David Brooks has suggested as much in two columns this month. It used to be an article of faith among conservatives that the economy was self correcting and the government should simply stay out of the way. While moderates usually favor some federal government intervention in preserving rights and enforcing regulations, they have often been skeptical of government stimulus plans. Liberals have still been calling for a stimulus, though political reality has dictated that even Pres. Obama’s latest offering is much reduced.
But what if, as a thought experiment, we were to concede that the current downturn is likely to play itself out regardless of government action. Suppose that any action taken now will be too little and too late to steer what remains a very large economic ship in any immediately discernible fashion. If that’s the case, what should our government concern itself with right now? I suggest the following:
- Broaden and Strengthen the Safety Net – The problems in the economy are structural but the impact is individual. Those who have escaped the worst consequences have a civic obligation to help those who did not. The latest data show that 1 in 6 Americans is living in poverty. Helping them weather this economic storm should be a higher priority than arguing over tax levels for the wealthy and middle class or over the near-term budget deficit.
- Invest in the Economy to Come – At some point, the economy will get better. How prepared will we be (as individuals and as a society) when that moment comes? Now is a great time to improve our infrastructure for future demands. Ditto investing in the education and re-education of our workforce. Such actions have the added benefit of increasing employment in the short term.
- Reform Entitlements – I think we need some form of federal retirement insurance and old age health care program. But there’s nothing magical about the existing age or coverage levels of Social Security or Medicare. They generally reflect a historical moment that has passed. We should take the steps to ensure their long-term solvency in a way that is sustainable despite inevitable (but not always predicable) demographic shifts.
- Clean the Slate – I’m not anti-tax or anti-regulation. But both systems are bound to be full of cobwebs and historical leftovers. Emerging from the recovery with a simplified tax code would give the United States a major leg up. So would (the more difficult task) of updating both the regulatory codes and the regulatory process. A simple tax code and a clear regulatory framework will make it easier for individuals to plan for the future, lower the barriers for new companies to compete in the marketplace, and free up investment in more productive enterprises than manipulation of the tax and regulatory codes.
Those are my initial suggestions. Starting from the premise that the government can’t fix this economy, what are your suggestions for what it should be work on now for our future?
I think you are pretty spot on with your recommendations however i would say that first two inherently require government spending. As we have seen, any new government spending is has been essentially banned by the right.
One suggestion that comes to mind is fixing our trade policy with China. Just like Chuck Schumer (D-NY) said a few days ago, China has been committing economic murder on our country by keeping wages low, rigging their currency and ignoring any sort of environmental protections. People always talk about how everything here is made in China. Well when you have an import tariff of 2.5% here and China has a 25% import tariff, what do you expect? This needs to be fixed.
Now i should state that i am not advocating a trade war with China. This is not something that can be changed overnight nor should it be. We do need to have an adult conversation about this though.
Another item i would suggest, to tack onto your ‘clean the slate’, suggestion would be to put smarter more efficient regulations on the financial industry. Especially the “shadow banking” sector.
My last suggestion would be to eliminate money from politics. This is the toughest one but i think would address most of the issues we currently have in our country today. In fact, Dylan Ratigan from MSNBC, along with Jimmy Williams have come up a draft for a potential new amendment to the Constitution. http://www.getmoneyout.com/
Its a great starting point and i think really is the key issue to fixing A LOT that is wrong systemically with the country. I do question having all federal candidates move to public financing as well as creating a national holiday for voting. But again this is something that will need to be discussed and debated.
CJ
You are right that the first two require spending, which is anathema to the GOP right now. My hope would be that there are still enough Senators and House members to sign on to those provisions in exchange for the latter goals.
I will admit to knowing too little about the trade issues with China. But it is certainly something we need to discuss as rational adults. I wish Huntsman hadn’t been so eager to run for President – resolving the issues there probably would be easier with a longer-term diplomatic relationship.
I agree on a financial sector regulation overhaul. The GOP is mad about Dodd-Frank, but they don’t seem to have an alternative. Perhaps offering a chance to overhaul the system would bring them to the table. Unfortunately, I think the Tea Party has moved on a bit from its focus on the bailout recipients in its eagerness to demonize Obama and Bernanke. If they could see that common cause with the Occupy Wall Street people instead of resorting to knee-jerk partisanship perhaps we could push Congress to enact real reform there.
As for the last suggestion, I don’t think you can “eliminate” money from politics. The best we can aim for is a balance that prioritizes spending by individuals over spending by corporations. As far as the Constitutional amendment suggestions, I’m also skeptical about the federal funding of all candidates, though I’d welcome a holiday for voting.
Thanks for some good suggestions.
This may be totally simplistic, but the major event over the past few decades is that 2 billion+ people (China + India) joined the labor force linked by free-ish trade and capital mobility. Adding 2 billion people to the global economy has a massive depressive effect on wages. I think people that earn wages will suffer while people who employee wage-earners will benefit. trade wars, wto sanctions, new policies, etc–I think there is just no way around it.
the right thing to do in this case is to compensate the generation of losers from the generation of winners–a straightforward re-distribution of wealth. call it whatever you like, but that is the basic idea. Some retraining is available. But for many people (the 6-figure auto union worker, for example) cannot be retrained and may never work again.
americans just can’t stomach any sort of straightforward redistribution of wealth as a goal in and of itself. my pessimistic view is that income inequality is a permanent feature of our economy.
I think you’re right about the labor influx and the need to re-balance the way in which wealth is distributed. I have no idea really how to do that or sell it to the American people. It would require a drastic new social contract. The best way to enshrine that with legitimacy would be a constitutional amendment, but I don’t have the first idea what such an amendment would contain. And all the “proposed” amendments I see floating around are awful.
I guess in part what I’ve tried to do above is to take the first steps in a new direction, building on the implicit social contract we’ve had in place.