by Andy Serwer, Editor-in-Chief of Yahoo Finance
Dear President Trump,
Congratulations on winning this hard-fought election—it must be quite the relief to be done with. But of course now is only the beginning of your job, and as you know better than anyone this was the most negative and divisive campaign on record. You will soon be in charge of a country that is sitting on two sides of a divide. Your number one job will then be to bring us back together. It’s a massive undertaking that requires deft handling of politics and the media (I know you’re not a big fan), as well as all of your leadership skills.
But to truly unite America again will require something more than even that. You must bridge the economic gap that separates the rich and the less rich in this nation because that’s the issue that has spawned our current state of hyper-partisanship.
I know you know this, but just to be clear: Income and wealth gaps in the United States are at multi-decade highs. Economic mobility has stagnated, with median American household income stuck at 2000 levels. Yes the unemployment rate is down to 4.9%, but structural unemployment remains frozen, with some nine million men not even looking for work. Nobel prize winning economist Joe Stiglitz writes: “The upper 1% of Americans are now taking nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1percent control 40 percent. Their lot in life improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent.”
No wonder why millions of Americans feel disenfranchised and voted for Bernie Sanders in Democratic primaries and his pledge of free college and tax the rich. And I know you felt somewhat simpatico with Bernie and his positions.
How did we get here Mr. President? Both with purpose and inadvertently, in a process that took decades. General Wesley Clark speaks of a “shareholder class” that has benefited from years of low taxes, low interest rates and deregulation dating back to the Reagan administration. Clark’s point is that the global economy has been optimized for, well, shareholders, through tax cuts, deregulation and low interest rates. All that has benefited the wealthy, Clark argues, at the expense of working-class people in America and the rest of the world.
Whether or not you subscribe to Clark’s thesis, the question is how to stop the gap from widening and in fact begin to narrow once again. If we don’t I can promise you this latest chapter of American history will end badly.
It won’t be easy Mr. President. Vincent Reinhart, chief economist of Standish Mellon Asset Management acknowledges as much. The income gap has to do with productivity he says, and economists aren’t very good at fixing that.
Another economist, Dambisa Moyo, pretty much spells out the problem: “We probably need to tear up the old manual,” she told me. The problem she says is, “We’ve tried both solutions: Tax and spend favored by the left and also trickle down economics favored by the right, and neither of these has really worked.” Bottom line? Moyo suggests we probably try a little bit of both.
Of course Mr. President there are a million possible ideas out there, but I wanted to narrow it down to a few I thought would move the need the most. I’m sorry sir — none of these are terribly new or bolts from the blue, but many are absolutely essential.
—Comprehensive tax reform. There are a number of facets to this and it all needs to be done in one fell swoop because it’s all connected, and it needs to be done early on while you have the political capital. Done right, this could be a signature moment of your presidency. Here are the items: You need to on the one hand, cut corporate taxes, end inversions, and yes provide Americans with a tax amnesty period, with caveats that money can’t go to shareholders. On the other hand you need to close the types of loopholes that you used to great effect—and suggested should be closed—as well as the carried interest loophole, which both candidates you and Hillary Clinton wanted to close. That would serve as a tax hike, I know you wouldn’t want to raise taxes overtly. I would urge you not to cut taxes for the wealthy. Believe me, as you like to say, that wouldn’t make the economy grow more.
—Do an infrastructure build-out coupled with a massive retraining program. I’m not just talking about bridges and trains and airports—but yes them too—I’m mostly talking about digital infrastructure, like 5G networks and high-speed WIFI. And let’s face it, both you and your vanquished opponent are pretty damn clueless when in come to the digital economy. Both your infrastructure programs were relatively modest—yours at $500 billion, hers at $275 billion—and neither focused on the digital economy. And that means you are missing the whole economic ballgame going forward. The world economy is becoming a digital economy. America needs to join it—or better yet lead it—or our nation will be left behind. An article from Brookings notes that in a recent survey, only 17% of adults were characterized as “digitally ready” active learners who are confident to use digital tools for training.
This really should be akin to President Kennedy’s calling for a moon landing or President Reagan calling for Gorbachev to tear down the Berlin Wall. I have to say Mr. President that calling for and then implementing a massive digital build out is arguably even more important than Kennedy’s and Reagan’s challenges. Could you imagine what an incredible legacy this would be for you? Unbelievable.
—Raise the minimum wage to $12 an hour by 2020 and index it to inflation. I know Bernie said $15, but I wanted to give you something you could actually get through Congress. (And of course any state can go higher.) Also note there are economists who will tell you that a higher mandated federal minimum wage will destroy jobs. Hint: That’s voodoo. Don’t believe it. Sure this is a form of wealth redistribution, but it something that on the margin American business can afford. Yes I know it would hurt some small businesses. They may have to raise prices and pass it on to consumers, which might be inflationary. (Don’t worry — Janet Yellen will thank you.) But the big picture is that will put millions of dollars into the hands of hardworking Americans who need it the most.
And more than that it will be a sign to all Americans, Mr. President, that you are on top of the situation and are determined to bring us together. What President Trump, could possibly be more important than that?