We’ve spent a lot of time, and posts, writing about the current economic malaise. We’re in a severe recession where traditional monetary tools (lower interest rates, pump cash into the economy etc) have run their course. They have had some positive effect, but it appears doing even more easing won’t accomplish much.
So in an effort to spell out what can yet be done, here are some observations.
- Create jobs. The private sector can’t create them right now because of several reasons, but most of the reasons can be summed up by the phrase “lack of demand.” Without this demand, productive capacity is taken off line (including people being thrown out of work) to wait for a better day. There are $2.2 trillion in public goods (infrastructure primarily) that will need to be built. Might as well do them now because they will create private sector jobs for a minimum of three years, and it might take that long for the private sector to regain its footing and start creating jobs independent of government largess.
- Reduce the trade deficit by imposing tariffs on imports. Just because foreign competitors can make some goods more cheaply because of currency manipulation and millions of low cost laborers, doesn’t mean we should buy those goods. Instead, we should protect the manufacturing industries we now have, and expand back into the industries where we allowed jobs to disappear only to re-appear on foreign soil. The reality is the majority of Americans need to work with their hands. That’s simply a fact of life. If the country continues to export manufacturing jobs, that will guarantee high unemployment for many Americans. We cannot afford all those hands to be idle. The overall goals are to protect employment and to achieve balanced trade.
- Immigration reform. We do need farm labor, after all. Our immigration system needs to be more robust and legally allow in sufficient numbers of migrant farm labor, at the least. America was built by immigrant labor and nothing’s changed in that regard. Second, allow more highly trained professionals to come to America. We are in a global, competitive world today. We should allow the world’s best and brightest to come to our shores and work with us. It will guarantee our advantage in innovation. It will make more millionaires and produce more private sector jobs.
- Let the Bush tax cuts expire on schedule. All of them. Just as with the other monetary tools’ usefulness, tax cuts are inefficient right now. Restoring marginally progressive rates that were in place under President Clinton (a period of strong job and wage growth) will have little effect on the economy, but will show that America is willing to seriously reduce its deficits. Oddly, so-called fiscal conservatives won’t even commit to this minor effort to reduce deficits.
- Change the health care delivery system. The first reform effort is flawed in many ways, but the impulse was and still is correct: Our current system is based on fee for service which is inefficient and far too expensive to maintain. The simple fact is the system that works best is results based. It’s not how many procedures you do, it’s the results that count and for which you get paid. Necessarily that means the administration of payments needs to be done by non profits, i.e. what in our system today remains with for-profit insurance companies. That has to change. Also, we need to expand the population allowed to become doctors. That means a subsidized system of scholarships open to competition where the winners get a free degree (other than the incredibly hard work required) but in return agree to a salary or at minimum some guaranteed hours working for those covered by Medicare or Medicaid: Effectively the vast majority of Americans. This will have huge positive consequences not only for the population’s health, but for the taxpayer’s pocketbook.
- Wind down overseas military engagements. We cannot afford to be the world’s Robocop. We cannot afford to nation-build around the world. We have an $800 plus billion military industrial complex in America, and more than $200 billion of that is spent on overseas engagements, primarily in Iraq, Pakistan and Afghanistan. If we can get that down to $100 billion, it saves us a cool trillion dollars over the next 10 years.
- Put in a cap and trade system directed at removing inefficient use of fossil fuels. Right now that would probably mean old coal plants will be idled and new, gas fired plants built. Which would generate new jobs and help bridge the necessary transition to more sustainable base energy systems, which can gain subsidies derived from the cap and trade revenues.
- Maintain robust regulation of major industries. The cheapest expenditure you can make is to have an honest, career oriented, regulator. A major cause of our current problems came about due to poor regulation of our financial infrastructure. Financial regulation already passed will help restore confidence in banking. But what about better regulation of offshore drilling? Or better inspection of food processing? Or better inspection of mining? Capitalism is great, but capitalists will compromise regulation if they can and we’ve seen clearly the negative consequences of allowing that to happen. It’s cost us trillions in taxpayer money, millions of jobs, and ecologic damage that will no doubt be in the billions from the BP offshore disaster.
- Restore some sanity and fairness to our political process by severely limiting lobbying activities and restraining both individual and corporate contributions to campaigns–particularly at the federal level. This has become a foundational problem. A problem made even worse by the recent Supreme Court decision reversing a century of Supreme Court decisions that restrained direct corporate campaign contributions, both money and in-kind. Just turn on the TV today. The screen is literally shouting at you with political ads not paid for by candidate campaigns, but by invisible and un-named corporate fronts. This will inevitably control public information, swamping open and honest discussion and debate with marketing spin paid for by large, often multi-national, corporate treasuries. This may turn out to be even worse for America than the current recession.
- Restore competitive markets in critical industries. Right now American industry is dominated by oligopolies–near monopolies that use government power to stifle competition. The problem is evident in banking, in agriculture, in energy production and in health care. Banking has undergone some reform. As has health care. But both have come in weak form. These efforts need to be continued until there is real competition in these industries. It’s astonishing how well these non-competitive markets have convinced many Americans that they are, in truth, competitive. And as for Congress and the White House, companies that control these markets have apparently consolidated their influence everywhere. It may need some good old fashioned trust busting by Attorneys General, both federal and state, to unwind this decades old effort to buy government.
There’s much more that we’ve recommended, not the least of which is to stop subsidizing corn and to subsidize organic farming instead. But these are the major areas where America, according to a liberal, has gone far astray and is paying a high price for doing so.