- The Washington Times - Sunday, January 29, 2006

Pennsylvania Gov. Ed Rendell came to Washington last week to offer a deeply pessimistic report on the state of the Union. The facts, however, suggest otherwise.

America was losing its competitive edge in the world in just about every sector imaginable, the states were forced to make deep budget cuts because they did not have enough revenue or federal assistance, largely due to President Bush’s tax cuts, and all “the trend lines are getting worse,” said the finance chairman of the Democratic Governors Association.

There didn’t seem to be anything bright, uplifting or optimistic in the picture of the nation’s economic future Mr. Rendell painted to reporters at the National Press Club.

We were losing our edge in global trade — to China and other emerging economies. We were facing failure in technological innovations in a world where other countries produce far more science, engineering and math graduates. We remained behind just about all other industrialized nations student test scores. We were falling behind on everything.

It was a starkly different picture than that which President Bush is expected to present in his State of the Union address tomorrow night. But Mr. Rendell’s message that “America is losing its edge” is the Democrats’ latest attempt to convince voters the United States is in decline, and only more spending, funded of course with higher taxes, will pull us out of this spiral.

But let’s take some of Mr. Rendell’s America-Is-Falling-Into-The-Abyss trend lines one at a time:

He says state revenues have been drying up and the governors have been forced to make draconian cuts at every level of government.

In fact, the economic expansion has produced a tax revenue windfall for the federal government (nearly $100 billion more than expected last year) and for the states, too. A study for the Cato Institute by tax policy analyst Chris Edwards last week said state and local tax revenues soared in the last two years.

State tax revenues rose 8.7 percent in 2004 and an estimated 8 percent last year, according to the Cato study. Local tax revenues, driven up by a booming housing sector, rose 7.3 percent in 2004 and an estimated 7.1 percent in 2005. All these numbers are based on Census Bureau data. So Mr. Rendell’s poor-mouthing of the states’ fiscal picture isn’t true.

On trade, Mr. Rendell had nothing good to say about America’s remarkable performance in the global economy, focusing myopically on trade deficits but ignoring expanding U.S. exports. We sold more than $1 trillion of goods and services abroad in 2004, and last year’s figures may well exceed that.

Surely a country’s sales abroad are a major measurement of whether it is competitive. And U.S. exports have been growing, not shrinking. Boeing is selling more planes, Intel is selling more computer chips.

Yes, the trade deficit has risen, but that is more a reflection of growing U.S. affluence and, in part, weaker consumer economies elsewhere in the world. We buy a lot of imports because we are a rich nation, but we also import a lot, too, at the lower end of the consumer price scale. This is not a negative. It helps Americans save money so they have more to spend on other things.

Mr. Rendell kept comparing the U.S. economy to all the world’s other industrialized nations but did not compare numbers that show the United States growing far faster than any of them.

The U.S. economy grew 4 percent in third-quarter 2005. Europe was growing little more than 1 percent. Our gross domestic product since Mr. Bush took office has soared from about $10 trillion a year to nearly $12 trillion. Our unemployment rate is 4.9 percent, below average over the last 30 years. Europe’s permanent jobless rate has remained stuck at more than 9 percent for many years.

As for losing the competitive edge technologically, it is hard to think of any new breakthrough technology in Europe in the last several years, or in the Pacific Rim countries, while we have been on the cutting edge in a number of new generation high-tech inventions and products. Microsoft’s Windows is still driving most of the world’s PCs.

The intensely competitive U.S. economy remains the envy of the industrialized world at just about every level. But that isn’t the country Ed Rendell sees in his politically driven assessment of America’s future. It is a worldview sharply at odds with the latest U.S. consumer confidence polls which reflect a growing belief America’s greatest days are still ahead of us.

Donald Lambro, chief political correspondent of The Washington Times, is a nationally syndicated columnist.

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