During the summer, I drafted an op-ed about an economic agenda that President Obama could propose to help the American economy. The agenda was not simply Republican tax cuts or Democratic spending ideas, but more nuanced solutions that reflect the two major challenges President Obama faces in passing any legislation: (1) an unsustainable national debt that has made additional deficit spending politically toxic and (2) an ultra-conservative Republican Party unwilling to compromise.
If President Obama wants an economic agenda to pass Congress, he needs to ensure the agenda does not increase the deficit and that every solution within the agenda has gained Republican support in the past.
These solutions are therefore titled "deficit neutral and bipartisan," or DNB for short. Below are five examples of DNB solutions that President Obama could lead on to help the ailing economy.
1. Comprehensive tax reform.
The current U.S. tax code is complex and inefficient due to a myriad of loopholes and exemptions. Tax rates could be significantly decreased and the tax code simplified if many of these loopholes and exemptions were deleted from the code. This would lead to a more effective allocation of resources, increased investment from home and abroad, a more level playing field for businesses and a simpler tax return process. As long as increased revenue from the closed loopholes and exemptions offset the decrease in revenue from lower tax rates, tax reform could be deficit neutral.
2. Recruiting and retaining highly skilled immigrants.
During a weak economy, America should make recruiting and retaining highly skilled immigrants a top priority. America should increase the cap on visas for foreign high-skilled workers, offer any immigrant who graduates from an American college permanent residency and streamline the burdensome immigration system.
Recruiting and retaining more high-skilled immigrants would be a boon to the American economy. What do AT&T, Verizon, Google, Goldman Sachs, Intel and Kraft all have in common? Each is a Fortune 500 company that was either founded or co-founded by an immigrant. Opening America up to more high-skilled immigrants will lead to a stronger American workforce and an increased number of start-ups.
3. Signing outstanding free trade agreements.
Currently, free trade agreements between America and three countries, Colombia, South Korea and Panama, are written but pending Congressional approval. These agreements would allow America to better compete overseas by lowering tariffs and other barriers. Other countries have taken advantage of America's political dysfunction. A trade deal between South Korea and the European Union became effective on Jul. 1, while a deal between Canada and Colombia became effective on Jul. 15. The longer Congress waits, the harder it will be for American exporters to compete in these countries.
4. Replacing long-term with short-term investment.
Even though America needs to cut spending in the long-term, it still needs economic stimulus in the short-term for a stronger recovery. These two goals can be achieved by first implementing the President's fiscal commission's deficit reduction plan, "The Moment of Truth." This proposal is balanced, bipartisan and gradually cuts $4 trillion from deficits over the next decade. Half the savings should be used to pay down the debt and the other half should be used for increased economic stimulus through tax cuts, infrastructure spending and other critical investments.
5. Minimize political uncertainty.
During an economic recovery, Washington should minimize political uncertainty. Political uncertainty is when policies related to important issues are unclear in the near future. Political certainty is important because investors are more likely to invest capital and businesses are more likely to create jobs when the political climate is certain. Currently, "certain" does not accurately describe America's political system.
Uncertainty was created by political fights over the extension of the Bush tax cuts in winter 2010, funding the government in spring 2011 and raising the debt ceiling in summer 2011. Better negotiations, more compromise and less procrastination can end much of the political uncertainty that both parties have created over the past two years.
As I was finishing this op-ed in late August, President Obama announced he would address the nation on his new economic plan, providing me an opportunity to compare my ideas with those of the President.
But as I watched the President's speech, I realized the agenda he offered uses the two DNB principles.
By offering a DNB economic agenda, President Obama reasserted himself as the center-left pragmatist that Americans voted for in 2008. But as the saying goes, "it takes two to tango." DNB solutions will only work if the Republicans can compromise with the President on an economic agenda. Compromise will only happen if the Republican Party makes their number one goal assisting the millions of unemployed today, instead of beating Barack Obama in 2012.
Adam Newman is a junior finance major. He can be reached at
anewman3@nd.edu
The views expressed in this column are those of the author and not
necessarily those of The Observer.
