Category Archives: Better Way

We Need Fundamental Change and Now We’re going to Get It!

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I want to emphasize that I voted for Hillary Clinton on Tuesday because Donald Trump has such a sleazy and mercurial personality. But Mr. Trump was clearly the change candidate and we need change big time.  His strongest base of support is the white working class which has not really recovered from the Great Recession of 2008-2009 and he will surely try to help out these people.

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Here are the changes we need in order of importance:

  • Grow the economy faster. Tax reform, individual and corporate, and regulatory reform are what are most needed. Mr. Trump and the House Republicans are in rough agreement on both of these major initiatives and hopefully the new Republican led Senate will go along. The best kind of tax reform means to lower tax rates and shrink deductions enough to avoid losing tax revenue. This can be accomplished if a real effort is made to do it this way.
  • Begin to shrink our massive debt. This can only be done by major entitlement reform, meaning to control the costs of Social Security, Medicare and Medicaid. Medicare should be transitioned over from a single payer system to a premium support system, consistent with a reformed Affordable Care Act. Healthcare costs can only be contained by giving consumers more skin in the game, meaning higher deductibles supplemented with health savings accounts.
  • More assertive foreign policy. Worldwide peace and stability depend on our own economic and military strength. Right now China, Russia and Iran think they can push us around. President Trump will not let this happen.
  • Trade and immigration policy. Most knowledgeable people agree that international trade is generally beneficial. We simply have to do a better job of retraining American workers who lose their jobs to foreign competition. The key to immigration reform is tougher border security plus an effective guest worker visa program.

Conclusion. The Republican House of Representatives has an excellent plan, “A Better Way,” for American economic, fiscal and social renewal and Mr. Trump is largely supportive of it. This augers well for fundamental progress in the next four years.

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The Democrats Are Half Right (and Half Wrong!) on the Economy

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In my opinion both of the two main presidential candidates have overall poor economic plans.  But at least several major Democratic figures such as Hillary Clinton, the NYT columnist Thomas Friedman, and the economist Larry Summers do understand the importance of economic growth.
In particular, says Mr. Summers, “What is unfortunate is that many (progressives), in their eagerness to focus on fairness, neglect the single most important determinant of almost every aspect of economic performance – the rate of growth of total income, as reflected in the gross domestic product.”
Furthermore,

  • More growth means more employment. For each 1 point increase in adult male employment, the employment of young black men rises by 7%.
  • More growth reduces the need for desperation monetary policies that risk future financial stability.
  • If U.S. growth continues to have a 2% ceiling, it is doubtful if we will achieve any of our major national objectives. If we can boost growth to 3%, interest rates will normalize, middle-class wages will rise faster than inflation, debt burdens will continue to melt away and the power of the American example will be greatly enhanced.
  • The question is not whether business success is desirable. The question is how it can be achieved.

All of the above is very positive on the part of Mr. Summers. But then he adds, “What is needed is more demand for the product of business.  This is the core of the case for policy approaches to raising public investment and increasing workers’ purchasing power.”  In other words Mr. Summers is ignoring that:

  • Our national debt is huge and growing way too fast.
  • Wages are now increasing fairly rapidly which increases demand by itself.

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  • Investment in new business structures, equipment and intellectual property has now fallen for three quarters in a row.

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Conclusion. The way to achieve the faster rate of growth which Mr. Summers (and almost everyone else) wants is not more public investment but rather more private investment. The House Republicans have a plan to accomplish exactly this.

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The Presidential Candidates Are Clueless on the Economy

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My last several posts, here and here, have discussed the economic plans of both Hillary Clinton and Donald Trump.  In short,

  • Ms. Clinton wants “equitable” growth meaning huge new public spending on such things as infrastructure, free public college tuition universal pre-K education as well as increasing the minimum wage to $15 per hour nationally and mandating paid family leave. More public spending and new mandates will provide only minimal economic growth.
  • Mr. Trump wants to restrict the labor force with immigration controls and raise the price of imports with new tariffs. He would also cut tax rates across the board (good idea) but in such a way that would increase the national debt by $10 trillion over the next ten years (very bad idea).

They both need to take our actual current economic situation into account as follows:

  • The U.S. is in its weakest recovery since post WWII. The average growth rate of 2.2% for 2012 – 2015 has now stalled in the past year to just barely 1%.

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  • Consumer spending has been increasing steadily and rose 4.2% in the second quarter of 2016. In other words, consumer demand is at a high level.

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  • The problem is that business investment, i.e. supply, has decreased.

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The House Republicans have “a better way.” Their tax reform plan, among many other good features, would

  • Lower the top corporate tax rate from 35% to 20% and establish a territorial system, to encourage multinational corporations to produce in the U.S. as well as bringing their foreign earnings back home for reinvestment.
  • Provide a tax-free return on new investment by allowing, for the first time ever, for full and immediate write-offs.

Conclusion. The House Republicans have a sensible plan for getting our country back on a much faster economic growth track. Regardless of who is elected president, the House is likely to stay under Republican control.  I am waiting to see if either of the presidential candidates will figure this out and adjust their campaign messages accordingly.

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Donald Trump’s Best Chance to Win in November

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As I occasionally remind my readers, I am a non-ideological fiscal conservative and a registered independent. In November I will vote for the presidential candidate who has the most credible plan to address what I consider to be our country’s two more serious problems:

  • Slow Economic Growth, only 2.1% per year for the past seven years since the end of the Great Recession in June 2009. Faster growth will create more jobs and bigger wage gains for America’s workers.
  • Massive Debt. Our public debt (on which we pay interest) is now 75% of GDP, the highest it has been since the end of WWII, and likely to keep getting worse unless strong measures are taken to prevent this from happening.

According to current polls, Hillary Clinton is strongly predicted to be elected our next president. However her policy proposals will do little, if anything, to stimulate economic growth and are likely to make our debt much worse than it already is.
Capture8Donald Trump has a strong base of support among working class whites who are suffering in today’s economy and blame illegal immigration and unfair foreign trade for their woes.  However this base of support, while large enough for Mr. Trump to win the Republican nomination, is not nearly large enough to bring victory in November. The only way Mr. Trump can win is to greatly expand his base of support by appealing to moderate Republicans and Independents who are highly concerned about the direction our country is taking.
Capture9The best and most direct way for him to do this is to endorse the reform program, “A Better Way,” developed by the Republican House of Representatives, under Speaker Paul Ryan. This reform program has already unified the fractious Republicans in the House, and could easily serve as a vehicle for unifying the entire Republican party as well as many independents.
In my next post I will delineate how the Trump platform could easily mesh with “A Better Way.”

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