If we want to dance, we must pay the piper

"I like to pay taxes. With them I buy civilization.''

Oliver Wendell Holmes Jr.

Next week, Americans will elect a new president. Throughout this long and not-too-inspiring campaign, the candidates, when they are not dealing in campaign smears, spent a lot of their time and money talking about taxes.

Republican candidate Sen. John McCain apparently thinks there shouldn't be any taxes and wants to give tax cuts to the big earners. Sen. Barack Obama is usually talking about programs that will increase taxes, or at least redistribute them.

But let's be clear: There's a lot more than tax policy at stake here. Whoever is elected will have to deal with how to make this country competitive again in the global marketplace. And that will be expensive.

The United States is often described as "the most powerful country in the world." I have always assumed that the word "powerful" was made up of two elements: economic power and military power. While there are several countries that could claim comparable military power, none has the combination of the two. But several countries are closing in.

During World War II, America earned the title "arsenal of democracy" for its ability to manufacture guns, tanks, ships and planes at a blistering pace. After the war, the United States was able to convert this manufacturing capacity to produce not only war materiel but also big-ticket consumer items.

From finished goods such as automobiles, televisions and refrigerators to construction materials such as steel and aluminum, we were an economy of workers who made things and statesmen who helped rebuild war-ravaged economies in Europe and Japan.

But by the 1970s and 1980s, inflation, oil shocks and government regulation had sapped much of the power of the U.S. economy. Meanwhile in Japan, South Korea and Taiwan, manufacturing was on the rise as Asian nations used exports to grow their economies.

With the fall of the Soviet Union in the 1990s and the peace dividend from the end of the Cold War, the era of global trade blossomed. But U.S. manufacturing, by and large, did not. It was farmed out to markets in Ireland, China and India, among others, where labor costs were lower and quality was often as good or better than from domestic producers. In return, U.S. consumers got access to low-cost consumer goods and the United States morphed into the great consumer economy.

Sure, manufacturing jobs disappeared, but there were plenty of jobs for Americans in the services sectors, right?

Consumer debt debacle

Looking back on the last few weeks, we can see how vulnerable the United States has become as an economic power. The $700 billion bailout of the financial services sector is only one example. Exotic securities manufactured by Wall Street whiz kids fueled the binge and kept the borrow-and-spend game going -- until it came crashing down this year.

Now, debt-strapped consumers are defaulting on their mortgages in numbers not seen since the Great Depression. High gasoline prices are sapping household incomes. Recession and higher unemployment are on the way, economists tell us.

So for whoever is elected next week, a primary objective will be to recapture the markets that will once again make the United States a leader in research, innovation and production of the products and technologies of the future. That will create good-paying jobs for the next generation of American workers.

But the transition won't be easy. It can't be accomplished without a substantial investment in the nation's physical and educational infrastructure. No one likes to pay taxes. But rebuilding the U.S. economy cannot be done on the cheap. A large share of this cost will fall on the taxpayer; how much depends on how the new administration spends the tax revenue it collects.

The Bush administration is spending $10 billion per month on the wars in Iraq and Afghanistan. The U.S. spends billions of its tax dollars to rebuild Iraq while the U.S. infrastructure goes wanting.

When Sen. Joe Biden suggested that it was patriotic to pay your fair share of taxes, Gov. Sarah Palin criticized him. But most citizens are smart enough to know they have to help foot the bill if they want to continue a high-quality society. Of course, they'd feel better about it if they had confidence that their tax dollars went for projects that strengthened the nation.

This is not too much to ask from a government with citizens who would be willing to make the necessary sacrifices if given the proper leadership. The military certainly has carried out its part of the bargain. Now its time for the U.S. economy to regain its strength.

In the last few decades, the United States has ceded ground to new economic powers who intend to replace the western countries as the primary source of economic power. The United States and the Western world cannot afford to let that happen.