The nation is at war. Worries over government finances overshadow policy debates. Amid other pressing policy objectives, the president pursues an agenda to enhance economic opportunity.
The president was Abraham Lincoln, whose 205th birthday we celebrate today.
Today’s economic-policy debates are stuck in time, despite significant economic changes from globalization and technological advance. Political visions remain frozen in a contest between a laissez-faire view of growth and economic dynamism, in which a rising tide lifts all boats, and a statist view of economic security, in which entitlement programs take center stage. The visions make little attempt to adapt to earnings stagnation for many Americans — which causes many to doubt whether our dynamic economy can create mass prosperity — or to budget realities — as escalating entitlement spending shifts government’s focus away from the nation’s future to its present or past.
As in Lincoln’s day, this logjam must be broken with an agenda for economic opportunity. While that may sound unobjectionable, such an agenda is not obviously attractive to partisans of “safety net” security or of growth and dynamism. At present, the Left’s welfare-state agenda muddies the water by focusing on unequal incomes rather than unequal opportunities. An emphasis on increasing taxes on high earners, raising the minimum wage, and extending unemployment-insurance benefits hardly resembles a platform for job creation and income growth.
What would a mobility-enhancing agenda for today propose? A dynamic economy requires support for innovation, market expansion, and entrepreneurial risk-taking. “I know of nothing so pleasant to the mind as the discovery of anything which is at once new and valuable,” Lincoln said. Higher federal spending on basic research, trade-promotion authority, and business-tax reform to reduce marginal tax rates on income from business investments are important.
But, so, too, are an increase in focused spending on education and training, simplified and expanded tax incentives for higher education, and greater support for work. Education reforms could include vouchers for primary and secondary education for low-income students, and expanded education-savings incentives to make the cost of higher education and the human-capital investment it represents tax-deductible. Substantial support for individual job retraining could be advanced by creating Personal Reemployment Accounts, which would couple a grant for training and income support with a reemployment bonus if the individual takes a job within a specified amount of time. Finally, work incentives can be advanced by expanding the present earned-income tax credit for workers without children, or designing a new tax credit to supplement the working poor’s incomes that would reduce their income- and payroll-tax liability.
Republicans should not be timid here. Lincoln was not: He expanded land ownership (the Homestead Act of 1862), access to higher education (the Morrill Act of 1862, with support for land-grant colleges across the states), and the scale and scope of commerce and trade (the Pacific Railroad Act of 1862, which supported the transcontinental railroad).
That such measures were championed in the presence of the strategic and financial exigencies of the Civil War is a testament that there are opportunities to enhance economic opportunity in even the most difficult times. It’s also important that these steps empowered Americans: They emphasized providing access to the ladder of opportunity and narrowed the spaces between its rungs. The agenda was not one of economic security, but it still was one of significant government intervention.
Lincoln’s crusade for economic development was a lifetime political agenda. Just as the opportunity agenda he championed is much bolder than many conservatives appear willing to propose today, he was much less mired in emphasizing inequality than today’s Left. “I don’t believe in a law to prevent a man from getting rich; it would do more harm than good,” he said. “[But] while we do not propose any war upon capital, we do wish to allow the humblest man an equal chance to get rich with everybody else.”
President Obama would do well to channel the 16th president’s strong focus on economic opportunity. And Republicans should use Lincoln Day dinners to reimagine an opportunity agenda for mass prosperity.
— Glenn Hubbard, the dean of Columbia Business School, was chairman of the Council of Economic Advisers under President George W. Bush.