A Tale of Two Countries?

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Before energy prices collapsed, the conventional wisdom held that America's economy was being split along have and have-not lines: a prosperous Sunbelt and a rusting Frostbelt. Now, however, there is talk about a different sort of "two Americas." In the new version, the haves are the high-tech industries and financial-service firms stretching from New Hampshire down the Eastern seaboard and from California's Silicon Valley down to Orange County; the have-nots include the farmers, energy producers and heavy manufacturers in between. The split that some see emerging counterposes booming coasts against a problem-plagued heartland.

That is the intriguing, though debatable, conclusion of a study that Democratic campaigners are seizing as ammunition for the approaching 1986 elections. The study is partisan in origin: it was produced by the Democratic staff members of Congress's Joint Economic Committee. But at a time when the growth of the nation's deficit-ridden economy has slowed to a barely perceptible crawl, and when new uncertainties have been raised by the sweeping tax reform that is likely to become law, the study highlights some eye- catching trends in jobs and incomes.

Titled The Bi-Coastal Economy, the study asserts that economic growth during the Reagan Administration has been concentrated in California and 15 states lining the Atlantic Coast, while the rest of the country has been almost stagnant. From 1981 through 1985, these 16 coastal states enjoyed a lopsided 69% of total growth in personal income. Put another way: income from wages, salaries, rents and proprietary income in the 16 states rose a robust average 4% a year, vs. an anemic 1.4% in the other 34 states. The coastal states, where 42% of all Americans live, attracted 58% of the 8 million new jobs created since 1981. According to this month's Census Bureau figures, the Midwest has replaced the South as the area of the country with the lowest average family incomes.

While the coasts have enjoyed rapid growth in high technology and such service industries as banking, advertising and insurance, many heartland states have been held back by their dependence on depressed agriculture, oil and declining smokestack industries. The virtual disappearance of inflation (consumer prices did not rise at all in July, and for the first seven months of 1986 they actually declined .2%) has had uneven regional effects. % Overall stability has masked what a Reagan Administration official calls a "worldwide deflation" in commodity prices that has struck hard at farmers. More recently, the collapse of oil prices has depressed states in the energy belt from Colorado to Louisiana.

The Democrats zeroed in on another factor: the U.S. trade deficit, which hit a record $148.5 billion last year and is running even higher in 1986. Their purpose seems to be to build support for import-limiting legislation. But the trade deficit has hurt farmers, who have lost foreign markets, and smokestack industries, beset by import competition, far more than service and high-tech businesses.