Rather than sitting on an ash heap, scraping my sores with a potsherd at all of the bad economic news, let’s devote a little attention to brainstorming how we can actually improve the state of the economy.
1. Reduce healthcare spending.
Not study ways to reduce spending. Not pretend to reduce spending. Not change the trajectory. Reduce it. Healthcare spending is sucking the life out of the federal government, state and local governments, and individual pocketbooks. Too much of the increase in compensation over the period of the last 30 years has been in the form of ever more expensive healthcare insurance. That may nominally make its receipients better off but nobody feels better off. We’re borrowing billions to finance it. We’re laying off police officers and teachers (here in Chicago janitors are on the hot seat, a remarkable development) to pay for the healthcare of the rest.
We each have our preferred strategies for doing it. It’s got to be done.
2. Reduce defense spending.
We’re currently embroiled in three wars and have troops deployed in scores of countries. Prioritize defense spending towards measures that actually make us more secure. Cut the rest substantially. We are not going to fight a high tech war with China. Why prepare for one?
3. Stop propping up sectors that are in decline (or should be in decline).
Whether you phrase it as returning to the status quo ante or providing a soft landing it amounts to the same thing: throwing good money after bad. The financial sector is absurdly large. Rather than being subsidized the largest banks should be chopped up into smaller, less systemically vital pieces and we should take steps to keep them from getting that big again. Stop propping up construction.
Stop propping up auto manufacturing. Its decline is permanent. Total world production capacity exceeds any realistic level of consumption and is, absurdly, rising. The Volt will not save GM. They are selling 500 of them a month. If you’re a glass half full kind of guy, they’re ramping up production. If you’re a glass half empty sort, it’s too low to save the company. Whichever sort you are it’s too slow to save a company so incompetently run.
If we are absolutely bound and determined to prop up something, make it a sector where the activity will actually do some good. Here in Illinois (where the electricity costs are already among the highest in the nation) we’re facing a price increase so ComEd can deploy smart grid technology. That’s the kind of infrastructure we should be subsidizing rather than roads and bridges which will be obsolete long before they’ve reached the ends of their productive lives. Subsidize the future rather than the past.
4. End quantitative easing.
If another round is implemented by the Fed, fire the Fed governors. If somebody proposes it, burn him or her in effigy. Its effect has been to goose the stock market and other assets, including commodities. That in turn has goosed the price of food and gasoline or, in other words, the rich get richer and the poor get poorer. No mas.
5. Conclude some of the free trade deals we’ve already negotiated.
While we’re at it maybe nudge them in the direction of real, honest free trade rather than the pretend free trade agreements we usually end up with. You can write a free trade agreement on the back of a business card. When the agreement runs to hundreds or thousands of pages you can be pretty sure it isn’t about free trade.
6. Rationalize intellectual property law.
I don’t care if Disney loses Mickey Mouse.
7. A uniform code of regulations for the environment, banking, insurance. (Update)
The federal government should act as a facilitator to get the states to agree on a uniform code of regulations for the environment, banking, insurance, safety, and so on analogous to the Uniform Commercial Code. If companies didn’t need to conform to different standards in different states it would reduce the cost of formation and expansion.
This is a brainstorming session not just a bitch session. Put your own suggestions in the comments. Please, please make them positive. Bitching about how lame the Republicans/Democrats/Right/Left/Obama/Illuminati are is tedious.
Those are very good, and I agree with almost all of them.
I think we should approach tariff a different way though. If I recall correctly, our average tariff on all goods is something like 2%. But that includes 0% on somethings, 100% on sugar, and 200% on cotton t-shirts, or whatever.
What I’d do, if I could, would be to unilaterally rationalize it to 2% and change, or maybe even 3%, across the board. Put that on everything evenly, from oil, to sugar, to t-shirts.
It would be slightly revenue-enhancing from the start, and it would certainly be a boom to economic efficiency, as entire industries just get down to business, rather than choosing imports based on an extremely heterogeneous import map.
(I’m not sure that any of our trade partners would really complain, because most would have both winners and losers from the change. The oil exporting countries might take the biggest hit, but 2-3% is small change to them.)
I don’t recall whether I’ve written about it or not but our sugar policy has been so misguided and destructive as to defy description.
I’m of two minds on trade. On the one hand there’s the economic side and on the other the geo-political side. I think I’d be happy if we went to zero tariffs across the board and banned foreign governments from buying treasuries or land.
I know I’ve posted it here before, but the import rules on shoes are beyond ridiculous. And the shoe makers are not even around anymore to complain if we just got rid of it.
Agree with everything so far. I think some kind of agreement between all states to collect revenue on goods bought out of state would go a long way toward helping balance sheets, raising revenue while likely being able to lower rates. Seems weird that we’re happy to punish in-state buying.
Another subject worth posting on: how the wage and price controls under Nixon destroyed the domestic shoe business.
And you bring to mind another interesting question. Why does the federal government have its panties in a wad about the states enforcing their own (actually the federal government’s) immigration laws and is blithely unconcerned about the states imposing their own barriers to interstate trade? It’s even weirder when you recognize that illegal immigrants aren’t a voting constituency.
