The latest numbers on the economy are alarming. The unemployment rate ticked up to 9.1 percent. Housing prices have dropped to a new low. Consumer confidence is down. The manufacturing index has taken a hit. GDP projections are being revised downward. Most people are dreading higher gas prices.
Some analysts make a case for optimism. The labor market, they say, is suffering from the crisis in Japan, and the numbers look worse because the labor force is growing. Hours worked in the private sector are up, and so are wages.
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We’re not persuaded. Even at its best, this recovery has been weak. We have had a persistently high level of long-term unemployment: a social catastrophe with no end in sight. The higher taxes and increased regulation that Democrats in Washington are promising will, on the margin, further weaken the economy. But the spending cuts that Republicans are finally getting serious about, while welcome, will not by themselves return us to prosperity, either.
The country needs short-term measures to accelerate the recovery and long-term measures to increase our trend rate of economic growth. Yet even that will not be enough. During the last decade we have had periods of economic growth without wage growth. Middle-class prosperity — a big part of the American dream that Republicans rightly say they want to restore — requires more than growth, as important as it is.
We cannot claim to have a ready-made agenda to achieve these goals. Our hope is to stimulate conservative thought about how to reach them. But it seems clear that the tax code as currently structured is an obstacle to them.
The bipartisan tax deal enacted this winter temporarily cuts the payroll tax for employees. To assist job growth during the recovery, there should also be a temporary reduction in the employer side of the tax. Companies would then have a way of reducing labor costs per worker without cutting wages.
Reducing tax rates and eliminating tax breaks, as Republican candidates are increasingly proposing, would help the government raise whatever revenue is considered appropriate while doing less damage to the economy. Reform is especially needed in the corporate tax code, as members of both parties are coming to appreciate. Both our statutory and our effective marginal rates are higher than those of other developed countries, and the difference is starting to hurt.
To moderate the rise in health-care costs, the existing tax break for employer-provided health insurance should be altered so that its value stays the same regardless of the price of the insurance policy selected. Cheaper policies should yield savings for the insured. As Yuval Levin and Ramesh Ponnuru have argued, people who do not work for companies that offer health insurance should be able to use the credit to purchase insurance for themselves.
Middle-class parents pay too large a share of the tax burden because the tax code fails to recognize that the expenses involved in raising children are, in part, contributions to the future health of entitlement programs. Tax reform should remedy this defect of the code as well.
Doubtless there are other policies that could be changed to promote a widely shared prosperity. A substantial reduction in illegal immigration should relieve the wage pressure on the low end of the labor market, and a reform that increased the skill level of legal immigrants should promote growth. Monetary policy could provide better macroeconomic stability were the Federal Reserve to be guided by a clear and sound rule, preferably encoded in statute.
But again, the goals are more important than the precise means used to achieve them. Conservatives should offer policies that help the middle class thrive for its own sake. We are also unlikely to achieve lasting spending restraint until we do.
There are a lot of young faces in that photo who probably voted for Barack Obama. Standing in an unemployment line and competing for those jobs that are available isn't the hope and change they expected and it shows on their faces. What is happening to them is the reality they never saw coming because they were caught up in the fantasy the cool guy with the silver tongue created for them.
Whoever gets REALLY serious about the agenda outlined above should be able to ride into the White House in 2012. If, however, we are to have statism 101 from the incumbent versus general GOP bromides about "growth" (which forget about the middle class) while the GOP House remains spoofed about doing anything, then perhaps the Tea Party should think about helping the RNC and its party go the way of the Whigs, Federalists, and other parties that outlived their usefulness....
Not all, but a lot of white collar jobs are going to cheap H1 visa workers being imported into this country to work well below the salary of an American worker. They really don't bring special skills as the program was intended. They are simply cheap labor. Couple that with wide-spread outsourcing to offshore firms and the fact that companies are globalizing their go-to-market strategies at an increasing rate to capitalize on emerging markets and you have a recipe for the real downfall of this country: corporations that forget their American identity and, therefore, their allegiance.
You are exactly right. I have worked in IT for years, and now when I contract at a company, one third to three fourths of the technical people are from India (either by insourcing or outsourcing). And many, though not all, have no idea what they are doing - certainly they don't have 'better' skills than Americans. The unpopular truth is that the Americans left working at these companies usually end up spending long hours cleaning up their messes.
The problem is that there are no more 'American' companies - they are multi-national, with no loyalty to our nation at all. They only care about the bottom line.
