The year may have changed, but the pitiful state of Barack Obama's economy remains. Millions of Americans remain unemployed, many of them for over six months, and businesses face a ever-increasing regulatory and tax burden from Obamacare, Dodd-Frank, and other ill-advised endeavors by this administration.
Millennials are especially hard-hit. People aged 16-25 have seen the biggest drop in employment of any age group, as student loan burdens mount and even those lucky enough to have jobs are too often earn too little to support a family. It's clear that Obama's attempt to impose a European-style welfare state on Americans is a colossal failure, but too often conservatives fail to advance concrete, specific alternatives. So here are five things conservatives should start fighting for, pronto, so we have an economy and a society that makes us proud to be Americans.
1. End the long-term unemployment crisis
Unemployment's terrible, and Obama's "stimulus" measures haven't done nearly enough to cut down on it. Here's what we should do instead. Instead of subsidizing Solyndra and other cronies of the Obama administration through wasteful "infrastructure" spending, let's spend money on what we actually want to do: create jobs.
Kevin Hassett, an economist at the American Enterprise Institute who was one of Mitt Romney's lead advisors during his 2012 run, has proposed that the government directly hire the long-term unemployed. This could be implemented by simply paying businesses to bring on more workers, and then phasing the subsidy out over time. Nobel laureate Edmund Phelps has long advocated this as a better approach than the minimum wage for supporting low-income workers; indeed, you could do away with the minimum wage and its burdens on businesses entirely if this plan were adopted.
This approach would be far more cost-effective than Obama' giveaways to wind and solar companies, state and local governments, and countless other interests. The TANF Emergency Fund, the closest thing to this in the 2009 stimulus, placed 260,000 people in jobs at a cost of $5 billion over two years: that's about $19,230.77 per job. Compare that to the overall stimulus, which could end up costing between $540,000 and $4.1 million per job, if you use the CBO's numbers.
And that's before you take into account the costs of unemployment to the government. "If somebody's 40 years old, and not employed for 25 years, that costs governments lots of money, and if we think rationally about reducing spending, maybe it's worth it to pay for their first year at a private employer," Hassett says. "Direct hiring, or a direct subsidy for hiring, could save taxpayers a fortune."
2. Tear down the welfare bureaucracy
The welfare state today is an alphabet soup of wasteful government programs, from TANF to SSI to SSDI to SNAP to WIC. But it's worse than complicated. It's fragmented and spent on very specific things, which may or not be what the recipient needs or wants.
Food stamps must be spent on food, but what if the family receiving them needs help on rent more? Why should the government tell them how to spend their money, any more than it should tell the rest of us? Worst of all, the current, hugely bureaucratic system props up a class of unionized government workers who can't be fired and who pension costs are bankrupting our states and cities.
The solution, as conservative and libertarian thinkers from Milton Friedman to Charles Murray to Guy Sorman to Veronique de Rugy have noted, is to burn down the bureaucracy and replace it with simple checks to everyone. This idea — which goes by a variety of names and variations, most notably "basic income," "guaranteed minimum income," and "negative income tax" — would treat all citizens equally rather than tagging a certain subset to receive help, and would eliminate any incentive that the poor have to live off of government programs, since they'd be at no risk of losing their benefits if they started work.
A basic income would shrink our bloated government, give people more choices, and break the culture of dependency in our poorest areas. What's not to like?
3. Eliminate job-killing income, payroll, and corporate taxes
The government should at the very least do no harm to the economy. But our current tax system — which taxes heavily things we want more of (like income, investment, and savings) — creates huge burdens for businesses and individuals, disincentivizes investment in promising technology, and reduces the living standard of ordinary Americans.
So how about we get rid of literally every income and payroll tax in the federal government? No more withholding from your paycheck. No more capital gains tax when you make money from stocks. No more getting your pay dinged for Social Security and Medicare. No more companies worrying about what expenses are or are not tax deductible (and no more charities worrying about that, either). Just make all corporate and individual earnings completely tax-free.
Liberals might want you to believe this is a fantasy, but as the great free-market advocate Henry George wrote in his book Progress and Poverty, there is a single tax that can and should replace all these, and do much less harm to the economy in the process. It's called a land value tax, and it's imposed on the value of land and other natural resources before improvements are made. So the owner of the Empire State Building would pay the same amount in land tax if the building stayed up or if it suddenly vanished tomorrow, in theory.
What's great about this is that, while taxes on income discourage people making more money and hurt the economy, the most that land value taxation could do is discourage people from making more land. But, some hijinks in Dubai aside, you can't make more land. So there are no economic distortions. People buy and sell as they would in the absence of any taxes, and yet the government can still earn more than enough from a land tax to pay for the whole federal government. So let's stop punishing job creation and implement the biggest supply-side tax reform in human history.
4. Have Social Security invest in the private sector, not the government
The promise of Social Security privatization is that, by letting people invest part of their payroll tax bill, it would enable higher returns on payroll taxes than government treasuries (in which the Social Security trust fund is invested). But most proposals, such as the Ryan-Sununu plan, require people to invest in index funds. That's generally a smart strategy for individual investors, but large institutional investors have better options.
So an even better idea would be to make the government a large institutional investor — basically, to create a government hedge fund, or "sovereign wealth fund." A number of other countries have such funds, as do Texas (which uses oil money to fund public higher education) and Alaska (which dispenses the returns on its fund as a dividend to residents), and conservatives and libertarians like Tyler Cowen and Reihan Salam have expressed support for establishing one in the U.S.
This can be used not just to fund entitlement programs but as a general source of funds for the government going forward, one which makes substantial tax cuts possible. In the process, it would provide a large new source of investment for U.S. businesses. It's a way to shore up our entitlement programs while bolstering, not taxing, America's businesses, a capitalist win-win if ever there was one.
5. Help small businesses grow
Too many small businesspeople with smart ideas are still unable to get the capital they need to start and/or expand in the wake of the financial crisis. So let's take some red-state wisdom from North Dakota, which has a public bank meant to serve this very purpose. You may be skeptical that conservative goals could be advanced through a government-owned business, but decades of experience has convinced conservatives in the state — most notably Sen. John Hoeven (R-N.D.), who served as president of the Bank of North Dakota from 1993 to 2000 — of the idea's virtues. Hoeven even recommended the idea to other states.
Unlike, say, the "public option" that Obama and his allies wanted for health insurance, public banks wouldn't compete with private ones, but instead partner with them, and in particular with local community banks. They would greatly increase the amount of lending those banks are capable of doing, which grows the local economy without requiring costly tax preferences or economic development grants.
North Dakota has far more small business lending by its community banks than neighboring states, such as South Dakota or Montana, that lack a public bank. Best of all, the Bank of North Dakota is profitable, and there's no reason that other states's banks couldn't be too. That means more revenue that doesn't have to be collected through taxes.