they took office. Is Medicare working better now than it was eight years ago? I don't think so. So if you think about the things the public sector is responsible for, we're worse off. The private economy is doing great. Business is doing great, but we squandered that prosperity.
	Fixing Social Security
	PAUL SOLMAN: Lindsey set out to illustrate the Republican economic plan on a tour of this year's convention city, starting with the Bush fix for Social Security -- individuals investing roughly a sixth of their Social Security tax in the stock market. So first stop, the Philadelphia Stock Exchange. LAWRENCE LINDSEY: I think this is a good change to illustrate the need for personal accounts in Social Security, to give all Americans a piece of American capitalism. But more important, it's a way of fixing the Social Security system. Money is temporarily flowing into that system. And right now that money is earning only about 2% after inflation. Stocks, historically, since the last century, have earned about 7%. PAUL SOLMAN: But a lot of finance professor particularly today from your own academic profession say the stock market is historically way high, and, therefore, if we're putting our money into the stock market when it's high, we're buying high and looking to pay the piper when it goes down. LAWRENCE LINDSEY: Well I looked into that. If you were to... if you have personal accounts in 1980 and you were to have put the same amount of money into the stock market each year for the last 20 years and tomorrow the stock market was cut in half, you would still be getting a return four times higher than what Social Security is giving you, even if the stock market was cut in half tomorrow. PAUL SOLMAN: But don't Democrats have a similar proposal, we asked, and at lower cost, since government will do the investing instead of brokers who charge commissions and thus have an incentive to get people to trade? LAWRENCE LINDSEY: I think the key thing is that individuals should make the decision. And we could have something like the federal thrift savings plan where individuals own the stocks; it's a very low cost plan. What the Democrats want to do is they want to have the government buy up the stock market. Under Gore's plan, 25% of the economy could be owned by the government.
	Tax cuts
	PAUL SOLMAN: Lindsey's theme -- individuals, not government -- continued as we headed to the next stop as well. In an area where they worry more about pest control than their portfolios, the once ritzy Broad Street Trust Bank is now being redeveloped by the Greater Exodus Baptist Church as a credit union and computer training center for welfare moms. LAWRENCE LINDSEY: How much do your graduates make when they get out of here? REV. HERBERT HOOVER LUSK II: Anywhere between $30,000 to $40,000 a year. LAWRENCE LINDSEY: Wow, that's a good job. REV. HERBERT HOOVER LUSK II: It certainly is. PAUL SOLMAN: A good job coming off welfare. But, says Lindsey, the job would be better if Bush were President because he would cut taxes so that graduates of this program would keep a lot more of their money. LAWRENCE LINDSEY: Under current tax law, these women, who are making $30,000 to $40,000 have half their raise taken by the government when they go out and work on these jobs. PAUL SOLMAN: How could it be? They're not in the 50% bracket. LAWRENCE LINDSEY: Well, if you add everything up, they are. There's an earned income credit that takes 21 cents out of every additional dollar. PAUL SOLMAN: And they lose it? LAWRENCE LINDSEY: And they lose it. PAUL SOLMAN: I see. LAWRENCE LINDSEY: There's a 15% federal income tax rate. There's a 7.65% Social Security tax. There's a 5% state income tax, 21, 21, 7.5 you're up to 48.6, or something like that. PAUL SOLMAN: Of every extra dollar they'd be making coming out of this. LAWRENCE LINDSEY: Coming out of this program -- is taken from them in taxes. They're paying a higher tax rate than you and I are. PAUL SOLMAN: Reverend Herbert Hoover Lusk, a former pro-football running, thinks tax cuts that make work more appealing than government transfers, would help the community. REV. HERBERT HOOVER LUSK II: Self-help is the way that our people should go. I'm very, very interested in our people pulling themselves up from their own bootstraps and not being shackled by welfare programs that keep them in a vicious cycle of looking for a check. PAUL SOLMAN: And so you think that Governor Bush in that sense and his proposals will more nearly benefit a community like this? REV. HERBERT HOOVER LUSK II: They more reflect my philosophy of life for the people that I serve. PAUL SOLMAN: For all its emphasis on low-income taxpayers, however, the Bush plan also benefits the well off, which prompted a question. Why give any tax break at all to people who have already done so bounteously well in this economy, such as yourself and myself, people in our sector of the economy? LAWRENCE LINDSEY: Well, I think whenever you share half of your income with Uncle Sam -- and you may be and I am -- that is demoralizing. I mean, the question is do you work for yourself or do you work for the government? At some point we have to draw the line. And what Governor Bush is establishing for high-income people is a principle. Nobody should give more than a third of what they make to Uncle Sam -- 33% top rate. Four months out of the year is enough.
