The finer points of economic policy don’t get a lot of attention in the US these days.
With a president in the White House who seems far more interested in fighting personal battles than in making policy, and the country roiled by street violence and racial animus, there might seem little reason to think about how to improve Americans’ material standard of living. But someday the smoke will clear, and leaders will once again be thinking about economics.
So I thought I’d make a list of policies that I would enact if I were in office. The overall goals of these policies would be to improve productivity, to ensure gainful employment for as many people as possible, to alleviate material deprivation and to provide for those who have trouble providing for themselves. Here’s my baker’s dozen:
Universal health care: The US should implement a government health-insurance system that pays all costs for catastrophic care and for regular health check-ups. For other care, the government would pay a share of the costs — say, 70 per cent, like in Japan — and the rest would be covered by a lightly regulated private supplemental health-insurance system.
The government’s dominant market position would allow it to negotiate low prices and ensure proper incentives, defraying much of the cost of the programme.
Pro-employment policies: Income is important, but having a job confers many benefits beyond just the paycheck. The government should use corporate-tax incentives to encourage companies to hire and retain workers during recessions. For those who can’t find any job in the private sector, the government should provide jobs directly.
Improve infrastructure: This is one of government’s most essential functions. Enough should be spent to maintain road networks and improve electrical grids and water systems.
But the US’s peculiarly high infrastructure costs need to be brought way down. A federal effort to identify and eliminate these cost overruns is in order. Making infrastructure healthier, especially removing lead from water systems, should also be a key goal.
Encourage urban density: Many Americans now are being prevented from moving to the country’s most productive cities by a thicket of zoning regulations, laborious permitting processes and outright bans on housing development. Federal and state efforts to promote as-of-right building, liberalised zoning and more construction in cities would raise national output and improve opportunity for low-income workers.
Wealth taxation: Wealth taxes work against inequality, but they can also help improve productivity. Two existing forms of wealth tax include property taxes and estate taxes.
Both should be increased. Property-tax credits for development would help ensure that the tax doesn’t discourage productive construction.
These taxes should be paired with a cut in the corporate income-tax rate, since taxing business is not a very efficient way of getting money.
Skilled immigration: An increase in skilled immigration will do many good things for the economy — boost innovation and entrepreneurship, increase the tax base and help pay for the retirement of older generations. The US should establish a points-based green-card system, modelled on Canada’s, on top of the existing family-based immigration system, and use this new class of permanent residents to increase immigration from today’s modest levels.
Wage subsidies: The government now subsidises incomes through the earned income tax credit, which has been proven to be an effective poverty-fighting system. The country should shift this programme to be a wage subsidy, so that workers experience the added income as a boost to their paychecks rather than a check from the government. The amount of the subsidy should also be increased.
Stronger antitrust enforcement: There is evidence that creeping market concentration is raising consumer prices and reducing the share of income that goes to workers. Stronger review of mergers, and continuing review of past mergers, would help reverse this trend and increase competition throughout the economy.
More research funding: Research, the ultimate key to productivity, is getting more labour-intensive, which means more needs to be spent to keep the locomotive of technology chugging forward. The US has fallen off in this regard, but it could restore leadership quickly if it wanted, thanks to its excellent system of universities and national laboratories.
Mobility policies: Americans move less than they used to, which is stopping them from getting better jobs and keeping them trapped in bad neighbourhoods. Relocation voucher systems like the Moving to Opportunity programme can help solve this problem. Funding for job retraining, continuing-education programs, and midcareer apprenticeships can also play an important role here.
Childcare support: This would give single parents a much-needed helping hand, and make it easier for Americans to balance children and careers. It would also encourage higher fertility, which would reduce the economic burden that young people must shoulder to care for the old.
Export promotion: Companies that enter world markets tend to become more productive, probably because they face stiffer competition. Although certain export subsidies are banned by international trade agreements, the government can still provide a variety services to help smaller, domestically focused US companies break into global markets.
An export-promotion agency could find all sorts of innovative ways to turn US companies’ focus outward.
Federal housing for the homeless: Homeless people are the most abject and destitute of Americans, so helping them should be a priority. There are fewer homeless people in the US than there used to be, but the problem is more concentrated, overwhelming social services in some cities.
A federal initiative could help bring the national homelessness rate to near zero.
This list of policies is eclectic. It draws on ideas from multiple ideologies, from social democracy to free-market neoliberalism to industrialism.
Many of the policies, like more jobs, less lead pollution, housing for the homeless and universal health care, would have positive social benefits in addition to their economic effects — reducing crime, increasing dignity and creating a healthier, happier populace.
As soon as possible, the US should get back to economic policy. There is much work to be done.