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8 Ways to Fix the USA, Starting with a GOP Senate

Liz | Wednesday, July 30, 2014 - 1:38 pm

Six years in, it’s fair to say that the Obama White House has laid an egg.

Here’s the problem: we’re not growing fast enough. In the past, growth bailed us out – providing money to balance our budget, build our roads, train our workers, provide for our retirees, expand our public colleges, bolster our military, and spread our safety net. This is not happening today, and few are paying attention. Certainly not President Obama, who is consumed with crises largely of his own making, and attentive only to splinter politics.

It’s time for a change; it’s time to put in place policies to move the country forward. It’s time to elect a Republican Senate. At the very least, we would no longer have to endure President Obama blaming our lack of progress on a recalcitrant GOP. That would be worth a lot.

Related: How Hookers and Drug Dealers Could Boost US GDP

This recovery, as has been well documented, has been and continues to be disappointing. For the past several years, beginning-year optimism has faltered, with anticipated second-half acceleration consistently falling short. 

Unfortunately, the string of one-year shortfalls also points to long-term problems. The expected underlying growth rate of the U.S. has been ratcheted down; JP Morgan now puts it at 1.75 percent.  As The Economist pointed out in a recent cover piece, that’s about one-half the rate registered between 1947 and 2007. The article notes that long-term progress depends on productivity and an expanding supply of workers; on both fronts we are coming up short.

The number of people available for hire in the U.S. has grown by only 0.3 percent annually since 2010, less than half the rate in the prior ten years. Partly that is because Boomers have started to retire, but it is also because people have dropped out of the workplace. Our misguided entitlement programs and the initiation of Obamacare have contributed to a startling and unprecedented drop in workforce participation.

Related: China GDP Seen Steady at 7.4 Percent

One data point is our much-abused disability program, which now supports more than 11 million people (about equal to the entire population of Ohio), including nearly 9 million workers and their dependents. The number has surged – up 44 percent in the past decade. The system is being gamed, with applicants increasingly citing health problems that are harder to prove (or disprove). In 1961, 26 percent of applicants cited heart disease or stroke as preventing them from working. In 2011 tough-to-diagnose back pain and other musculoskeletal issues had become the principle complaint, afflicting 34 percent of the disabled. 

Disability claims tend to go up and down with the economy. While the number of workers receiving benefits dipped slightly in January and February (after 204 straight months of increase), it began again to climb and in June hit a record high. One reason? Disability payments now equal about 90 percent of what a minimum-wage worker might earn; add in unemployment and other benefits, and there is little incentive for people on disability to return to the workforce.

Another force reducing the urge to work in the United States is the arrival of Obamacare. Historically, many people were forced to seek employment in order to obtain health insurance. That is no longer the case; consequently, the CBO has projected that the ACA would reduce employment by 2 million workers by 2017.

All other issues aside, the biggest constraint to our workforce going forward will be the aging of the country. Given improved life expectancy and better health outcomes, we should raise our retirement age. Germany, Greece and Spain are in the process of hiking theirs to 67 (though Germany is wobbling); we should follow suit. There have been proposals to do just that, aimed at bolstering Social Security and Medicare, but a higher retirement age would also boost the number of available workers.

Related: IMF Cuts U.S. Growth, Says Full Employment Years Off

The number of workers is a problem; so is stalled productivity. Output per worker surged in the aftermath of the recession, as companies pared employees and sales turned higher. In the fourth quarter of 2009, that measure bounced up at a 5.5 percent annualized clip. More recently, productivity has ground to a halt, advancing less than one percent a year since 2011 and actually retreating during the first quarter of this year.

The trouble is that businesses have not been investing; the amount of capital per worker is falling. For the past few years, uncertainty stemming from ever-changing regulations has combined with tepid demand to discourage capital spending. 

What can be done? The good news is that we have at the ready all the tools needed to put the country back to work.

First, though, we need a functioning legislature. Americans tired of the stultifying back-and-forth between the White House and Congress, who are alarmed at the serious challenges going unmet in our country, should elect a Republican Senate in November. 
Broadcast the GOP commitment to growth. Start with reforming our entitlements programs – not to eliminate help for those who are needy, but to bolster Social Security and Medicare for the future, and to pare the waste and fraud bloating our disability system. (Even the IMF has advocated reforming the latter, as a boon to our growth.)
Related: Why the US Economy May Be Doomed to Slow Growth

Roll back some of the entanglement of regulations that produces nightmares for our business managers small and large. (Obama increased the Code of Federal Regulations more than 11 percent in his first five years in office; with much of Obamacare and Dodd Frank still to go.)
Reinstate the $500,000 investment tax credit, which expired in December; some claim the demise of the offset discouraged investment.
Enact other tax changes that reward corporations for bringing money home and spending it here.
Push education reforms that will prepare high school grads for the workplace.
Enable increased spending on infrastructure so that America can compete.
Produce a workable and self-interested immigration policy that will attract and keep talented workers, provide some legal status for those here illegally and provide a mechanism for deporting those who cross our border without papers.
President Obama has proposed some of these measures, but cannot manage a bitterly divided Congress. We know what needs to be done. The U.S. needs to move forward—a legislature in high gear could help.

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