The United States is, amazingly, still the world’s largest and most sophisticated manufacturer, at over $2 trillion. The tax system should incentivize research and everything that strengthens the advanced manufacturing sector–such as computerization, aerospace, and communications–with accelerated depreciation and tax rebates for new employees. Ideally, about 10 percent of GDP would move from the fool’s paradise of service industry–which is a massive tax on real production, because such items as consultancy and legal fees, and excessive medical-insurance and financial-transaction costs, total about $7 trillion–to the most exalted forms of research and manufacturing.
If the president was serious when he spoke on election night about conscripting young people to community and non-combat military service, he should extend the ranks of those programs to include able-bodied, low-income people and redesignate the infamous “refundable tax credits” to low-income non-taxpayers, as income supplements.
There should be a special regime for the automobile industry: A car czar should have a five-year unlimited mandate to combine the Big Three into two, and redesign compensation, work rules, retirement benefits, model design, and marketing. I intend no disrespect to Steve Ratner, but an industrialist like Lew Gerstner (RJR Nabisco and IBM) or George David (United Technologies) would be preferable to a financier. The congressional penchant for keeping Detroit on life support building green cars no one will buy, while the Japanese and Germans devour what’s left of the U.S. market, is financially assisted suicide.
To cool inflation when it surfaces, the government should arm itself with standby ability to eliminate taxes on interest and equivalent income and raise them on all sales (except medical supplies, children’s clothes, and retail groceries). The timeworn reflex of the central bankers–to raise interest rates for everyone, even though each one-point rise in the prime rate is a half-point rise in the cost of living, until inflation is defeated by a bone-cracking recession–amounts to pouring gasoline on the fire until everyone is scorched.
Regulatory changes must not take the form of Orwellian overlordship, as they did in Sarbanes-Oxley. All that is really needed is 1) reasonable lending ratios; 2) prudent variations on mark-to-market, so that short-sellers don’t hold a sword of Damocles over every public company; and 3) the requirement of truth in packaging in risk matters. Sarbanes-Oxley should be repealed. When the time comes to try to pay for all the stimulating pork and flimflam, transaction and selected sales taxes are the way to do it.
The energy crisis has to be attacked by setting ambitious but attainable automobile fuel-consumption and conservation standards, and by recourse to nuclear power. Here, we can learn from the French: Neither the spotted owl, nor the snail darter, nor the Preble’s mouse, nor Al Gore, nor Boone Pickens trying to sell us windmills, must be allowed to stop this. Nor should they be allowed to stop increased offshore drilling: Hurricane Katrina washed out one of America’s most famous cities, but did not spill one drop of oil from the offshore rigs in the Gulf of Mexico.
If radical thinking is desired, some consideration should be given to inviting Japan to join the dollar zone. The rate would have to be adopted carefully, as Japan has a national debt of 180 percent of GDP, but such a move would be a massive quick fix to much of the current account deficit. An appropriate, large oil exporter might also be considered for an invitation. Such a combination, sensibly negotiated, would be a stunning reinforcement of the world’s two largest national economies.
All of these measures except expanding the dollar zone should be rolled up into an omnibus Economic Recovery Act, Obama’s “Take Two.” The president should present them in an updated fireside-chat format, explaining, as FDR did, how the problems arose and what he will do about them. Times like this do not bring only fear and sorrow; they also invite original thinking and strong leadership. Much more of what we have seen in the last four weeks will incite nostalgia for George W., Jimmy Carter, Herbert Hoover, and James Buchanan.
– Conrad Black is the author of Franklin Delano Roosevelt: Champion of Freedom and Richard M. Nixon: A Life in Full.