Editor’s Note: In the lead up to Election Day, we teamed up with Jim Stone, author of “Five Easy Theses” to test your knowledge of America’s economic challenges in our post “Are you an informed voter? A quiz.” With Donald Trump’s inauguration now a week away, we asked Stone to discuss how Trump could tackle America’s largest economic issues.
— Kristen Doerer, Making Sen$e Editor
My recent book, “Five Easy Theses,” offered thoughts about logical resolutions to five thorny public policy issues. When I wrote it, though, I was guessing that the next president would be a traditionally mainstream Republican or a Democrat. Although I called attention to angry voters, I underestimated their impact, especially in the Rust Belt.
It is clear now that the majority of non-coastal voters so deeply wanted a change agent that they were willing to accept one with an astonishingly apolitical personality and a highly abstract policy offering. Given the unusual combination of an apparently fearless chief executive and an ideologically aligned Cabinet, House and Senate, major change is now a possibility for the first time in many years. Whether we will like the changes depends on our preferences as well as unforeseeable future context, but I’d like to lay out, in my five selected policy areas, some directional shifts to hope for and some to fear.
In my first chapter, I urged limiting deficit expansion to meeting the needs of short-term stimulus and investments for which our offspring would thank us. We should applaud the new administration if it launches a major infrastructure investment program. The next generation needs the improvement in our schools, roads, bridges and water facilities. Deep concern over deficit growth will be called for though if taxes are cut dramatically while expanding spending in this manner. I also suggested shoring up Social Security, even if that requires raising both the income cap and the retirement age. We should unite behind a responsible long-term solution for Social Security, and neither party should use the issue for shameless demagoguery. But we should fear Social Security privatization that would leave us to bail out the poorest, the sick, the unlucky or even the foolish. A civilized nation can’t let any of them starve on the streets.
This is the big one for the angry voters – even those who fail to see the connection. Other than during the Great Recession, our economy has actually done reasonably well in recent decades. The problem is not that the U.S. prosperity has faded, but that the new wealth has been sequestered by a select few. Believe it or not, from 2003 to 2013, more than 110 percent of all wealth created went to the upper 10 percent of earners. (Yes, the top decile not only netted all the new wealth but captured an existing slice from the other 90 percent as well). We should be dead set against enacting any tax cuts that increase disparities. Instead, we should support meaningful job creation programs and an end to personal and corporate tax gimmickry.
Here we can hope for a serious new commitment to vocational education, conducted in partnership with businesses that have actual jobs to offer. We can also cheer if the most is made of the charter school opportunity, using these schools to benefit not only participating students but to shine a beacon on best practices that can be adopted by district-operated schools. We should heartily resist going too far, though, and eviscerating the public education system or channeling money to religious schools.
It will be a praiseworthy accomplishment if the Trump administration can honor the candidate’s promise to lower drug prices by permitting properly vetted competition from overseas. We should be similarly approving if malpractice tort reform is enacted and it produces reductions in unnecessary testing and other aspects of defensive medicine. Greater applause still can be earned if rationality is introduced into end-of-life care — not through the bugaboo of “death panels” but by asking Americans while still healthy to specify how much extreme intervention they want at the end — and honoring their wishes. We should be fearful if we retreat from universality of coverage. The savings in doing so would be largely false and the pain unnecessary.
Finally, I suggested a new round of financial sector reform rooted in more disclosure and less leverage. If Dodd-Frank is to be diluted, as seems likely, let us hope that any relief from operational restrictions is in trade for compensating improvements in regulatory philosophy writ large. It would be a huge boon if bank capital requirements were raised, all derivative positions had to be backed with suitable reserves, and hedge funds were governed under the same disclosure rules as mutual funds. Financial regulation can be less specific and more effective at the same time … and we can greatly lessen the risk of another crash. It is clear already that finance will be well represented among the policymakers. We should pray that this brings a “takes one to catch one” sophistication rather than foxes in the hen house.
Our fate on all of these matters can go either way from here. Pivotal moments in history impose a heightened duty on all of us to stay informed and participate actively. Like the man said, this could be huge!