With a COVID vaccine in sight, economic recovery in 2021 is a reasonable expectation. But is there a way to build a better economy, not merely a larger one? It is a promise of the incoming Biden administration. Some elements economists would include in creating a better economy are listed below.
Raise the standard of living for non-college-educated workers. It’s fallen by a lot. The result is worsening health statistics and growing family food insecurity, issues that existed even before the pandemic. Raising the minimum wage, rural development strategies and investments, and more affordable healthcare and housing are critical strategies for accomplishing this objective.
Democrats propose changes to the tax system as the best way to achieve this aim. CEOs like Mark Benioff of Salesforce, on the other hand, argue that business and job creation is a better strategy, and there is truth in what he says. But federal personal income taxes have moved far from being highly progressive, so job growth alone will likely not achieve the goal of better equality. (See graph below.) Greater use of the earned income tax, healthcare insurance subsidies, and payroll tax and childcare credits make sense as compromise policies to build back progressivity.
Watch how radically taxes on the wealthy have fallen over the past 70 years:
(Full column: https://t.co/XP0a4Iljti) pic.twitter.com/dGxmOjQ1b5
— David Leonhardt (@DLeonhardt) October 7, 2019
With a COVID vaccine in sight, economic recovery in 2021 is a reasonable expectation. But is there a way to build a better economy, not merely a larger one? It is a promise of the incoming Biden administration. Some elements economists would include in creating a better economy are listed below.
Raise the standard of living for non-college-educated workers. It’s fallen by a lot. The result is worsening health statistics and growing family food insecurity, issues that existed even before the pandemic. Raising the minimum wage, rural development strategies and investments, and more affordable healthcare and housing are critical strategies for accomplishing this objective.
Democrats propose changes to the tax system as the best way to achieve this aim. CEOs like Mark Benioff of Salesforce, on the other hand, argue that business and job creation is a better strategy, and there is truth in what he says. But federal personal income taxes have moved far from being highly progressive, so job growth alone will likely not achieve the goal of better equality. (See slide.) Greater use of the earned income tax, healthcare insurance subsidies, and payroll tax and childcare credits make sense as compromise policies to build back progressivity.
Anti-trust is also a strategy here: farmer’s share of agricultural income has fallen with the consolidation of the food chain, and workers have less power over behemoth companies in negotiating wages. Anti-trust has another benefit: our economy has become less competitive due to lax anti-trust laws for a digital era.
Increase public investment. The competition for tomorrow’s growth industries is happening today, and our federal R&D budgets are too low and too narrowly oriented towards defense. Higher taxes on high-income earners (e.g., by closing loopholes that allow Warren Buffet’s tax rate to be lower than his secretary’s), simplifying and closing corporate tax loopholes, and raising the top personal income rate could pay for the needed investment. Improving infrastructure quality also is required. Ours is crumbling, and we need broadband in rural areas. New methods of finance can help, along with more government investment.
Reduce greenhouse gasses. Economists argue that in the presence of irreparable harm, the right policy is to minimize the risk of that harm. After decades of the climate debate and vigorous efforts by many, we are fortunately at the point where the changes that will make us a greener economy will help create needed jobs. Ending subsidies to fossil fuel-based industries, building the infrastructure for electric transportation, and investing in energy storage and bio-fuel federal research are the right next steps.
Improve the value of healthcare. U.S. healthcare does not require more money. As a nation, we pay way more than any other developed country for a healthcare system with too much waste, too low quality (in terms of avoidable harm), and embarrassing public health statistics. Our financing system mainly rewards providers based on the number of procedures they do versus how successfully they keep people healthy/healthier. The Federal Government is a big enough payer that it could dramatically change incentives. Start by taking over Medicaid from states in return for states making far more significant infrastructure investments. Then combine Medicare and Medicaid (and I would suggest a public option instead of state-based ACA plans) into one system. This system should allow individuals a choice of HMO/Medicare Advantage type plans or fee-for-service plans. The Government should also contract directly with drug companies, as in every other developed nation.
Strengthen our democratic institutions and immigration system. I combine these, as they define our nation’s uniqueness and the root cause of economic success. The risks of authoritarianism are not insubstantial. Thus, it’s key to protect and expand voting rights, secure voting, and raise judicial appointment qualifications. As 50 Trump-driven voting cases were turned down by the courts, I kept asking, “What if courts are full of cronies without knowledge or experience?”
Immigration remains an issue, as political parties secure donations and votes by not solving the problem. There are collaborative solutions to address immigration issues. Finalize dreamers’ status. Find a balance between skill-based immigration and our current family-based immigration system. Fulfill our international duty towards asylum seekers and use a guest-worker program to meet the need for seasonal and agricultural industry workers. Attract and retain international students. Harder yet is the status of long-duration residents without criminal records who entered the U.S. illegally. But there are solutions. The reality is that the U.S. economy needs immigrants to avoid the kinds of labor force issues that China, Japan, and many European nations have with an aging population.
Measure more than GDP and the stock market. In business and life, you achieve what you measure. Many nations are looking beyond GDP to broader measures of how well their economies are performing. GDP is merely an accounting measure for monetary transactions. We need insights into inequality, health status, the quality of infrastructure and institutions, and environmental health as part of our measurement.
I, for one, am hopeful we can build back better. And all of us have a role in reducing political divides to get this vital “building back better” work done.