Which candidates have our economy’s best interest in mind? Remember decades ago, when we expected Japan to outpace the U.S. economy? Japan made a series of macroeconomic policy mistakes to protect near term interests that doomed it to an economic lost decade, if not more.
As we approach November’s elections, therefore, let’s step away from our politics and take a long view of what’s happening in our economy.
The U.S. and Wisconsin’s job creation engines are broken, period. Growing commoditization is migrating jobs to the lowest cost production locations or eliminating them through technology. Lost jobs are not being replaced in sufficient numbers with new jobs (from new companies, new industries or existing companies’ new offerings).
Second, a record deficit makes federal economic policy very tricky. Ditto for Wisconsin. The solution is not as simple as Republicans’ “just cut taxes and spending” or Democrats’ “spend more” mantras. Just as a company cannot cut costs into greatness, you don’t grow solely by cost cutting in today’s borderless, knowledge-driven economy.
Third, U.S. debt is dirt-cheap today. As long as we commit to longer-term solutions to the U.S. deficit (and I believe we can), we can afford today’s deficits, especially as they are the finger in the dike preventing deflation. Deflation works like quicksand, pulling businesses, consumers and savers into behaviors that create still more deflation, fewer jobs and hopelessness. Ask the Japanese. At the state level, we need budget cuts for sure, but investments and pace matter.
Finally, growing U.S. income inequality threatens the basic values on which our nation rests and imposes significant social and economic costs on business and society not just individuals (See this.). Good job creation and job training are far better anti-poverty programs than income redistribution.
What does all this spell in terms of U.S. and Wisconsin government policy needs?
We must transform how we collect tax revenues before adjusting their levels. Start from a blank sheet and make every tax policy decision driven by economic development considerations.
Then we must strip federal and state spending of waste while increasing investments in infrastructure, research, technology-transfer and education, even if on the national level they create short term increases in the deficit.
I would start cutting waste on the U.S. level by ending the subsidized medical care wealthy elderly receive through Medicare. Shifting federal programs to state block grants would also help. Ending tax expenditures (totaling over $1 trillion) would be next, especially the ones that have created a regressive tax structure. A simplified tax structure is also on my list for reducing waste and increasing job creation.
In Wisconsin, I would create overwhelming incentives to consolidate units of government and automate more government services.
I understand a free market’s creative destruction, but when you use free trade to advance a nation’s wealth, make sure there’s a level playing field and make sure that you use gains to help compensate and retrain those hurt by trade. Totally free trade – cutting taxes on those benefiting most from it without helping those displaced – is not just unfair, it’s terrible for the economy.
Make no mistake about it – business special interests as represented by over 10,000 Washington, D.C., lobbyists benefit some industries and companies at a huge cost to other industries and companies. Don’t listen to their propaganda.
I’m an independent who will vote for politicians who are smart enough and educated enought to understand the nuances of policy in these challenging times, who understand the larger economic dynamics surrounding Wisconsin and the U.S. economies and who have terrific communication skills to help us get past paradigms that polarize us.
Kay Plantes is an MIT-trained economist, business strategy consultant, columnist and author. She served as chief economist for former Wisconsin Republican Gov. Lee Dreyfus. Plantes provides expertise in business model innovation, strategic leadership and smart economic policies. She resides in Madison, Wis., and Oslo, Norway.
