On Wednesday, President Obama and Vice President Biden took time for a working lunch with leading economists to talk about paths forward to accelerate economic growth and improve the competitiveness of the U.S. economy. Experts at the lunch included former Federal Reserve Chairman Ben Bernanke, Kevin Hassett, Edward Glaeser, Martin Feldstein, Robert Hall, Melissa Kearney, and Luigi Zingales.
White House press secretary Josh Earnest said Obama, whose luncheon guests included a bunch of conservative economists, was “not a coincidence,” adding that the president wants to talk to folks “who aren’t constrained by politics in terms of their thinking.”
A handful of the country’s top economists who weren’t enjoying a meal in the Old Family Dining Room Wednesday afternoon had some advice of their own for the president:
Douglas Holtz-Eakin The president of the American Action Forum, Holtz-Eakin served as chief economist of the President’s Council of Economic Advisers under George W. Bush, director of the Congressional Budget Office, and director of Domestic and Economic Policy for Senator John McCain’s 2008 presidential campaign.
“We need to switch from the current style of policy-making, which is temporary and targeting policies like stimulus to permanent pro-growth reforms. There is a pretty short list of things that everyone can identify, beginning with entitlement reforms, that would get the debt under control; tax reform, which would have the biggest competitive impact of anything; trade agreements and getting TPA to close those trade agreements; …and immigration reform, which appears off the table this year. That’s the list. There’s been nothing like that on the horizon for years.”
“What we really need to do is grow more rapidly. This economy has been grinding along at 2, or 2.5 percent tops, growth for years and we need to accelerate the trend rate of growth…. After the first quarter, if we grow at 3.7 percent in the second, third, and fourth quarters, we will get 2 percent for the year. So here we go again, another year of bad growth. It’s time to change the playbook. There’s nothing new coming out of the White House. I’m not entirely surprised, but very disappointed.”
Dr. Arthur Laffer is the founder and chairman of Laffer Associates, an institutional economic research and consulting firm. Known as “The Father of Supply-Side Economics,” he was a member of President Reagan’s Economic Policy Advisory Board for both of Reagan's terms (1981-1989). The famous Laffer Curve, which argues that tax cuts lead to greater government revenue, is named for him.
“In a narrow immediate sense [accelerating job growth] could be done quickly. I believe that global U.S. corporate taxation should be made into a territorial tax (i.e. U.S. companies pay only U.S. taxes when they operate in the U.S. and only foreign taxes when they operate abroad). This would eliminate the issues surrounding the repatriation of profits currently held abroad.”
“In general to encourage competitiveness and economic growth the U. S. government should: adopt a revenue neutral low rate broad based flat tax system to replace all federal taxes; [exercise] spending restraint; adopt sound money (i.e. reverse quantitative easing over time); move towards freer trade; and reduce regulatory excesses such as the prohibition against the Keystone pipeline.”
Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities. Formerly, he was the chief economist and economic adviser to Vice President Joe Biden, executive director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team.
“[The best policy prescription to improve the competitiveness of the U.S. economy] is a deep commitment to investing in our public infrastructure. And I would cast that net broadly and think of it in terms of public goods, from roads and bridges to education of our citizens. This is a great time to make such investments. Borrowing costs are low; our stock of public goods needs a lot of work. It’s at least a twofer in the sense that you would put a lot more people to work and you would improve a key input into the nation’s productivity.”
“[In order to accelerate job growth], I’d also think about ideas to help our manufacturers. Our manufacturers could be more competitive. I think the White House has the right idea in terms of trying to help promote innovation in the manufacturing sector. But we also need to be mindful of currency issues. Our manufacturers would be more competitive if exchange rates were set by markets instead of currency management that other countries sometimes use to give them an exporting edge.”
Dr. William Spriggs serves as chief economist to the AFL-CIO. Formerly, he served assistant secretary for the Office of Policy at the U.S. Department of Labor and was the chair of the Department of Economics at Howard University.
“The president must do a better job to educate the American people that the immediate and long-term fiscal debt issues are dwarfed by the continued and huge gap between where we are and our potential GDP. Underinvesting now, in infrastructure and the human capital investment needed in K-12 and higher education, is leaving the current generation of young people with a deficit that is increasingly difficult to close and will be increasingly more costly in the future. [The president] needs to use the fiscal space that is evident from modified increases in the slowing of health care costs to push for an expansive fiscal policy to close the employment gap for young workers.”
“The best way to improve US competitiveness is to: (1) pursue trade agreements that raise world standards directly, including much higher labor standards and global wages and safe work conditions; and encourage higher standards for the ecology; (2) dramatically increase U.S. investment in K-12 education, higher education and infrastructure. We cannot let state governments continue to drag down U.S. national investment in basic K-12 education and to decimate public higher education.”
Stephen Roach is a senior fellow at Yale University’s Jackson Institute of Global Affairs. Formerly, he served as chairman of Morgan Stanley Asia and the firm’s chief economist.
“America needs a saving strategy in order to rebuild its long neglected competitiveness. Only by increased saving can we regain the wherewithal to invest in human capital, infrastructure, and new productive capacity—all of which are essential to boost the US share in today's modern global economy. Expanded saving incentives—enlarged IRAs and 401Ks together with targeted programs for low and middle-income families such as the President's myRA proposal—would be important steps in that direction. Ending the Fed's anti-saving zero interest rate policy that taxes American savers would be equally important. With a restoration of saving, households will feel more secure about an otherwise bleak financial future—sparking a sustainable revival in consumer demand that will provide an equally sustainable impetus to job creation. Saving is the seed corn of future prosperity. Without it—which is where America stands today—that future is grim.”
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