Tuesday, December 11, 2012

Ten ideas to fix the economy

By Frank Moraes

I have this strange idea that I don't care for Dylan Matthews over at WonkBlog. But I just looked at my writing over the last year, and I find I am always very impressed with his work. I know that from time to time, he falls into false equivalence and splitting-the-difference fallacies. But mostly he is a very good reporter who understands economics.

Last week, he wrote perhaps the best thing I have yet seen from him, "Ten Ways to Reduce Inequality Without Raising Tax Rates." He lists ways that will reduce inequality for "both sides to get what they want." That's reaching up to Ezra Klein-level adorableness. I am far too cynical to think that Republicans would ever go along with these ideas. The reason is simple: Republicans like inequality; they are as a rule against anything that is good for the country generally. (I would not have said this 30 years ago.)


  1. Make it easier to start and join unions. Oh, there's a proposal Republicans are going to jump on! This is a great idea. Unions are one of the big reasons why workers shared in the productivity gains after WWII for 30 years and their demise is one of the big reasons why workers have hardly shared at all in the gains of the last 30 years.
  2. Weaken the dollar. This is all about big dicks on both sides of the aisle. A weak dollar makes our exports more competitive. But those who already have wealth hate a weak dollar because it lowers what their wealth can buy. But this is a no-brainer: a weak dollar is good for the economy. Politicians like a strong dollar because it makes them think they are powerful. Or something.

3. Promote trade in highly-skilled professions. This is one that Dean Baker pushes. We have allowed globalization to hit low wage workers in manufacturing, but we continue to practice protectionism for doctors, lawyers, dentists, college professors, you name it. If we had a truly free market, workers would have less money, but they would need less to pay for things like healthcare and education.

4. Force the Fed to get serious about unemployment. The Fed has a dual mandate to minimize inflation and maximize employment. But you'd never know it. All the Fed seems to care about is minimizing inflation. I think this has to do with the class of people at the Fed: they are the rentier class. No one they know is out of a job, but lots of people they know own stuff that would be hurt by inflation. Back in June, Matt Yglesias asked a great rhetorical question, "If the unemployment and inflation rates were reversed, would the Fed do something about it?" The answer is, of course, that they would work very hard to change it. But these numbers are not reversed and so the Fed continues to do the bare minimum.
 

5. Reform IP law -- especially for medicine. This is another Dean Baker issue (although he talks about them all). Our intellectual property laws are used by companies to stifle innovation and competition. Check out more from Lawrence Lessig on this.
 

6. Relax licensing rules. At last, an idea that a Republican might support! This is basically the idea that the guy who cuts your hair shouldn't need to have a license. I think we could liberalize such requirements. But I don't think they are all bad and I don't think there is that much to be gained here. Hence: the perfect Republican issue!
 

7. Ease up on zoning restrictions. This basically means having a free market in housing. A lot could be done on this issue. Matt Yglesias is very interested in this subject. Check out his e-book, The Rent is Too Damn High.
 

8. Increase transfers. Instead of focusing on taxing the rich, focus on helping the poor. Matthews points out that much of Europe is more unequal than the United States. In fact, the United Kingdom and Germany have more regressive tax codes, but their societies are more equal because of all the countries do for the poorer classes. Of course, the biggest example of this is to provide healthcare for everyone. But we can't have that here! At least, we can't have it unless the insurance industry gets its pound of flesh.
 

9. Fund early childhood education. Want to make a society that really does have equality of opportunity? One necessary part of this is to help children early on enhance their cognitive skills. Necessary but not sufficient!
 

10. Get the lead out This one surprised me. Lead in painted surfaces have amazing consequences to society. Here's Matthews:

It's hard to overstate how important the removal of lead from household paint and gasoline has been in recent decades. There's something approaching a consensus that deleading is responsible for the majority, if not the vast majority, of the decline in crime rates since the 1970s. One study says that 90 percent of the decline is attributable to deleading.

It’s not just crime. Much of the decline in teen pregnancy can be chalked up to deleading, and school performance is highly correlated with lead exposure. Even lead amounts below the so-called "safe" amount can reduce IQ by about 7 points. Lead is just a very dangerous chemical, one that hinders judgment in all manner of contexts.

We've done a pretty good job deleading, but the effort is by no means done. Many communities, primarily poor ones, still have buildings with lead pipes or lead-based paint. Children in such communities are liable to be exposed to crime, which leads to aggressive and cognitive/academic difficulties, to teen pregnancy, to commit crimes themselves, and to have lower cognitive functioning.

These are great ideas. I wish supposed liberals like our president would start talking about them. But even without that, it is very exciting to think about the options we have to create a more perfect union.

(Cross-posted at Frankly Curious.)

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