I think zero-tariff people miss something. The US system does not cleanly stop at borders. This makes taxes on onshore
activity (income, corporate tax) a tax on less than the whole.
We need tariff as revenue to make tax on the local beef rancher fair relative to the beef importer. (Remember that the importer gets to use world price as his basis and not Brasilian production costs.)
Shorter: zero tariff means that local tax alone is sufficient to drive every possible activity off-shore.
Only true if the local tax is greater than the gains from trade. We’re back to comparative benefit. Both countries benefit even if Country A has an absolute advantage over Country B.
The comparative benefit argument is tangential to my point.
I’m saying that if the US captures more revenue from the local beef producer than the importer, that will improve the position of the importer. This will shift production beyond the natural comparative benefit.
It stops begin about the growing conditions in Brazil, and starts to be about the tax rate in Brazil.
Or put another way, if you want to ensure that imports and exports are determined by comparative advantage, then you need to balance internal tax and external tariff.
Get it?
Reduce compliance costs across the board: Tax compliance, safety compliance, environmental compliance etc. All those rules need to be simplified so that few, if any, specialists are needed to understand, interpret and implement the rules. Note, this isn’t an argument for deregulation or throwing worker safety and environmental concerns out the window – it’s an argument for the KISS principle.
I don’t know enough about a lot of the specific points to have an opinion.
I demur only to a degree on the IP laws. I’m busily selling IP to Hollywood and I would have a big problem with a world where Disney could just take my books/games/apps etc… At the same time, seeing what’s happening in tech with patent trolls I can see the damage done by applying laws that are now ancient and off-point relative to the tech reality.
Here’s a positive suggestion: remove barriers to modernizing classrooms at the middle school, high school and university levels. We can do a better job with fewer not more teachers, smaller not larger facilities. The cost of education could be a lot lower. Drastically lower. And if education were cheaper it would change in basic character — you wouldn’t be making a 10o thousand dollar bet on a particular field paying off well enough to justify your student loans.
Another positive: reform immigration to reflect the needs of the US. We should have borders open to people willing to bring their assets, their businesses, their educations to the US. If you want to bring capital and smarts, you’re in.
Dave you vile dastardly conservative wingnut Fox News watching retard!
Just kidding, but you know if I posted those same enumerated items with similar explanations that would be the response (well at OTB anyways). And I agree with the broad ideas (might have some differences in implementation).
Can’t really add too much. Maybe simplify the tax code which seems to be what Andy was touching on. Not lower rates, and maybe even raise them a bit, but just make it easier to do them. Money and resources spent on doing taxes is really a waste, in the end. Freeing up the money and resources would be a good thing. And if simplifying the tax code also closes loopholes and various…”incentive” programs and boosts revenues all the better, IMO.
Strongly related:
That from a Time article on Why Don’t Jobs and Corporate Profits Match Up?
(BTW Steve, I dare you to post a similar list at OTB, without any red meat, straw men, misdirections, or silent conclusions, for the liberals to seize upon.)
1) Decreasing health care spending must also include cutting the costs of private insurance. I am skeptical that we can achieve lasting, significant cuts in Medicare without addressing private costs.
2) Honor the current withdrawal dates for both Iraq and Afghanistan. We dont stay unless they ask us to stay and help defray costs.
3) Time for major tax reform. The costs of preparing tax returns have become too high.
4) Education. Link the ability to obtain a Pell grant or any federally back to loan to some kind of performance standard by the school receiving the loan. I would prefer something like employment as a metric.
5) Modernize the electric grid.
Steve
The only thing I’d add is, shoot all the economists. Other than that, it’s all good.
Quantitative easing has caused a decline in the dollar and an increase in exports. If you don’t like QE how do you propose to reduce our trade imbalances?
Decrease legal immigration of the low skilled. Mandate the use of e-verify by employers to curb illegal immigration.
Make student loan debt easier to discharge. Require the recipients federal guaranteed college loans and aid to pass an academic test.
While interest rates are low borrow to repair old infrastructure.
My contribution to this party: blow up the workforce development system, and replace with better incentives for employers to provide their own training, job readiness, and apprenticeship programs (or to partner with technical colleges in doing so). It only comes to about $3 billion or so a year, but is so wildly inefficient and not well-tuned to the needs of either employers or prospective employees.
Why the heck should this matter, when you can hire them where they live, and ship the iPhone or whatever here?
It isn’t so much that these ideas are bad, Maxwell, just that in the world described by that Time story, they don’t matter much.
How much does it cost to “incentivize” Apple to move a US$168/Month ($2016/Year?) back to the US?
I guess I missed “job” in there, between “move” and “back.” But anyway, that’s the elephant in the room, the one people would apparently rather not discuss.
There is something funny going on. Economists have sold “comparative advantage” so hard in the abstract that fairly bright people think it means “everybody wins.”
Actually, not.
I propose we shoot everyone named ‘sam’ and especially the one that posted at 6:27. Hold him down, and put two through the back of head for good measure.
After all we know that sams caused the recession. Without them everything would have been great.
What? No bitching? No fair! I wanna whine!