Obama Has No Bold Economic Ideas? Try These Eight.
The Washington Post's Dana Milbank says that President Barack Obama is going to serve up "warmed-over" ideas for new economic policies in his speech at Knox College today. He's probably right, but pretty unfair -- calling for "bold new proposals" without any suggestions of his own.
So here are eight economic-policy ideas Obama hasn't tried, and that Republicans would at least consider.
1. Go really, really big on job training. The federal government runs dozens of programs that provide job training and placement across Cabinet departments. There's mixed evidence as to whether they make any difference at all. Republicans, such as Senator Tom Coburn, have been trying to scrap them and start over for years. Obama should outdo them all by presenting three options: (1) privatize them with social-impact bonds, (2) block-grant the funds to the states, or (3) create a single federal job-training office in the Labor Department. He should ask for the funding to be doubled in return.
2. Link the Earned Income Tax Credit with inequality. The credit -- which, out of all such "tax expenditures," provides the biggest boost to the bottom fifth of earners -- is currently indexed to inflation. That's better than nothing, but a conservative solution to inequality might tie the size and eligibility of the credit to a measure of inequality, such as the 95th-percentile hourly wage, for instance, or with productivity.
3. Try to drive H&R Block out of business. What if you never had to file taxes? Not because taxes didn't exist, but because it was so easy that it was done automatically. A less aggressive path would be to simplify and standardize taxes, reducing the burden of filing. It's crazy, for instance, that the U.S. federal tax code has three different definitions of "child" and countless thresholds and phase-out ranges for tax expenditures. Time to simplify. And it would be much easier than tax reform.
4. Give the Fed a new, single mandate. I've longthoughtthat the Federal Reserve should use monetary policy to stabilize the path of national income in current dollars, rather than the rate of inflation. It would be a rules-based replacement for highly discretionary quantitative easing and dual mandate.
5. Lean on states to deregulate entrepreneurship. All net new jobs come from startups, according to Tim Kane, who researched the subject for the Ewing Marion Kauffman Foundation. But 23 percent of all jobs require a state license, creating a barrier to entry. The federal government should reduce its contribution to unemployment benefits for states that don't simplify the process. Other states shouldn't have to support a state's unemployed if it has chosen to lock them out of many fields.
6. Replace the tax on corporate profits with a tax on corporate consumption. My colleague Ramesh Ponnuru has written the best explanation of the proposal. In short, taxing profits raises many tricky issues and creates severe economic distortions. A tax on business consumption wouldn't penalize investment or encourage tax avoidance.
7. Let the sun set on old regulation. Congress should create a Regulatory Review Office with a mandate to re-evaluate federal rules once a decade. Like the Congressional Budget Office, it would produce nonpartisan, cost-benefit analyses without endorsing any particular solution. Congress could also design a "sunset" mechanism -- after a review, either it renews the rule or it lets it expire. Obama has proposed only discretionary, not automatic, reviews.
8. Formally repeal (or replace) the employer health-insurance mandate. The House Republicans has been dying to repeal some part, any part, of the Affordable Care Act. Throw them a bone. Limit the employer responsibility to tax reporting. Alternatively, Obama could push Congress to adopt the employer mandate in the House version of the health overhaul, which would require large employers to set aside a minimum amount of total payroll to health insurance premiums (see page 276 of the bill). The benefit is to remove the disincentive against full-time hiring in current law, which penalizes large employers for not covering employees who work more than 30 hours a week.
Today's Knox speech is the start of a multiday tour on jobs. Perhaps by the end of it, Obama will present some truly fresh ideas.
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Evan Soltas at email@example.com