What are we gonna do? If you read those of us who kvetch constantly about not just what’s wrong but exactly what’s wrong you probably get a kind of fatigue after a while. That’s understandable. I strongly believe that if you are in the business of pointing out the bad stuff you have an obligation to produce a credible way that it can be fixed – or else it’s just whining. While I’ve done my best to produce a framework for understanding how things can go wrong that includes ways to understand fixing the world, it requires a lot of working through the abstraction – and brain ache.
This is where I get specific. This is my platform.
It starts by reiterating that without Restructuring there is no Recovery – we have to do something different. That’s not whining, that’s shown over and over throughout history. I can’t say just what the new economy will look like, but I can look at the barriers that prevent the accumulated wisdom of 300 million people from breaking through to the other side. Matt Miller tells us in “The Tyranny of Dead Ideas” (and on every gab show where he plugs the book) we are in a period of rapid and transformational change, and I agree with that. That’s the first assumption that goes into this.
The second assumption is that while we’ve put trillions of dollars into the top end of our financial system to stabilize it, the meat of the economy comes from people who spend every dime they get, when they get it. That’s where high unemployment hits hardest in the short term, so my main focus is on jobs. We’ve lost 6 million jobs in the last year, and replacing them has to be the top priority.
I also assume that we don’t want people to starve or die otherwise horrible deaths. Argue with this assumption if you want. Ready?
Barriers to Entry
Job creation is hampered by the overhead per employee that businesses have to pay, which is the employment-based cost that does not go directly into salary. These include benefits, taxes, regulations and training. I propose a national conference to determine all the sources of employee overhead and set a goal of cutting them at least in half. According to surveys from the Bureau of Labor Statistics, the cost of benefits and taxes alone is nearly half what workers take home in pay. Cutting this in half would save manufacturers about 6% of their total costs – not counting a wide range of overhead costs I haven’t even considered – which is about the percent of all jobs lost. (This was worked out with Bruce’s help in the comments of an earlier post.)
Moving a substantial amount of basic health care coverage from a kind of employment tax to a general tax on income will be a big help, but it will take more than that.
The Obama administration will front $5,000 towards hitting a community college for retraining, which is a nice start. If we’re going to give people unemployment extensions for the next few years, the least we can do is give them the tools to break out of the problem as well. The problem is a simple one – what skills are the most important? Somewhere, guidance based on where you are likely to find a job is the key to making this work. Over the long haul, programs like this are probably going to be necessary to keep people up to date on their skills as we move away from employer based training, too.
The Apollo Program cost about 150B$ in today’s money. I can’t see that anything less is desirable when it comes to the future of energy, currently running about 11% of our economy. While the Obama administration has a bill pending with a grab bag of policies and incentives, none of them will advance the technology as rapidly as a focused effort. I propose that we be willing to spend up to 300B$, if necessary, on a series of challenge grants that pay out as goals are reached. The first step is to write concise requirements, such as a safe and practical car that consumes 20% of the energy that a current one does and has a range of 300 miles before refueling or a crop that can replace all imported oil on the cropland we leave fallow without environmental damage.
Any college or corporation that wants to compete for these grants will be seeded with money up to their own match, with a cap. They would keep any intellectual property they develop. Interim goals being met would trigger a payout of enough money to continue research as a reward, and they would all be competing for a defined prize of some insanely large amount of money to be the first to reach the overall goal. A lot of engineers would be employed in the process, which is to say not collecting unemployment.
The Recovery Act authorized 111B$ for infrastructure, which is expected to create or stabilize 400k jobs. It sounds great, but it’s no WPA. There are many reasons to invest a lot more than this in infrastructure, not the least of which is the potential payout if we can overhaul our rail systems at the same time. A lot of people have criticized the Obama administration for being a bit timid on infrastructure investments, so I’ll join the chorus – we can do a lot more for this.
I can see where we could spend up to 600B$, less than a tenth of what has been spent on the finance industry, to set up our economy to be completely transformed on its own terms. We know that things like health care and energy are major sources of inefficiency even if we can’t be sure just what the system will look like. I happen to believe that we know enough to know what’s preventing the economy from transforming itself, and that’s good enough. Let’s start there.