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Only presidential leadership can restart America’s economic engine

By Paul H. O’Neill,

This piece is part of a leadership roundtable on unemployment and restarting America’s jobs engine — with opinion pieces by former Treasury Secretary Paul H. O’Neill, Harvard Business School professor and author Bill George, leadership expert Katherine Tyler Scott,Wharton School professor Michael Useem, and Woodrow Wilson Center scholar Amy M. Wilkinson.

In our society, there are some things that can only be done by presidential leadership. Fundamentally fixing the country’s unemployment problem and strengthening, more broadly, its economic engine is one of them. It can’t happen merely at the hands of business leaders.

The major impediments to higher rates of growth are structural. And it’s ultimately only our government leaders—particularly the president—who can help us overcome them, by taking the initiative to overhaul several of these massive, systemic flaws.

To start, we have an unbelievably inefficient tax system in America. It costs our society hundreds of billions of dollars to administer each year, not to mention it under-collects the revenue owed by hundreds of billions of dollars more. And this is further complicated by the fact that the tax system, which should be about raising the revenue we need to pay for the agreed shared needs of U.S. society, is really more about social engineering—every credit and every deduction is formulated to create incentives and disincentives for Americans to cultivate particular behaviors.

That shouldn’t be its mandate. Our lives and the prospects of our economy would be vastly improved if we could reset the tax system to raise revenue; we could do so with some sort of value-added tax. Then, whatever social engineering our government leaders choose to do can be done by writing checks to the people we want to favor. A collateral benefit would be that no individual, non-profit or company would ever have to give money to members of Congress again in hopes of receiving or maintaining a tax benefit.

There are two other structural changes we need to make in order to improve our growth potential. One is to convert our ‘Ponzi scheme’ entitlement programs into truly funded programs to ensure financial security for the aged and disabled, and the other is to focus on the trillion-dollar opportunity—per year—we have to eliminate waste and error in our health and medical care systems.

To fix these three major impediments to U.S. growth requires presidential leadership, and it begins with a truth-telling diagnosis of the problems and the opportunities. We will return to a better growth path in time, but it will never be what it could be until we fix these structural problems.

Paul H. O’Neill served as the 72nd secretary of the U.S. Treasury, from 2001 to 2002. He was also the chairman and CEO of Alcoa.

From the roundtable:

Paul O’Neill: Only presidential leadership can restart America’s engine

Bill George:Enough talk about jobs—where’s the action?

Michael Useem: Revising investor capitalism’s mantra

Katherine Tyler Scott: A moral imperative on unemployment

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