	Improving schools
	PAUL SOLMAN: Another key aspect of Republican economics this year, improve America's human capital, the skills of our people, by improving schools through competition. Reverend Lusk is starting a new charter school down the block from his church. This summer he is running a day camp, in recess at the moment, which teaches business, among other things. Shiron Smith reenacted what had she has learn thus far about banking. SHIRON SMITH: Come get my money out. Is say "can I please have my money out." They say "yes." I take my money and I go right back home. PAUL SOLMAN: And it's more money than you used to have? SHIRON SMITH: Yeah. It's more money. PAUL SOLMAN: Because the money grew while it was in the bank? SHIRON SMITH: Yes. You get more money... PAUL SOLMAN: If you put it in the bank. Is that a good thing? SHIRON SMITH: Yeah, that's a good thing. PAUL SOLMAN: So you're learning stuff like that. SHIRON SMITH: Yeah. PAUL SOLMAN: The Republican plan is to force public schools to do similarly effective teaching. LAWRENCE LINDSEY: What Governor Bush is insisting that they have three years to improve the local public school. If the school can't do it, the money goes to the parents so they can send their children to the local charter school or to another school of their choice. PAUL SOLMAN: My sister has taught in the LA schools for about 25 years now, pre-k, and she says when I bring up the idea of school choice, hey, look, what you're going to do is take out, cherry pick the most astute parents who will send their kids to the better schools, perhaps, but you'll leave the parents who don't speak English, who don't know any better, and their kids stuck in an even more ghettoized school. LAWRENCE LINDSEY: Well, with all respect to your sister, what she is saying is we should lock the astute parents and their students in failing schools. That's got to be unfair. PAUL SOLMAN: But don't you worry about the idea of a sort of an even more concentrated what we used to call ghetto? LAWRENCE LINDSEY: I'd like to see every student get out. And any student that can, I think is better off. Probably the Reverend has a view on this as well. REVEREND HERBERT HOOVER LUSK II: There will be people who will be hurt in the beginning, however that's why we have community organizations that fill in the gap and who meet the needs of those people and help them make their ministries and resources to get to the people who will be affected by this. PAUL SOLMAN: And your idea is let's bolster those community organizations. LAWRENCE LINDSEY: Absolutely. Governor Bush is pushing the idea that faith-based institutions are the best people to deliver public services. If you actually know the people involved, you know how to help them, not if you're some faceless bureaucrat in Washington.
	Rehabilitating inner city housing
	PAUL SOLMAN: Lindsey's last stop was not far from Reverend Lusk's church -- a low-income neighborhood rehabbed by a group that gets government money to help individuals rescue neighborhoods house by house. LAWRENCE LINDSEY: In this rehabilitation project, the rehabbers acquired the buildings from the Housing and Urban Development, the government that used to own it. Crack addicts were living in there, in spite of the fact that government owned it for four years, right across the street from a school. The rehabbers bought it, they sold it to a policeman; the policeman, as a result, has changed the whole character of the neighborhood. And you can see what they've done all the way down the street. PAUL SOLMAN: The idea: transform the eyesores and you change the face and spirit of the neighborhood. LAWRENCE LINDSEY: What Governor Bush is proposing is first of all to help rehab $1.5 billion a year that states will be able to give to people who do things like this -- and second of all, to provide down payment assistance to buyers so that people like the policeman can move in up on the corner. PAUL SOLMAN: As if on cue, one of the new owners of the former crack house emerged while we were talking. CATHERINE CARTER: With more homeowners, people are interested in keeping up their neighborhoods when they own their own homes. That's the first thing. Give them homes to own, and they'll keep the neighborhoods up. PAUL SOLMAN: Do you think that's a Republican or Democratic policy? CATHERINE CARTER: I think it's probably some of both, some of both. PAUL SOLMAN: And you? LAWRENCE LINDSEY: Well, I'm biased. I think it's Republican, but... What can I say? PAUL SOLMAN: We'd reached the end of our tour. And after spending so much time being taken through neighborhoods far from the strong holds of Republicanism, we had one final question for Governor Bush's economic advisor Lawrence Lindsey. PAUL SOLMAN: Throughout the day here, you've been touting policies that I would have, perhaps naively, described as traditionally Democratic or Democrat policies because their intervention is to help solve social problems. What am I missing? LAWRENCE LINDSEY: What the difference is is how well money is spent. The Democrats came in and said "Great Society." They bulldozed many neighborhoods like this one and put up giant high-rises, which are today unlivable. That's the Democrat response: Big government, big projects, big jobs. PAUL SOLMAN: But that is the traditional Democrat approach of the 50s and 60s … LAWRENCE LINDSEY: 70s... 80s. PAUL SOLMAN: But not 90s. Not the Clinton-Gore approach of smaller government, more responsive government, at least certainly that's what they talk about. LAWRENCE LINDSEY: Well, if a Republican Congress can turn them around, imagine what we can do with both a Republican Congress and Republican administration. PAUL SOLMAN: And, at the end of the day, that's what the Republicans will be trying to convince voters of from now until November.

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