The Democrats and the Economy II. A Path Forward

 

On Monday the Democratic Congressional leadership held a rally in rural Berryville, Virginia. They laid out a program designed to appeal to the middle class and blue-collar workers who voted for Donald Trump.  However many of their proposals involve expensive government programs and therefore would add significantly to the national debt.


What is needed is a greater emphasis on free-market ways of helping middle- and low-income workers such as:

  • Increasing basic economic growth which has stalled to a relatively slow 2% per year of GDP since the end of the Great Recession in June 2009. For example:
  • Revenue neutral tax reform, lowering rates for both individuals and corporations, paid for by closing loopholes and shrinking deductions, would have many benefits. It would stimulate business investment, create new demand by lowering the taxes paid by the approximately 2/3 of taxpayers who do not itemize deductions, and provide an incentive for multinational corporations to bring their foreign profits back to the U.S. for reinvestment.
  • Targeted deregulation of the financial sector by exempting main street banks from the onerous requirements of the Dodd-Frank Act would enable these smaller banks to lend more money to small businesses.
  • Fundamental healthcare reform to lower costs from the current 18% of GDP to the approximate 12% average of other developed countries. This would save the American economy $1 trillion annually which could be spent far more productively. The Democrats are on the right track here by refusing to accept Republican half measures.
  • Improve educational opportunities such as early childhood education for low-income families, expanded career education and job training in high school and community colleges, and more emphasis on income-based repayment for student college debt. There would be some cost involved here.
  • Modest increase in the national minimum wage from the current level of $7.25 per hour to perhaps $10 per hour and then index it to inflation going forward. The Democratic proposal for a national $15 per hour minimum wage would put too many people out of work.

Conclusion. This collection of proposals involves both Democratic and Republican ideas and should be implementable with a bipartisan effort.

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The Democrats and the Economy

 

The Democratic Party is starting to wake up. Donald Trump was elected President because he was able to appeal to blue-collar workers who feel left behind in today’s high tech global economy.
Yesterday the Democratic Congressional leadership held a rally in rural Berryville, Virginia to lay out an economic program to try to appeal to these very same Trump voters.


Such a program, would, for example:

  • Increase people’s pay by lifting the national minimum wage to $15 per hour and also creating jobs with a $1 trillion infrastructure plan.
  • Reduce their everyday expenses by providing paid family and sick leave as well as breaking up large monopolies which can raise prices without restraint. Also empowering Medicare to negotiate lower drug prices for older Americans.
  • Provide workers with the tools they need for the 21st century economy by giving employers, especially small businesses, a large tax credit to train workers for unfilled jobs.

Unfortunately, there are problems with most of these ideas. In Seattle even a $13 per hour minimum wage has significantly reduced minimum wage work. The national minimum wage should be raised but to a more modest level.
There is no demonstrated need for a large-scale publicly funded infrastructure program and it would add hugely to the national debt.
A jobs program to maintain the employment rate for prime-age workers without a bachelor’s degree at the 2000 level of 79% and at a living wage of $15 per hour plus benefits would cost $158 billion per year.


Conclusion. Yes, blue-collar workers are hurting.  Yes, some of the ideas suggested above would help them get ahead.  But many would also increase already large deficit spending and therefore add dramatically to the national debt.  What is needed is a combination of free market initiatives and carefully targeted government programs.  Stay tuned!

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