The job market may be limping back, but many people — from both the 99% and the 1% — sense America desperately needs a revival. Living standards have been stagnant for a decade. Many Americans struggle to raise themselves up. The Washington politicians charged with crafting better laws and policies are, in some ways, doing more harm than good.
At the Milken Institute’s recent global conference in Beverly Hills, business leaders, economists and academics debated the nation’s top economic problems — and offered many solutions. America still has profound advantages and is far from beaten, most believe. “We never lost the baton,” said Walmart CEO Bill Simon, referring to the suggestion that China or some other nation has overtaken the United States. “We just forgot we had it. American businesses and American consumers have to remember they do have that baton.”
There’s no shortage of ideas for how to boost the economy. The problem, of course, is making them happen. The list below includes ideas that tend to be pragmatic rather than partisan. Some but not all require government involvement, and there are many things state and local officials can accomplish more effectively than the feds. Not all of these ideas would necessarily pan out, but none would be disastrous if they flopped, either, making the risks worthwhile. If restoring America’s economic might were a top national priority, these would be 10 ways to get started:
Recruit more immigrants. There are two types of immigrants: Those who sneak in illegally and those who come for work, school or other legitimate reasons. The two tend to get lumped together in the stymied immigration reform effort in Washington that’s turning a U.S. economic advantage into a liability. Legal immigrants have always been good for the U.S. economy. They open businesses and earn patents at higher rates than natives. Yet the United States has strict limits on the types of talented, well-educated immigrants who would most help the U.S. economy. Canada, by contrast, works hard to lure immigrants and even has an immigration minister who must meet a stretch quota or face the consequences. “We need to stop linking [legal immigration] to illegal immigration,” said Edward Conard, bestselling author of Unintended Consequences, at the Milken conference. “We could skim the cream of the world.” Raising immigration quotas or eliminating them altogether might do the trick.
Streamline corporate taxes. One reason U.S. drug giant Pfizer (PFE) wants to take over British firm AstraZeneca (AZN) is to relocate its headquarters to the U.K. and take advantage of lower tax rates there. CEOs have a lot of overblown complaints, but they’re right that the U.S. corporate tax rate, at 35%, is among the highest in the developed world, and the U.S. tax code needlessly convoluted. Even President Obama favors a lower corporate tax rate, if combined with fewer loopholes, since the current rate encourages U.S. multinationals to stash and spend money overseas instead of repatriating it to the United States. “Corporate America has never sat on so much cash, and it’s been deploying it abroad,” said Ken Griffin, CEO of the investing firm Citadel. “They’ve created millions of jobs — in Mexico, Canada and Asia.”
Make it easier to start a business. The rate of business creation has been declining since 2010, partly because some people who got laid off during the recession are returning to traditional jobs — but also because it’s just plain complicated to start a business. “We used to be able to start businesses faster than we do now,” Blackstone Group CEO Steve Schwarzman noted. Government — at all levels — could help by streamlining or even axing regulations for new businesses, or perhaps offering a moratorium until the business gets off the ground. Free or inexpensive mentoring groups can also be helpful, so entrepreneurs can get advice about accounting, payroll or other things they may not be able to hire a professional for.
Fast-track energy independence. Cheap energy is becoming a huge advantage for the U.S. economy. It lowers bills for consumers but, even more importantly, cuts manufacturing and production costs enough to persuade big firms to locate facilities in the United States instead of, say, China or Mexico. That means jobs. There are plenty of sticky issues involving pipelines, exports, environmental regulations and many other things, with no obvious answers on either side. But one thing state and federal regulators can do is create expedited processes for making decisions and quickly securing as many energy advantages as possible.
Try a new type of unemployment insurance. Four million Americans have been unemployed for more than six months, and many more have given up looking for work completely. Yet Washington has stopped offering extended jobless aid as the costs have risen and concerns have mounted about government checks dulling the desire to work. So why not try something else?
One idea is “worksharing,” a scheme in which employers cut everybody’s hours during a downturn, without laying anybody off. Companies can do that on their own, but the government could help — as it does in Germany — by paying jobless benefits equal to the amount of pay lost for each worker. Then, when the economy improves, everybody’s hours go back up, with nobody having to endure a ruinous bout of unemployment. Another idea from Kevin Hassett of the American Enterprise Institute is to pay jobless benefits in the form of a single lump sum of cash that the unemployed get to keep even if they find a job the next day. That would create an incentive to find a job quickly — since the worker would get the cash and a paycheck both — yet the total payment could still be capped at traditional levels.
Create incentives for reviving old factories. The Boston Consulting Group and others argue that cheap energy and rising labor costs overseas are beginning to generate a U.S. manufacturing renaissance. That’s an opportunity for state and local officials to draw new occupants to shuttered facilities. Old factories can’t just be turned back on, because most manufacturing these days is high-tech. But facilities close to rail spurs or other transportation hubs could be good rehab candidates.
Supercharge vocational training. One reason many companies can’t find the workers they need is nobody knows what skills are needed where. Siemens (SI) has tried to solve this problem by teaming with community colleges in places such as Charlotte, N.C., to devise specific training programs with guaranteed jobs for those who complete them. Local governments can play a role in getting companies and schools together, but this is one initiative that doesn’t require much political activity or taxpayer money. “There can be a role for government as an integrator,” says Diana Farrell, global head of the McKinsey Center for Government, “but these can be public-private partnerships, or purely private.”
Make the R&D tax credit permanent. This credit encourages business to spend more in the U.S. on research and development, which is closely linked with innovation and jobs. Yet since 1981 it has always been a temporary credit requiring regular renewal by Congress, and sometimes it lapses only to be restored retroactively. The latest version expired at the end of 2013 and will probably get renewed or expanded this year, but that’s not certain. Some businesses plan their R&D budgets assuming the credit will be available, but others don’t. Making this a permanent part of the tax code would give businesses more clarity about their costs and improve the case for ramping up R&D activities in the United States.
Improve ways to move things around. Infrastructure sounds like a boring topic, yet the ease and cost of moving stuff around is a huge consideration for businesses deciding where to locate plants and other facilities. Many nations in Asia and elsewhere have newer and better roads, train networks, ports and air-traffic systems than the United States. Infrastructure projects aren’t just job programs — they’re investments in future economic activity. This, too, can take place in the form of public-private partnerships with the government serving as organizer and investors footing some or all of the bill.
Fund more basic science. The Chinese are doing it, plus stealing all the Western trade secrets they can get their hands on, which could produce a double advantage before long. One key area requiring research: energy, including better ways to produce and store massive quantities of it. “This is an important role for the government,” said Stephen Hoover, CEO of PARC, the famed R&D lab in Palo Alto. “We may miss a window of opportunity. I wonder if we get this.” Let’s hope we do.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.