The path to a booming economy
Following “conversations we have had over the past three months with top lawmakers, officials, their senior aides and the CEOs who advise and lobby all of them,” Jim VandeHei and Mike Allen published an article at Politico which declared, “Most politicians in the most powerful positions in Washington agree in private that there are a half-dozen or so big things they could and should do that could put a rocket booster on the U.S. economy — but they are too timid to say it in public.”
The five components of this economic rocket booster turn out to be “tax reform that goes way beyond individuals and rates; much deeper Social Security and Medicare changes than currently envisioned; quick movement on trade agreements, including a proposed one with Europe; an energy policy that exploits the oil and gas boom; and allowing foreign-born students with science expertise to stay here and start businesses.”
You can get a feel for just how “nonpartisan” or “post-partisan” the Politico brain trust really was by noting that one of the quoted members is Warren Buffett. Every businessman quoted in the article is a high-level corporate CEO – a group not generally sympathetic to small business. In fact, as a class, Big Business honchos are noted for using their influence upon government to create policies actively hostile to their smaller competitors. It was not difficult to find enthusiasm among such people for the job-killing super-weapon known as ObamaCare, for example. This is not to say that top-level CEOs can’t have some good suggestions, or that none of them are legitimately concerned with the best policies for general prosperity, but the old trick of insisting that conservatives should automatically agree with the proposals of billionaires, because they’re the living incarnation of free-market capitalism, is becoming tedious.
The quest for a post-partisan economic boom strategy designed by straight-talking CEOs and high-minded centrist politicians is reminiscent of the quest for cars that work just as well as today’s models, without burning any fossil fuels. It might happen someday, but for the time being, it is best to view all claims of success with a degree of healthy suspicion.
In this particular case, the Politico piece would have us believe that opposition to its five Big Ideas is a matter of partisan thick-headedness from both sides of the aisle… but anyone who has been paying attention knows that opposition to “tax reform that goes way beyond individuals and rates” is now an article of religious faith among Democrats. Perhaps it escaped the Politico writers’ notice, but the Republicans actually did just put such a plan on the table, and President Obama wouldn’t even dignify it with a response. Granted that it wasn’t nearly bold enough to launch any sort of economic boom, but clearly Republicans as a group have signaled their willingness – and in some cases, eagerness – to talk about tax simplification, while Democrats have become passionately opposed to even relatively mild simplification strategies. They would rather set up an alternative tax trap like the “Buffett Rule” to recapture the government revenue lost to deductions, while keeping the insanely complicated tax system in place. In fact, ObamaCare is making it vastly more complicated. There are individual rules, such as the woeful “unearned income Medicare contribution tax,” which are generating dozens of pages of fresh tax code.
The kind of Fair Tax or Flat Tax simplification that really would launch an economic boom is not seriously on anyone’s radar screen. It really should be – instead of adopting a defensive crouch, the House Republican leadership should be proposing such bold pro-growth ideas – but that doesn’t sound like the kind of tax-slashing party the Politico team of billionaires and “post-partisan” politicians wants to throw. None of their five big ideas lives up to its billing as economic rocket fuel. The ideas for accelerated trade agreements and a better energy policy are fine proposals, but the latter is never going to get past Barack Obama’s bloody-minded determination to “transform” America by moving its citizens forcibly toward the low-energy green-crony future he envisions.
Entitlement reform is indeed a serious topic, but once again, it will encounter something approaching jihad-level resistance from Democrats, who have spent years staking their political futures on the claim that Social Security and Medicare are doing just fine, and don’t need serious reforms. The case for the looming shadow of entitlement implosion as a cause for current economic torpor is tough to make, because a lot of people – both consumers and business types – have swallowed the Democrat rhetoric that nothing is wrong. That’s broadly true of the general Washington fiscal crisis, too. It most certainly will cause economic devastation when the whole thing collapses, and some far-sighted investors are making preparations for that rapidly approaching day, but it’s not clear that fear of anything further away that Taxmageddon and the full implementation of ObamaCare is causing major depression right now. It’s easier to make the case that most of America should be more worried than it actually is.
And the entitlement reforms described by Politico have an all-too-familiar ring to them:
“The critical problem is entitlement reform, and if taxes even have to go up to get an entitlement deal done, that still solves the vast majority of the issue,” said Kenneth Griffin, who founded Citadel LLC, a hedge fund, and is worth an estimated $3 billion. He is a Republican.
Nearly every lawmaker and staffer will tell you privately that they know the Social Security retirement age needs to go up, the rate of growth of benefits needs to be slowed on a sliding scale that protects the poor, the cap on income subjected to the tax that finances the program needs to rise and the rich should get smaller or no payout from the program.
They will also tell you Medicare, which is on pace to be insolvent in 12 years, is a much, much bigger mess and threat to long-term economic vitality — and much harder to solve. Yes, the rich need to get smaller benefits, but that is almost meaningless in terms of fixing it. Ultimately, many Americans will have to get less generous benefits that start to kick in at an older age — and those changes need to start a decade from now. Otherwise, the math simply doesn’t work.
(Emphasis mine.) So we save Social Security and Medicare by picking the pockets of upper income earners, stealing their benefits, and rejiggering the systems into even more blatantly “progressive” welfare programs? Perhaps they should have been sold that way in the first place… but of course, they might not have passed if “progressives” had been honest about them at their inception. Instead, they tricked America into thinking they were launching big communal “investments” to guarantee our retirement incomes and health care. Only now, after these systems have dragged themselves to the edge of insolvency, while acquiring enough political voltage to become nearly untouchable “third rails,” do we learn that they’ll have to become simple wealth-transfer programs in order to survive.
It’s become a common observation that cutting Social Security checks to billionaires like Warren Buffett is silly. Well, okay, but that observation should have been made at the time of the program’s inception, not before Buffett (and more pertinently, people with far less wealth who are now classified as honorary “millionaires” and viewed as pinatas full of potential government revenue) spent a lifetime making involuntary “investments” into a system that promised guaranteed returns. At any rate, there just aren’t a lot of “millionaires” collecting Social Security checks. Terminating payouts to the hated Two Percent will, by definition, reduce the liability of the system by about… two percent. The biggest upside to scamming even more “contributions” from successful Americans, while looting their Social Security and Medicare benefits, is that we could stop pretending these magical programs are anything other than standard-issue, under-funded wealth redistribution schemes.
And the last big idea advanced by Politico for creating an economic boom is the most puzzling:
The one issue where it’s hard to find a single detractor in a position of power is getting more high-skilled immigrants here. There is a simple solution to this that both parties agree on. It’s called the STEM (science, technology, engineering, math) Jobs Act, a confusing-sounding law with a straightforward purpose: Allow at least 55,000 immigrants with science expertise into the country to help innovate. It’s a spinoff of another idea that most lawmakers agree on: Staple a visa to the degree of any foreign-born student who graduates with technology and science expertise. This bipartisan concept has been the casualty of partisan squabbling for years now.
“This country was built on the talent and the energy of immigrants,” Buffett said. “We attract them — and then we send them back.”
Goldman Sachs CEO Lloyd Blankfein added: “America is still the magnet. I think some people are trying to demagnetize the idea, but they have not been successful so far, thankfully.”
Sensible reforms of legal immigration procedures are a grand idea, but why the hell are we talking about importing high-skilled people into an Obama economy with permanent double-digit real unemployment? Why don’t we talk about fixing our grotesque unionized public education system, reforming the increasingly absurd higher-education racket, and thereby radically improving the cost-benefit ratio of American education to grow our own “graduates with technology and science expertise?” Now that would be a boom worth getting excited about!