Originally Published: March 8, 2011 9:59 p.m.
So what should we do? I complain about economic and government policies. What am I suggesting instead? In a brief column, here is a list.
Weed the garden. There is plenty of government waste, but you don't weed the garden with a machete. It should be a constant effort to tease apart the productive efforts from the wasteful ones.
Close tax loopholes. Martin Feldstein has suggested an absolute cap on deductions. There is a lot of corporate tax avoidance. End the lowest rate (15 percent) that applies to some of the biggest earners - hedge fund managers. Put a reasonable ceiling on the mortgage interest deduction. Make taxes more progressive. This is a separate topic for another time, but taxes need to be higher than they are on those benefiting the most, particularly for those at the very tippy-top of income. This is especially true while our income disparity is growing, especially when we're having a very unbalanced recovery from such a terrible recession.
Spend where it helps most immediately. Fund IRS collections as far as is effective. Our construction industry would just love to be tasked with repairing and improving our infrastructure, and right now materials are inexpensive and interest rates are low. Alternative energy is a longer-term item, but imagine what we would save by avoiding some future war because we have cheap energy and no importing.
Complete withdrawal from the wars we're in as fast as possible and make our defense spending smaller and smarter.
Group negotiations: States need to cooperate as far as possible on business taxes so they aren't in a race to the bottom to try to lure business from one another. Major industrial countries need to cooperate in negotiating better trade agreements, so the countries we outsource our manufacturing to don't base their advantage on relatively poor wages, poor conditions, or carelessness with the environment.
Jail some financial criminals. In the '90s, after the Savings and Loan collapse, we had more than 1,000 felony convictions of major fraud. Whether by new regulations or just enforcing what we have, if we just prosecute the lies - the investments sold while hiding the liabilities, the ratings agencies that flat-out lie about the value, the investment insurers who can't back what they sell - just prosecute the lies and see how much more sound our financial sector becomes. If we had done this all along, no other single item would have made a bigger difference in our economic condition today.
Germany has two policies with profound benefits that we should adapt into U.S. versions. One is requiring major corporations to have employees on the boards. They require as many seats for employees as for management. Another is a specialized category of bank that is by law locally focused. Instead of engaging in financial gambling, they reinvest in the area. Most of their small and mid-sized businesses get their credit from these banks.
Get more bang for the health care buck. It doesn't matter if it's paid by Medicare or privately, health care is by far the biggest problem for our budget and economy in the coming years. As a percentage of our economy, we spend almost a third more than even the closest major country (Switzerland) and about twice as much as Britain or Japan. And our care is in some ways no better and in some ways worse. While none of it is perfect or easy, the world is showing us that it can be done much better.
We need a workforce that is more mobile both geographically and in their skills. Helping people stuck in bad mortgages, which prevents them from moving to where there are jobs, is something we've failed at miserably. Quality education and opportunities to change or upgrade skills are essential. At the same time, it's not a magic solution to all the problems workers face.
The deficit is not the only thing we need to focus on, but one advantage of regrowing a healthy economy, a middle-class economy is that the national deficit, the states' budget problems, the underfunding of pensions, and a host of other economic problems shrink in comparison.
In everything we do economically, as a nation and a state, we need to focus on how it builds up working people. Do that, and all the other economic problems become much easier to sort out.
Tom Cantlon is a longtime local resident, business owner and writer. Contact him at TomCantlon@TomCantlon.com.
Martin Feldstein: 11/29/10 Washington Post
Savings and Loan prosecutions: William K. Black, Senior regulator during S&L debacle. huffingtonpost.com/william-k-black/obama-embraces-the-econom_b_811487.html
Germany: The American Prospect prospect.org/cs/articles?article=business_is_booming
Center for Disease Control
Kaiser Health News
New York Times