Let's take as our starting point this statement by Tim Pawlenty: "This president is a declinist." This is a variation of a common theme that the Republicans having been touting: Obama is a declinist, a defeatist, he doesn't believe in American Exceptionalism. Personally, I don't think that Obama is particularly declinist, but I do think that he has no problem admitting that America, like anything else, has flaws and weaknesses that need to be addressed. I'd also argue that the inevitable decline of America has become popular in certain circles of the intelligentsia. Inasmuch as the latest manifestation of the Republican party, and especially the Tea Party, are defined by their common-sense, everyman attitude (as opposed to the pretentious liberals who are removed from the common American experience), arguing that Obama is a defeatist is likely to earn them political capital, and makes a certain sort of rhetorical sense. It's a catchphrase likely to win them some votes, because no one likes to think their nation is on a downward spiral.
The unfortunate part of this rhetorically sound tagline is that it distracts the American people from actual systemic problems that need to be addressed at this crucial point in our nation's history. Mitt Romney talked about how Obamacare takes $500 billion from Medicare, ignoring the fact that Medicare costs are projected to increase 4 percent annually until 2019, at which point they're projected to increase 6 percent annually. Medicare costs, if left unchecked, were projected to equal 10 percent of our GDP, or a slightly higher portion of the GDP than was represented by the financial industry in 2007. As far as I can tell, the Republicans have no credible plan to reduce Medicare costs that even covers the number of people currently covered by Medicare, much less expanding insurance coverage to 95 percent of the population.
Take a few points noted by Clyde Prestowitz in the blog post linked above:
The challenge of Japan in the 1980s was thought to have been turned aside in the 1990s by a combination of the collapse of Japan's great asset bubble and the dot.com revolution emanating from , where else, the United States. By the same token, the collapse of what was eventually revealed to have been the dot.com bubble, was understood to have been overcome by the dynamic U.S. real estate and services economy led by the rapidly expanding and sophisticated banks of, where else, Wall Street.What he is describing is hubris, plain and simple, and most dangerously, hubris that prevents a realistic analysis of circumstances as they actually are (or, to be epistemologically correct, circumstances to the closest approximation possible of how they actually are). What about this:
our statistical data gathering and analysis have not kept up with the evolution of global supply chains, outsourcing, labor arbitrage, and other key elements of globalization. As a result, we have been overestimating our GDP and productivity growth and underestimating the depth of the recent economic crisis and the extent of our economic decline.More hubris. Or read this article by Fareed Zakaria. Gratifyingly enough, he comes to conclusions similar to my own, specifically that fiscal austerity on the part of the government is likely to deepen and prolong the recession, and that we should begin emphasis on the manufacture of high-end technology. His specific recommendation is to borrow Germany's extensive system of vocational schools to provide a skilled workforce, but our current educational system is badly underfunded and produces a generally poor product.
The most important point in Zakaria's article is that short-term debt reduction, currently in vogue among the Republicans, will lead to long-term fiscal problems for the country. We need fiscal responsibility, not simply fiscal austerity. This is not to say that there are not spending cuts that need to be made; the Department of Defense is an obvious place to start, but government spending as a whole is loaded with pork and unnecessary waste (for which all politicians are equally to blame). Rather, the solution to the problem is that government spending needs to be reprioritized. Some areas need deep cuts, some areas need significant expansion. Most importantly, there needs to be an effort to increase federal revenue so that we can spend responsibly. Below are my bullet points for success.
1) Invest significantly in developing infrastructure. It has been noted in a number of places that the long term unemployed tend to fall out of the job market completely, which will have long term negative impacts on the economy. Construction and engineering jobs to replace our aging roads, ports, airports, bridges, etc. will be an excellent stopgap to prevent a large number of workers from being lost forever. Moreover, this effort should include efforts to make our infrastructure more green. When the Democrats talk about green jobs, the assumption is that they involve wearing Birkenstocks, smoking a lot of pot, and counting owls, but in reality green jobs are primarily construction and engineering jobs. Zakaria notes proposals by Congressmen that would allow private industry to partly finance these improvements, which is an excellent idea. But we shouldn't let the fact that these expenses will increase the debt dissuade us: they set us up for a larger tax base down the line, and in any case Japan's national debt is 200 percent of its GDP, with limited ill effects.
2) Reform the corporate tax code. I've talked about this before, but it's probably time that we actually took the CBO's suggestion and simplified and lowered the corporate tax rate. Counterintuitively, this will increase federal tax revenue by encouraging foreign businesses to invest in America while simultaneously forcing American companies to actually pay taxes. As the system currently stand, the corporate tax code essentially subsidizes American businesses while taxing businesses that haven't influenced several decades of legislation through campaign contributions and lobbyists at a prohibitively high rate.
