24 hours after most Congressional Republicans came to their senses we have effectively kicked the can into early 2014. The president is feeling a little cocky, Boehner is holding on, the GOP is ruing the day it hooked up with the Tea Party, and many in the Tea Party are upping their Thorazine dosages. But what is in store for America? The economic recovery is sputtering, labor markets are anemic, political will is absent, fiscal policy is missing, and too many of our representatives are preoccupied with re-election. So how do we get this ship righted?
For starters, fix immigration now. It is the single biggest reason why we have few start-ups today than before 2001. Start-ups become small businesses and small businesses are the labor engine of America. According to The Economist, start-ups created 2.7m new jobs in the 2012 financial year compared with 4.7m in 1999. The Republicans need to accept that they have no one to blame but themselves for driving immigrants into the arms of the Democrats. After all, when you talk about electrified fences, moats, and self-deportation what do you expect? But if you truly are patriotic pro-business Party of Lincoln lovers of American exceptionalism, you will fix our broken visa system.
Of course, the Democrats and the White House could meet the Republicans half way and look to scale back some of the 100 new regulations that are impairing small business growth. America needs regulations, but I also believe we need to follow the axiom of Mr. Alfred E. Khan, the man who led airline deregulation under President Jimmy Carter in 1978: “I believe in deregulation where regulation is unnecessary, inefficient, and injurious to consumers.” Scaling back could be a valuable bargaining chip with Republicans while also enabling job growth.
Then there’s the tax code. Special interests and various business lobbies will try to protect their pie over the greater national good. The tax code needs to be simplified, carve outs and loopholes closed, and the myriad of tax credits that creates manipulation bordering on cheating need to be replaced by grants. Our byzantine tax code does cost us jobs as companies retain their foreign earned cash overseas to avoid high repatriation taxes and lower effective corporate tax rates entice companies to set up operations in these lower cost sovereignties. Offer a repatriation holiday, but tie it to domestic economic development in the form of capital investment, education, and employee training. I know this sounds like governmental meddling and there may be unintentional consequences, but leaving the trillions of dollars offshore does no one any good. On the individual side, increase or remove the payroll tax cap to bolster social security, increase the gas tax to fund infrastructure, and most of all stop penalizing success. Simply taxing by income level dis-incentivizes many and leads to cheating, lower the rates, cap deductions, and institute a national sales tax.
Did I mention spending? If you think revenue and immigration are contentious, wait till we start talking about spending. I don’t see boom times coming anytime soon like we have seen in previous recoveries, simply because the most recent bursting of debt, housing ,credit, and bond bubbles has handcuffed the economy. The new millennium technologies are not job creators to the same degree as even the most recent ‘new things’ and the level of education required to fill the millennium jobs exceeds what we are turning out. So without growth and income to reduce our deficits and debt we are face with the short term discretionary spending on stabilizers and defense and the lone term mandatory spending on Medicare and Social Security. What do you do? Sequestration resulted in broad cuts and while no one was happy about that, suddenly democrats are talking about how the deficit is shrinking. Yes the same people that opposed any spending cuts, while the republicans can’t admit that a democratic president has cut spending especially after the republican spending spree under Bush. What the sequester has taught us is, dire predictions from pols and economists are less accurate than a soccer game picking squid.
I expect many oppose these concepts, and some sacred cows will need to be touched. Yes it will be controversial and painful. I believe there is a lot of common ground in everyday America and that compromise is possible. Sadly, I do not believe our elected representatives can get the big deal done. I am especially pessimistic knowing that the Republicans have eight legislators, including Paul Ryan, that voted no Wednesday night as members of the latest incarnation of the Super Committee. And the democrats have offered up Bernie Sanders the leftiest of the left. What could go wrong?
If only our elected officials would make a New Years’ resolution to actually get something done in 2014. Not holding my breath.