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Left, Right and Center on Incentives by JOHN HOOD In a previous column I described the political debate about North Carolina's economy as a disagreement among three schools of thought about how best to stimulate growth. For the sake of convenience, I employed the familiar labels of Left, Center and Right. The Left believes that weak economic performance is primarily a consequence of weak consumer spending. Recessions happen because people aren't buying enough stuff, say leftists, and one reason that happens is that too much money is flowing to rich people, who tend to save it, rather than poor people, who tend to spend it. The Left's solution is to raise income taxes on the rich and redistribute the proceeds to the poor, in the form of cash or in-kind benefits or to govern- ment employees and vendors. The Center believes that weak economic performance is pri- marily a consequence of inadequate supply, not inadequate demand. Centrists believe that a lack of investment in the prob- lem, and they see government's job as one of developing and implementing a plan to invest in infrastructure, education and critical business sectors or regions. If necessary, they favor rais- ing sales taxes to pay for the new investment, as such taxes hit consumption rather than investment and are the least-unpopular taxes to raise. The Right agrees with the Center that investment is the solu- tion for weak economic performance, but conservatives see private investment as the lever and government interference as a key reason the lever can be hard to move. That's why they focus on reducing the cost of investing and doing business in the state, through such means as reducing marginal tax rates and reforming regulations that either inhibit entrepreneurship or raise the cost of key business inputs such as energy and labor. It might be easier to distinguish these very different arguments by considering a spending will boost consumer spending and thus keep people employed. When the Center and Right see retail sales drop, they look past the aggregate number and look at the details. For example, they may notice that the sale of books, CDs and DVDs by big-box retailers is down, but not because consumers are reading, listening or watching less. Instead, consumers are buying these things less expensively online. Rather than assuming government must step in to boost aggregate demand, the Center and Right recognize the implications for new invest- ment. Stores need to drop unprofitable lines and locations, investing instead in products that consumers still want to see and feel before buying. Online retailers need to invest in expanded capacity and offerings. And other firms need to invest in new products or services to capture some of the dollars that consumers previ- ously spent on higher-priced books, CDs and DVDs. Where the Center and Right part company is not what to do — invest in new supply — but how to do it. Centrists believe that government should take an active role, either by spending tax dollars on infrastructure and worker retraining or by giving subsidies to private companies that invest in the industries and locations public officials deem to be the wave of the future. Conservatives don't think government should take an active There are many opinions about how to handle the economy. role in deciding where new investment should go. Instead, they seek to increase the real rate of return on all private investment and then let the market sort it all out, rather than having govern- ment officials attempt to guess at which firms or ideas will best satisfy ever-shifting consumer demands. Can you see now why the Left and Right, coming at the issue particular example: retail. When liberals sees retail sales fail to meet expectations or even drop year-to-year, they cite it as evidence of inadequate demand in the econ- omy as a whole and argue that redistributing income and propping up government from very different starting points, tend to be against corporate subsidies while the Center favors them? The Left sees government intervention in the form of bailouts or targeted tax incentives as the right solution to the wrong problem. The Right sees such government intervention as the wrong solution to the right problem. JOHN HOOD, Columnist. COMMENTS? Editor@upandcom- ingweekly.com Do the Lessons of Vietnam Still Haunt Us? by D.G. MARTIN Afghanistan is not Vietnam. True enough. But does that obvious truth mean that there are no lessons from our experience in Vietnam? Are there no haunting legacies that affect today's leaders? Does the Vietnam War have an impact on Americans as they decide on actions in Iraq, Afghanistan, Syria, Iran and other plac- es that call for the application of our military might? In their recent book, Haunting Legacy: Vietnam and the American Presidency from Ford to Obama, former prominent journalist Marvin Kalb and his daughter, Deborah, explain how Vietnam has been an important factor in the decision-making of every president since John Kennedy. Lyndon Johnson and Richard Nixon had to deal directly with the reality of that war, which each ultimately determined could not be won. Gerald Ford had to watch while Saigon fell. He felt compelled to demon- strate that the U.S. still had the might and the will to crush any country that challenged our interests. In response to the seizure of a U.S. merchant ship by Cambodian pirates, he launched overwhelming force in a risky but suc- cessful operation. On the other hand, Jimmy Carter, responding to the loss in Vietnam, aimed to keep the United States out of military conflict. However, unprecedented events in Iran forced him to change his posture and attempt a rescue of the embassy hostages. The failure of that mission tarnished Carter's presidency and left open the question of whether the U.S. had the resolve to respond militarily to challenges to our interests. Ronald Reagan was more cautious than his forceful rhetoric when he decided not to respond and punish those who killed 241 Marines in Lebanon. Worried about the possibility of other Vietnams, he pushed for development of what became the Powell Doctrine. It set out guidelines that limited the use of force to vital national interests, only as a last resort, with clear objectives and overwhelming force that would assure success. WWW.UPANDCOMINGWEEKLY.COM George H. W. Bush adopted the Powell Doctrine and applied it successfully to guide the country's response to Iraq's seizure of Kuwait. He then resisted pressure to continue the military operation once the "clear" objectives had been obtained. Burned by an early humiliating loss of troops on a humanitar- ian mission in Somalia and conditioned as a young opponent of the Vietnam War, Bill Clinton decided that he would not put combat troops on the ground, where they could get bogged down without an exit plan. Rather he sought to achieve objec- tives by air attacks. On the other hand, George W. Bush, confronting challenges in Afghanistan and Iraq, seemed eager to show that the memories of Vietnam would not keep the U.S. from using ground forces to subdue its adversaries. He accepted or did not consider the unin- tended consequences of two long-term counterinsurgency operations. Barack Obama inherited these two counterinsurgency or nation-building efforts. He learned from experience what Vietnam had already taught. If those types of operations can ever be successful, they require a long-term, solid commitment without a fixed deadline. Another lesson he might have learned from Vietnam: Americans want to win, but they will not accept a per- manent war with an ongoing loss of American lives. The Kalbs quote one president whose writings in 1999 might be good guidelines for his successors. "Our nation should be slow to engage troops. But when we do so, we must do so with ferocity. We must not go into a conflict unless we go in committed to win. We can never again ask the mili- tary to fight a political war. If America's strategic interests are at stake, if diplomacy fails, if no other option will accomplish the objec- tive, the Commander in Chief must define the mission and allow the military to achieve it." If only George W. Bush had fol- lowed the wisdom in his own words. D.G. MARTIN, Columnist COMMENTS? Editor@upandcomin- gweekly.com MARCH 21-27, 2012 UCW 21