3) Raise taxes on the rich. This will also broaden our tax base, with few to no negative effects for the population at large.
4) Rethink our agricultural subsidies and reform the process by which we charge other countries with dumping. According to Stiglitz, we spend $3 billion to $4 billion annually on subsidies to the cotton industry, without which our cotton industry could not compete globally. That's money taken out of the pockets of other programs so that we can export a raw good that is largely processed in foreign countries. The largest profits are in the finished goods. Land devoted to cotton could be devoted to another cash crop, or smaller farms that will employ a larger number of people. Similarly, international anti-dumping cases should be required to meet the same standards as domestic anti-dumping laws. There are several crops that can be imported at lower prices than they can be domestically produced, which lowers costs to consumers, and they can be replaced with more profitable cash crops.
5) Reform the federal procurement process, including the pertinent regulations. The amount of waste involved in procurement throughout the federal government is spectacular. Mandatory sources of supply remove vendors from free market competition, which leads them to raise prices. The contracting process is bloated and inefficient. There have been billions of dollars of waste on both foreign and domestic contracts associated with the global war on terror. Development of new systems is absurdly expensive. The Marine Corps' new logistics software system cost $700 million to develop, despite the fact that it is a modification of a commercially available system.
6) Reduce defense spending. Reform of the federal procurement process and a sensible manpower policy will maximize savings while maximizing the capabilities retained. If the contracting process was streamlined, the logistics and supply chain aspects of the military could be streamlined to a significant extent, reducing the total manpower required without negative impacts on capability. There are a number of large companies who perform logistical feats as impressive as those accomplished by the military, but private corporations are much more efficient. A revised procurement system will also cut operational costs by at least a third by allowing the military to purchase required goods at market price, rather than the current inflated prices. Simply holding contractors accountable for their budgets and their failures during research and development will also reduce costs. Even beyond procurement reform, simply giving the military less money will increase efficiency. The Marine Corps receives significantly less money per capita than the Army without negative effects on mission capability (it could easily be argued that the Marine Corps is more effective) while creating a culture of thrift that leads to more cost-efficient policies for the organization as a whole. The crowning example of this is the difference between the two branches' personnel policies: thrift has forced a more competitive promotion and retention policy on the Marine Corps, which raises the quality of the average individual while creating long term savings (because a higher percentage of Marines get out after their first contract expires, and retirees are a lower rank on average, while the active duty force as a whole averages a lower rank).
7) Invest in small business through subsidies, tax exemptions, grants, loans, etc. Zakaria noted that job growth is driven by new business and small business. Remove the subsidies, tax exemptions, grants, and loans that insulate large corporations and stifle small businesses.
8) Control health care costs and expand coverage. Obamacare doesn't have to be the solution, but the problem needs to be solved somehow. This ties into investing in small business, because forcing adequate coverage upon corporations like Wal-Mart will cut into their profit margins and give local businesses breathing room, but won't negatively impact large corporations enough to put them out of business. Moreover, universal health insurance improves quality of life, and although it seems like mostly a feel good about our humanity issue, it actually has broad economic effects. CBO projected that in some cases it will reduce the number of hours worked, influence individual's decisions to retire earlier, and keep some spouses in the home, and remove disincentives for low-income families to work. Because the projected reduction of 800,000 jobs is a supply-side reduction, it frees 800,000 jobs for people who want to work. Because people will work less, they'll have more time to exercise, make their kids do homework, etc. and these choices will benefit the economy as a whole.
9) Invest seriously in education, especially math and science. Zakaria's vocational school idea isn't bad, either. This is our future that we're underfunding, and moreover the university system arguably tends to saddle students with a large amount of debt while failing to qualify them for jobs. Vocational school provides an opportunity for all those superfluous psychology and marketing majors who are going to college because they were told that it's the key to success to learn a useful trade, expand our manufacturing base, and be gainfully employed without being saddled with crippling debt instead of binge drinking and sleeping through class.
10) Manufacture, manufacture, manufacture. This will be aided by better education, and also by increased federal revenue and revised spending priorities that give more to research and development.
This list isn't being declinist so much as identifying the problem areas that, if unaddressed, will lead to an actual decline. This is proactively being engaged in creating an exceptional America, and publicly addressing the need to improve ourselves for our future welfare. Tempting though it might be to rest on our laurels, American Exceptionalism is ultimately nothing more than complacency and laziness.
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