Last week we began a discussion about jobs; to recap the two most important numbers: we need to create 2,000,000 new jobs per year, and sustain a real economic growth rate of 3% per year, into the far future – at least through 2050. This leads to a simple question with the most complex and far-reaching implications: What must our government do to enable the marketplace to create this many jobs? It goes without saying that the only means to create 2 million jobs per year is found in the market place. It is the task of the Federal government and state and local governments to do all that is necessary for the market place to create those jobs and that growth.
The following represents a short list of the most important steps that the Federal government should take to strengthen the market place and initiate sustained real growth in the economy. The steps are divided into two main thrusts: provide stimulus to the market place to create the necessary economic growth and job growth the nation needs; and placing a rein on government growth – steps which would in turn stimulate the market place. It is not a comprehensive list and each of these steps would in fact be major undertakings of policy and bureaucracy at the federal and later the state level. Further, a great deal of work would need to take place to streamline regulation and provide the level of public safety and oversight required of responsible government, while leaving the market place free to create and develop new technologies and new markets.
Some Steps to Stimulate the Market Place:
1) Eliminate the tax on business and corporate income for all US corporations, leaving that money in the market place where is can create new jobs. As will be discussed below, this is the first and essential step to get the economy moving again, and moving in a vigorous manner. As to the argument that eliminating the corporate income tax would mean runaway deficits, history shows otherwise. Simply put, the economic growth and resulting personal income and personal income tax growth that would follow within two to three years would at more then compensate for this initial revenue loss.
There would a widespread hue and cry about favoritism if this were suggested. But the situation in which the US finds itself no longer is conducive to politically comfortable answers. The economy – the market place – must grow and grow substantially and in a sustained manner. The market place must become the primary focus of the government and the nation as a whole. It is the task of our political leaders to educate those citizens who question this fact.
2) Cut corporate taxes on foreign corporations to a rate that is below that in Europe or Japan. This would provide an incentive for foreign companies to move to the US and establish themselves in the US. Leaving tax rates for US companies at zero would then provide an incentive for these companies to relocate their headquarters to the US.
3) Stabilize personal tax rates. Constant gyration of tax rates makes investment more difficult. If we are to provide small investors more incentive to invest in businesses, there has to be a reasonable ability to forecast real return on investments, that is, returns after tax. That means taxes have to be stable. At the same time, tax rates should not continually penalize people for making smart decisions and thereby making profits. Simple tax laws, with fewer brackets, eventually a single rate for all taxpayers, provides for easier and thus more investment.
4) Eliminate inflation. Inflation’s impact on both savings and capital investments is wholly negative, impacting literally every facet of both private and corporate financial decisions. Even an inflation rate of 2% per year will erode a retirement account in short order. An individual who wishes to retire at age 65, but has a life expectancy that reaches into the 90s will find his effective income halved between his retirement and his death. As life expectancy continues to grow even low inflation rates will increasingly become curses to all of us no matter how much we have managed to save.
Inflation is not a mystery, something that simply ‘happens’ to which we are all simply victims. Inflation is a result of distinct government monetary and fiscal policies. And, the government has demonstrated, for short periods, the ability to manage real growth in the money supply so as to match and enable real growth in the economy, without cycling into periods of inflation. Driving down inflation so that it hovers between 0 and 1% will require real discipline from both the executive and the Congress, but it can be done; it must be done. The citizens must insist on it. The federal government should set as a goal to reach zero inflation within two years and then sustain a zero inflation rate.
5) Eliminate the capital gains tax for all US corporations, leaving that money in the market place as well where it can create new jobs. This would also provide additional incentives for foreign corporations reestablishing themselves as US corporations.
6) Eliminate individual income tax on any income derived from patents or copyrights for US citizens, or for any foreigner who is living in the US and has filed to become a US citizen. This would act as a draw to bring more creative and productive people into the US from abroad.
7) Establish a commission of business executives to review such legislation as Sarbanes-Oxley and other legislation that has generated excessive and costly paper work or otherwise scared business from our shores, to provide recommendations to amend or repeal such legislation.
Controlling Government:
1) Immediately cap all non-DOD spending at the inflation rate, to include Medicare-Medicaid and all other healthcare programs, Social Security and all other entitlement programs.
2) Freeze all non-DOD and non-DHS hiring for three years and then limit any and all hiring to a rate 1% less than real economic growth. (If real economic growth is flat, government should be forced to contract.) Set a definitive goal to reduce the federal workforce (to include all personnel except uniformed military and Federal law enforcement personnel) by 15 percent over the next 20 years.
3) Institute the necessary monetary policies for zero inflation.
4) Balance the budget within 5 years. A balanced budget - spending limits amendment is the surest path to this.
5) Reinstitute the draft.
Other steps.
1) Provide cheap energy. To grow an economy that can provide for a high standard of living for 450 million people means energy supplies must increase and increase substantially. Arguments to the effect that sustained economic growth can be achieved while using less energy work only on blackboards and in policy presentations on Capital Hill. They do not work in the real world. We need more power, lots more power. And that means cheap and abundant electricity. The only path to more power, on the order of 100% more power then we now generate is nuclear power.
Set a goal of doubling the electric power generated by nuclear plants over the next 20 years and doubling it again over the following 20 years. License more plants, begin reprocessing of radioactive waste, put research dollars into nuclear fusion and solve the energy problem once and for all. The Department of Energy (DOE) was established by President Carter with a charter to reduce and eventually eliminate our dependence in imported oil; since then US dependence on imported oil has doubled. A real energy plan is needed, and the money spent on the DOE - to little effect - is a good place to start to fund these new programs.
As a subset of this issue, begin reprocessing of nuclear waste. This would eliminate the contentious issue of storage of nuclear waste, provide a number of high-technology jobs, and provide ready fuel for more reactors. Other countries that have nuclear power generation plants do not have waste storage concerns, only the US. This is not a technology issue, it is a policy mistake. End the mistake, reprocess the fuel and waste, and build more reactors.
2) Space Exploration and Exploitation. In the end, we must expand off this planet if we wish to tap into larger, more economical sources of raw materials and energy. Government must develop an aggressive US space program – not one dependent on foreign participation - in concert with the private sector to move aggressively into the economic and industrial development of the solar system.
Tomorrow: What about Now?
No comments:
Post a Comment