People seldom ponder the effect of the Democrat takeover of the congress after the 2006 election. The first thing they did was raise the minimum wage and put a stop to entry level hiring. The minimum wage is a misnomer in that employers can hire someone at a reasonable hourly rate to see if they are suited for the work without having to over invest in them. When that rate is unreasonable as it is now employers just stop hiring untested applicants.
Nobody has to "live" on minimum wage. If the employee puts forth effort his boss is glad to make it worth his while.
If Tim Pawlenty's economic plan is any indication of what's to come, Republican presidential candidates will try to outdo each other on trickle-down tax cuts. By the end of the campaign, I expect someone to propose that workers simply transfer a portion of their income directly to Paris Hilton's trust fund. She's quite the little job creator.
They do, however, describe a behavioral situation: those who would hire believe they're at odds-or war- with their government. They're not hiring for fear of some new arbitary constraint, taxes or regulation, that's likely to be imposed on them.
The situation isn't a matter of resources, or fiscal or monetary policies.
More, three years ago we had a skilled labor shortage.
Skilled labor plateaued, and baby boomers are -or were at least- preparing to retire.
My judgment is that this shortage persists.
Here in MA, I know no one who wants a job who hasn't got one or can't find one. There's plenty of hiring going on. And believe you me, we have the most confiscatory personal plus corporate tax rates in the country.
NRO, why nibble around the edges proposing tweaks to our broken, special-interest dominated, income tax system? As we've all become more aware over the past couple of years, the "rich" never had enough money to pay for all that the federal government wanted, and the uber wealthy have long since figured out how to avoid paying much in income taxes anyway. The dirty little secret is Washington has always known that the middle class was where the real money was. Hence an income tax that takes just enough to keep the middle class from ever being able to become truly wealthy (i.e., independent of big brother) by siphoning off their nest egg before it can be accumulated. All in exchance for government dependence as soon as we retire.
The current tax code is broken, and just tweaking it isn't the bold step needed to turn things around. A bold move like changing to the FAIR tax is the only hope of jumpstarting an economic recovery at this point. A flat tax is just another tweak to a system that we all know is broken and economically counterproductive. All the complaints I hear about the FAIR tax are invariably based on ignornance or fear. So before anyone starts saying why it won't work, I suggest you find out the facts from the source, not from someone else who's against it.
pdevlin makes a good point about companies not particularly having any sense of being American--unfortunately, that's not something that any policy in particular can fix. The government can't, and shouldn't, be in the business of telling corporate decision makers how to feel.
And the consumers in this economy are also not going to put huge pressures on employers who are providing cheap goods. When you're not sure how far the paycheck is going to stretch, the question of boycotting a company that makes it stretch further becomes somewhat academic.
That part of the problem is deep and cultural, not political. We need people to want to hire, to build their communities as part of their wealth. Fetishizing the community above individual success has been the sin of the left; fetishizing individual success without regard to the community has been the sin of the right. Culturally, we need to lionize people who build businesses that build their home cities. That will never be the job of the government--it's the job of the culture-makers. Anyone want to give odds on that happening? (I mean, other than the "Imported from Detroit" commercials.)
Solutions are easy but are politically unpalatable.
To wit:
(1) Build a fence along the Mexican border. True, this is gov't spending, but as opposed to "Cash for Clunkers" or "Cash for Caulkers", there is a tangible product created. What's more, the product will severely slow the massive influx of cheap unskilled labor that has decimated the bottom of our work force. While 12 million Central American's pose no threat to my profession, they have devastated entry level or fall back jobs for millions of Americans. 20 yrs ago if you lost your job driving a forklift, at least you could make $$ cutting grass. Not as easy today when a 14yr old from Guatemala can undercut your wage.
(2) Remove the regulatory roadblocks for energy exploration in the US. Dear Leader and his minions have:
-postponed shale oil exploration leases in the Rockies
-put a moratorium on Gulf drilling &
-fought Conoco at every turn in their North Slope project
The next POTUS (if he actually want the US to develop our resources) has the opportunity to unleash a huge energy boom. The current is a modern Don Quixote.
(3) transfer health ins. tax deductions to individuals 100%. Employers that currently pay would have to include as take home pay the current amount they kick in through payroll contributions. This would be hugely educational so that individuals could see how much they are paying for benefits. It would also give incentive for workers to examine the plan they use and take ownership of negotiating a good deal.
Lowest effective tax rates in the OECD. WRONG,,, these rates are easy to look up on the internet...
Lack of regulations is exactly what got us where we are now. WRONG Again,,, As Americans we are over regulated, every aspect of or lives,,, usually under the false heading of "safety".
