Behave Yourselves

Posted: August 16, 2011 in Economy, Politics

As campaign season for 2012 gets into full swing, the rhetoric is flying on both sides. Tea Partiers and Republicans claiming that Obama just wants to impose socialism and tax the wealthy to give it to the poor, the Muslims, and illegal immigrants. Obama and the Democrats claiming that the Tea Partiers and Republicans are willing to let the country fail so they can stick to their principles, and that they couch themselves as true patriots, but that they cherry-pick the parts of the Constitution, Bill of Rights, and Declaration of Independence that they like.

Personally, I started off as a conservative and became even more conservative while in college.  Since then, I have mellowed, particularly on the social side of things.  Our current economic malaise has caused me to start rethinking some of my long-held economic beliefs.  Two points: first, lower taxes and regulatory burdens tend to foster economic growth; second, the US has pulled itself out of previous economic downturns via government spending of one form or another.  Whether it’s a massive public works investment like the interstate system, a technological race like Kennedy’s lunar mission, or one of the many wars of the past hundred years, our government has always racked up huge spending totals and they typically have pulled us out of recession and fostered robust economic growth.  It is this, combined with the specifics of our current downturn that are causing me to rethink some of my beliefs.

The current recession started (at least in my hometown of San Diego) with the real estate crash in 2007.  We had already been at war for nearly 6 years at that point, so going to war again wasn’t an option.  In California and other hot real estate markets, massive numbers of people were being laid off…people with skills and experience that often did not lend itself easily to cross-training into other fields, at least at compensation levels remotely approaching where they had been.  The stimulus programs put forth by both Presidents Bush and Obama were certainly well-intentioned and likely did forestall a complete collapse of our economic infrastructure, but they weren’t geared towards addressing the jobs problem.  Compound that with the problems faced by most State and local government agencies with their own budgets (their own revenue projections were coming up short and the Federal government seemed to be looking to cut funds normally allocated to the States/local governments), and the stimulus funds received typically went mostly for government agencies to preserve their payrolls and not lay anybody off.  Job preservation, perhaps, but certainly not job growth.

As I see it, despite our massive debt and the issues with the debt ceiling, we need to institute a massive public works jobs program combined with serious policy reform in the regulatory, fiscal, and behavioral areas.  First, the public works program.  Nobody can deny that our infrastructure is crumbling.  My hometown of San Diego has suffered numerous water main and sewer main breaks over the past several years, one of which resulted in a hillside failure that wound up condemning several $million-plus homes.  The I-35 bridge collapsed a few years ago outside of Minneapolis.  Pick a city and you will likely find a school district with facilities held together with bandages.  Target the money on these types of projects and we can reap multiple benefits.  First, so many of the currently unemployed are from construction, engineering and other related fields.  While not all of the specializations may directly translate, the basic skill sets allow for a much easier time for someone to cross-train from being an architect into a land acquisition specialist for a state Department of Transportation than it would to go from an architect to a software sales representative.  Furthermore, there have been countless news stories in AP, Time, BusinessWeek, WSJ, etc., stating that so many of the currently unemployed simply do not possess the required skills and knowledge to apply for most of the current job openings.  So the part of the labor force that has taken one of the largest overall employment hits will get an opportunity to get many of its members back to work.  Second, this type of work is not only labor-intensive, but it is also machinery, equipment, and materials-intensive.  This then presents further opportunities for another sector of our labor force which has been taking hits over many years even before our current downturn…the factory workers and manufacturers.  For too long we have been exporting our manufacturing capacity to cheaper locales.  Having a stable manufacturing base is what allowed the US to grow to the level it did, plus the simple act of building something helps foster innovation which can have all sorts of positive economic impacts all on its own.  Third, we get not only the benefit of having safe, efficient, and functional infrastructure, but we would likely realize a healthy amount of budget savings based on both the efficiency and the fact that maintenance costs would obviously drop.

The policy reform is another story, and sadly it will be more difficult to realize.  On the regulatory side of things, the elected officials need to standardize the rules, simplify the rules, and consistently enforce the rules.  Give business owners and entrepreneurs the opportunity to actually anticipate what sort of hurdles they’ll have to leap to engage in whatever business activities they are contemplating.  On the fiscal side, there are a couple of things.  One, and here’s where the Democrats and liberals will need to accept some compromise, we have a structural spending problem.  The debt ceiling deal is certainly talking about budget cuts to discretionary spending (defense, et al), but the structural budget items like Social Security, Medicare, and the like are generally off the table.  Traditionally we have been a country of innovation…surely we can figure out how to provide an appropriate level of service in an efficient yet thorough and caring manner.  On the other hand, Republicans and Tea Partiers will need to accept compromise on both raising the debt ceiling and allowing some movement on taxes.  Ideally, in my little world I would rewrite the tax code into something simple like an across-the-board 15% tax rate for everybody, with no exemptions and no loopholes.  Some people and entities would end up paying more, but I bet a lot of people would wind up paying less, and I also bet that if the right percentage was picked, overall tax revenues would increase.  But even without my little plan, the fact remains that to initiate all of this stimulus spending I’m proposing, the government will need additional revenue.  Frankly, the economy is as shell-shocked as I’ve ever heard, and the actions currently being taken by the Federal Government (tax cuts, low interest rates, etc.) are probably not enough to jolt enough of the entities with the wherewithal to invest and expand to actually do that.  There simply is not enough confidence in our economy, from all corners of our society, so that leaves the Federal government.  Sadly, they are the only entity capable of not only undertaking the risk but also financing the risk.

The third point is also the most complicated, difficult, and likely to fail.  Our elected officials need to wholesale change their attitudes.  First, they all need to stop thinking in absolutes.  We are not in a position where absolutes are able to be considered.  Everything has to be on the table, and open for discussion and compromise.  Second, they need to make these decisions and then stick to their decisions.  The past way of imposing a regulation and instantly granting an exemption to the oil industry or the corn (ethanol) industry will not help our economy.  In the short term it might help those individual beneficiaries, but in the long run it will only serve to drag things down.

So I don’t expect to hear much if any of this discussed by the candidates during this election cycle.  Still, outside of the trying to get the elected officials to “behave” instead of act selfishly, I don’t think I’ve proposed anything particularly radical.  We shall see.

  1. […] stimulus activities.  Sadly, the weak link here will be our elected officials.  As I have stated before, our elected officials need to start looking past their own wants and needs and consider the needs […]

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