This November, we, the electorate, have the opportunity to choose between two very different paths regarding the war, the economy, and the quality of government. The problem is we've been so distracted by non-substantive debates regarding lapel pins, the Clinton/Obama saga, etc., that, at least regarding the economy and related aspects of social policy, the difference in the paths has not been sufficiently elaborated (re: the war, the different paths are clear).
So, with heartfelt apologies for the down-in-the-weeds wonkery that follows, here is a list of problems and solutions. It's not a complete list, but I was guided by one insider's view of what we've learned over these last two terms of a presidency that served as a test--a natural experiment, if you will--of conservative ideology. I'll be brief, if not glib. Those who want more details about the best path back to broadly shared prosperity should go here .
Problem: Energy policy, or lack thereof: High gas prices are understandably our national economic obsession right now, but there's not much that can be done to bring prices down in the short run, and anyway, those prices are sending an important signal. Interestingly, how you receive that signal appears to have a lot to do with you politics.
Solution: Supply-side types always want to poke around for more oil, but what's missing from the national debate is some serious thinking around conservation. Japanese and European cars breathe the same air as ours, yet their fleetwide MPG standards for new vehicles are 46 and 43 versus 27.5 for US cars. Sure, there's a critical role for seeking alternatives supplies, from wind, solar, and renewables, but smart energy policy will start by giving prime placement to some long overdue conservation.
Problem: The crunch. There is a structural fissure between overall economic growth and the incomes, wealth, and even opportunities for too many families. This was a productivity rich recovery, but the benefits failed to reach most people. In fact, it's the first business cycle on record where the real median family income will likely have failed to regain its prior peak.
Solution: First, don't blame the victims. It is neither correct nor helpful to blame this gap wholly on the supposed skill-deficits of the have-nots, a point now recognized by many economists. First, the lack of gains go quite high up the wage/skill scale. Even college-educated workers have experienced stagnation. Second, the income inequality that's behind much of the crunch is largely being driven by the gains at the narrowest of slivers at the very tippy-top of the income scale--not the top 20% but the top 1% or even 0.1%. Yes, most of those big winners are college grads, but most college grads do not dwell in that rarefied atmosphere.
So what is responsible for this split between productivity and broadly shared gains? Diminished bargaining power is the key. Relative to the past, far fewer workers have the necessary clout to claim their fair share of the growth they've helped to create. Part of it is the lack of union power, part of it is globalization, and a good chunk is related to policy changes that have consistently favored portfolios over paychecks (see next example). It's also a function of low-pressure job markets (the absence of full employment). All of these are amenable to policy changes (progressive tax changes, EFCA re: unions, better trade policy and safety nets re: globalization, and Fed policy and demand-based policies re: full employment).
Problem: Tax cuts don't come anywhere near paying for themselves. Even conservative economists, like Martin Feldstein and McCain advisor Doug Holtz-Eakin, have conceded that the best you can hope for is to lose less revenue than you cut. And the reason why supply-side economics doesn't work is that its advocates--including John McCain, who formerly eschewed this bunk--hugely exaggerate its alleged positive impact on economic growth. Exhibit one: the 2000's expansion that just wound down.
Solution: return some progressivity to the tax code.
Problem: Lack of immigration policy. Yes, we have a dysfunction (non-) policy re immigration, where low-wage employers welcome a constant supply of cheap, exploitable labor, yet even these jobs pay much more than many immigrants can earn in their home countries. So the magnet is strong, and the messages--come on over!...get the hell out of here!...are deeply ambiguous.
Solution: First, it's got to be national. The current patchwork, while understandable from localities' perspective (if the Feds can't get it together, what choice do they have?), is merely squeezing a balloon. The answer is here: no guest workers, earned citizenship for those with roots here, regardless of their legal status, and serious border control without fences (employer sanctions, verifiable IDs). But it's equally important to recognize that the immigration debate gets a lot more heated when living standards are hurting for those who view themselves as hurt by immigrant competition. It's no surprise this debate became so hot in the 2000's, when the working class was left with the crumbs, versus the 1990s, when prosperity was more broadly shared.
Problem: Despite years of economic growth, poverty is higher now than it was in 2000. This is just another example of inequality's impact. If growth is concentrated at the top of the scale, the rising tide doesn't do squat for the rowboats.
Solution: Full employment (see the latter 1990s, when a truly tight job market led to historical progress against poverty, with the least advantaged benefiting the most), higher minimum wages, and work supports.
Problem: Health Care. The system (and "system" is a polite word for it) is broken. Its costs are rising at an unsustainable rate, and it's worse on the private than on the public (e.g., Medicare) side. Meanwhile, we're leaving about 50 million people uninsured.
Solution: This one really is a no brainer, as every other advanced economy has some type of universal coverage with costs contained through either government as the sole insurer or extensive oversight of regulated private insurers. Market solutions, such as the one proposed by Bush and now embraced by McCain, will fail to accomplish either the cost or coverage goals. I like the way Marcia Angell recently put it: "there's a fundamental illogic to trying to contain costs in a market-based system." (BTW, if you want to get totally up-to-speed on the problems and solutions re: health care, spend a few minutes with the above American Prospect link--the Angell piece is but one in this superb issue.)
Problem: There's gotta be a better way for economies to grow over the cycle than bubble, bust, recover, repeat. Both this recovery and the last one were brought to their knees by bubbles, first in IT markets and now in housing. Top officials were asleep at the regulatory switch or worse (Greenspan actively nudged the housing bubble along). And, especially in the 2000s, growth was far too dependent on leverage--borrowing, easy credit, and "innovative" investment schemes.
Solution: Common sense regulation (e.g., memo to investment banks: if you're too big to fail, then we have to oversee your work--"if you can bail 'em, you can nail 'em"); government agencies, from the Federal Reserve to the various oversight commissions, must monitor markets for obvious excesses/bubbles and intervene when imbalances are clear. If we take all the other steps above to ensure a more equitable distribution of growth, consumption will be fueled more by income than debt.
Hey, where you going? Get back here, I'm just getting started!
Sorry, it's hard to stop. Yes, I know many a vote is cast not on a candidate's health care plan but on whether they're someone with whom you'd like to share a beer (or a shot, in Hillary's case). But neither McCain nor Obama has an obvious edge in that regard, as Bush had over Kerry, and once the general election debate commences, we'll be hearing a lot about all of the above. Much smoke will be blown and fog created, but the path is clear, and it's a very different one from the one we've been stumbling down for the past eight years.