Presidential candidates often struggle to explain their economic policies in the detail sought by media questioners. But that won’t be a problem for Laurence Kotlikoff, a financial economist and familiar name to investment professionals who read his Bloomberg columns or attend conferences featuring the Boston University professor’s brand of thought leadership. Kotlikoff has announced his candidacy for president of the United States, running as a candidate of Americans Elect, an Internet-based third-party platform that promises to place its top vote-getter on the ballot in each of the 50 states.
Kotlikoff (left) has written several books and numerous articles, giving the economist a highly specific paper trail on a host of issues ranging from sweeping tax reform to overhauling the financial regulatory system. Interested citizens can read his often granular policy proposals on his campaign website.
In a telephone interview with AdvisorOne, the 61-year-old professor said his campaign is about “policies not people, about the next generation not ourselves” but the rhetorical flourishes expanded into a broader analysis when he was asked questions such as what is the biggest problem facing the country today.
“The immediate problem is we have a very uncoordinated economy,” Kotlikoff says. “There are some 29 million Americans who are out of the labor force because they’re discouraged or they’re working less than they’d like. Everyone is earning less than they’d like. The challenge is getting all these people back to full-time employment. To do that we need to be organizing a collective hiring action by employers without ordering them or subsidizing them. We need to hire en masse; just like they were firing en masse.”
Asked how he would accomplish the mass hiring action, the candidate cited the jawboning precedent of President John F. Kennedy in 1962 when he pressured the steel industry to reverse planned price increases the president thought to be dangerously inflationary. Kotlikoff says our next president “needs to get the top 1,000 CEOs in a room and lock the door [figuratively, he later added] and talk with them as long as it takes; and explain to them that they need to hire, hire, hire. They need to increase their employment by 5%.”
Kotlikoff argues that today’s economy is characterized by “coordination failure” that calls for a policy approach different from normal times when the economy is “in a good equilibrium.” He compares our situation today to the Great Depression, from which we emerged via the government’s role in coordinating supply and demand through our military build-up for World War II.
“By hiring people, the military was like one huge firm that was hiring and producing output and demanding that same output,” Kotlikoff says. In the current economic crisis, Kotlikoff says the Germans have maintained high employment by actively adjusting “wage demand.” In less technical terms, Kotlikoff says that as president he’d be “in the faces of the employers day and night.”
After employment, the second critical issue Kotlikoff cites is our nation’s debt, whose true enormity “is carefully concealed from the public,” he says. Retirees are now receiving, on average, more than $30,000 per capita in Medicaid, Medicare and Social Security benefits.
When the number of baby boomers collecting benefits rises to 78 million and we’re paying $40,000 (in today's dollars), on average, to each of them, the annual cost will be over $3 trillion. "This is a problem for which we need to do open heart surgery not administer more Band-Aids,” he says.
To address runaway entitlements that Kotlikoff says benefits older Americans with wealth at the expense of younger Americans without it, the financial economist has drafted a number of “purple plans” aimed at appealing both to “red” Republicans and “blue” Democrats. These plans cover taxes, healthcare, Social Security, energy and more, and aim to restore financial equilibrium to costs and benefits. “You can’t have per capita benefit levels growing at a 1.9% higher rate than GDP per capita for over 40 years,” he says.
On health care, for example, Kotlikoff estimates we can get rid of 60% of the problem off the bat “by stabilizing health care spending. Give everybody a basic health insurance plan. Everybody gets a voucher, but it depends on your pre-existing health,” with a diabetic, for example, getting a more generous voucher. “No health insurance company can turn them down. The government gives them a voucher and uses the tax system to pay for it,” he adds.
Asked whom he’d choose as a vice presidential running mate if he became the Americans Elect third party candidate, Kotlikoff said his first choice would be “a former high ranking member of the military whom I know and respect deeply,” but whom he would not identify because talks with this person are ongoing.
But he was clear he would not choose any of the current candidates: “Politicians have done us great harm. We don’t need more politicians. We need an economics doctor. And national security has to be handled properly,” for which reason he would want his running mate to have complementary experience in foreign and military affairs.
As for the incumbent, Kotlikoff says the policies from the 2009 stimulus to the present day have been misguided. “He and his team badly misread the nature of the economic malady. Consequently, they were applying the wrong medicine. Giving payroll tax cuts to people with jobs–how will that help people who don’t have jobs?”