Ask Auntie Pinko
August 7, 2003

Dear Auntie Pinko,

I was raised a Republican and conservative but see hypocrisy in many things they do. In the last 20 years of working in business, and after reading the DU and Auntie Pinko, I see many situations from a new perspective. My question is this: what five things would Auntie Pinko do to improve the economy and increase jobs for the long term?

Todd,
Lombard, IL

Dear Todd,

Thank you for such an interesting question. Auntie Pinko is not (as I've pointed out before,) an economist, nor yet a fiscal policy expert. But it's fun for all of us to speculate, isn't it?

Let's take your question literally, Todd, and look at the economy and jobs in "the long term." I think there are a couple of root causes for our economic instability, and the vulnerability of our economy to the boom/bust cycle, and that's where I'd focus my five reforms.

The two problems I'd try to address are an accumulating imbalance in the government's intervention in our market system, and our economy's over-dependence on a few key large elements.

There is no such thing as a truly "free market," nor do I think the American people really want the kind of Darwinian competition that would result from genuinely unregulated capitalism. The question is, where do we focus the interventions of public policy in the marketplace? There are two ways to intervene: to restrain, or to encourage. Auntie Pinko favors economic policy that uses restraint with, well, restraint. Restraint should be used primarily in the interests of public health and safety.

Encouragement, on the other hand, can be applied with more freedom. Our government has a history of applying policies that encourage business to expand and grow and strengthen the economy, and I would certainly consider these tools among my five reforms. I would look at re-balancing our intervention, though. While we have done a great deal to help businesses in America meet their needs for capital investments, we have done very badly at helping businesses here in America meet their needs for an affordable, high-quality workforce.

The result is that many businesses take the public's investment in helping them meet their capital needs, and use it to outsource their labor force outside America's borders. I don't think that's good public policy.

The second problem I'd focus on is our economy's over-dependence on large businesses in a few major sectors. By allowing the energy sector and the financial services sector to dominate so much of our economy, we have also allowed them to shape our economy in ways that are good for them, but not necessarily good for other business sectors. By trading the 'cost effectiveness' of a few large businesses for a myriad of moderate size businesses, we become hostages to their success, like a business that gets too much of its operating revenue from one or two customers.

So Auntie Pinko's five reforms would focus on making it cheaper and easier for businesses to meet their labor needs here in America, on upgrading our physical infrastructure to enable a broader variety of business models to thrive, and on investing in the kinds of innovations in resources, infrastructure, and ideas that will nurture the development of new business sectors altogether.

Reform One: Auntie Pinko would make it possible for all businesses, of every size and type, to hire American workers without having to compete in the health care benefits market. The only way I see to accomplish this would be a national single-payer plan. I won't go into a lot of detail, because I am not an expert, but the examples of Japan, the Netherlands, and many other countries provide us with some good models on which to build.

Reform Two: Commerce depends on the ability of businesses to freely and cheaply move goods and ideas. Attracting and retaining a quality workforce in the geographic locations most favorable to a particular business also depends on the ability of people to move freely between home and services and business locations. I would make a major (massive, even) public investment in communications and transportation infrastructures to enable this movement, using the technologies of tomorrow, not yesterday (see Reform Three).

Reform Three: One of the most important economic resources to all forms of business is power - the availability of cheap, easily accessible power that doesn't depend on the monopolistic profits of a few businesses, and doesn't necessitate the degradation of our living environment and the endangerment of our health and our grandchildren's well being. Reform three would be an investment in research and development of a range of new, safe, environmentally-sound power sources that can be 'micro-focused' on the particular needs and circumstances of businesses.

Reform Four: The market of the future has to be a place that attracts voluntary investment from the broadest possible cross-section of the community, and modern communications tools and methods make transparency and accountability more important than ever. To ensure that a confident capital market is available to sustain an expanding economy, I would go well beyond Sarbanes-Oxley in implementing direct investor access to key information and decision-making in the management of their money.

Reform Five: Neither labor nor capital should bear a disproportionate share of the tax burden needed to pay for these (admittedly expensive!) reforms. Reform Five would be a new tax system that would share the tax burden between earned and unearned revenue, using a progressive formula. Income taxes would be offset by payroll taxes for employees and employers (that is, the more payroll taxes paid, the less net income would be taxed) and capital gains and other unearned revenue taxes would be offset by targeted investment credits.

Now, nobody needs to write back to Auntie Pinko to point out how pie-in-the-sky these reforms are. I know perfectly well we can't implement them all wholesale by Friday afternoon. Nor are they focused on the short-term fix our economy needs right now to lessen the misery so many Americans are feeling.

But that leaves Auntie Pinko with a question for my readers: Let's turn the tables here, for an experiment:

Readers, what one measure would you suggest should be taken as soon as possible to address our economic problems?

Send your answers to [email protected]. Make the subject of your email "Economic Fix for Auntie" and please keep your answers short (50-100 words). Auntie Pinko will read your answers, and next week my column will feature a few of the most interesting and provocative.

Only one rule: We will assume that the best thing we could do is to defeat Mr. Bush and other Republicans in the next election, so all answers focusing on this idea will be discarded. Take that as read, in other words, and suggest the second-best thing.

I'm looking forward to your ideas, and thanks, Todd, for the interesting question!

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