America Needs Good Pro-Growth Structural Reforms

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WASHINGTON – After the August 24 sell off, there was no real bounce back. The US stock market regained some ground, but only some. Still too many uncertainties for investors, I guess, from the Fed and its decisions on interest rates to the real global ramifications of the Chinese sudden and somewhat mysterious convulsions.

Put our house in order 

Alright, enough of that. Forget about markets. The smart thing for America would be to begin –right now– to put our own house in order. In order to do so, we need to focus on at least three major areas:

1) Fiscal and Tax Reform

2) Deregulation

3) Public Education Reform

Fiscal reform 

On fiscal and tax reform, Washington had a great opportunity to start the process back in December 2010, after the release of the final Report by the National Commission on Fiscal Responsibility and Reform headed by Erskine Bowles and Alan Simpson, (it was also known as the “Debt Commission”). The bipartisan Report, (endorsed by the majority of the Commission members), was aptly titled “The Moment of Truth”. It provides a good start on a process eventually leading to entitlement and fiscal reform. It is a genuine bipartisan effort led by two credible, experienced national leaders, a Democrat and a Republican. Granted, it is not comprehensive. It does not seriously address health care policies. But, there again, it was a good faith attempt to get things moving. It was a very good start.

Well, President Obama looked at the Report, thanked the co-chairmen and essentially discarded it. Notwithstanding subsequent political upheavals, Tea Party activism, Republican congressional victories and more, we have made zero progress to reach the needed political agreement on reform. And yet real fiscal reform that would have to include a major overhaul of the large and soon unsustainable entitlement programs (Social Security, Medicare and Medicaid) is essential.

Necessary 

Let’s be clear. This reform is no guarantee of long term economic growth. But it is hard to believe that we are going to go very far while America will carry the weight of an enormous debt burden. Look at anemic Japan. Is this where we want to go?

Same for tax reform. America has an absurdly long and complicated federal tax code. We have the highest corporate tax rate in the developed world. This is not good for business.

(It would be nice to see some serious discussion about these issues in the unfolding campaign. This would be more substantive than stupid polemics about “anchor babies”).

Deregulation 

Ditto for deregulation. When concerns about regulatory compliance become the overriding daily preoccupation of business owners, we have a real problem.

Regulations should be about establishing and enforcing reasonable environmental, work safety and public health standards. But now we have gone way beyond that. The attempt by the US Environmental Protection Agency, EPA, to essentially outlaw coal-fired power plants (and more) by regulatory fiat, on questionable legal grounds, is just the latest illustration of this.

Education reform 

And finally public education. This is after all and will be the “Knowledge Economy”. In this new world, If you do not have a good education, you are done. If you do not know much, if you do not master sophisticated skills, you simply do not have the entry ticket. Period. No way to have access to good jobs. You will be relegated to the lower echelons of society. No prayer to  become “upwardly mobile”, as we used to say.

Slice it the way you want, but if we do not get serious about drastically improving American public educations standards, at least half the country, the half that cannot afford private education and live in poor neighborhoods, will be left behind.

We need an action plan 

This is what needs to be done –today. Forget about Wall Street gyrations. Let’s get busy and rebuild the solid fundamentals of a world-class, truly competitive US economy.

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