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October 12, 2016 at 02:05 PM
Although the economy hasn’t always been the focus of the current vicious and protracted presidential campaign, it will be among the most important challenges facing the next president.
With that in mind, the liberal-leaning Brookings Institution has issued a series of reports on economic issues the next president will face, including recommended solutions. We’ve consolidated them into nine issues, ranging from fixing crumbling infrastructure to creating jobs for the poor and middle class, reforming health care and addressing the swelling levels of college debt.
Most of the authors quoted are senior fellows of economic studies at Brookings unless otherwise identified.
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1. Fixing Crumbling Infrastructure
“The next president needs to frame infrastructure as an investment, not as spending” and create “programs to maximize return on investment, not to just seek out shovel-ready projects,” wrote Aaron Klein, policy director of the Brookings Initiative on Business and Public Policy.
He recommends enhancements to the Transportation Infrastructure Finance and Innovation Act (TIFIA), which provides credit assistance for qualified projects; reinstatement of the Build America Bonds program; and federal coordination with state and local governments to support private sector investment in infrastructure using a project finance model.
That model, used more widely outside the U.S., tries to align government incentives with those of private capital. For example, in exchange for the concession rest stops along Interstate 95 in Connecticut, Dunkin Donuts, owed by private equity firm Carlyle, had to contribute money to invest and maintain that section of the roadway.
Another attraction of infrastructure spending: it “has historically paid for itself, mostly through direct user fees,” according to the report.
Klein suggested the creation of a Department of Infrastructure whose mission would focus on economic growth and on linking our various infrastructure modes and networks more efficiently. It would allocate funding on the basis of performance and economic analysis.
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2. Create more jobs for the poor, the middle class, including “prime age” men
Although the latest Census data shows the average family’s income rose sharply between 2014 and 2015 and lower income families benefitted disproportionately, inflation-adjusted incomes still have not recovered to the levels achieved before the last recession, according to Brookings.
The current inflation-adjusted income of the median American household ($56,516) is actually slightly below the 1999 level. Also, more than one in seven men in their prime working years are not working, up from 1 in 20 reported 50 years ago.
“If you want to improve middle class incomes and help people at the bottom move up the ladder, there is nothing more important than creating jobs,” wrote Isobel Sawhill, addressing the next president.
In addition to more spending on infrastructure, Sawhill favors expansion of the EITC [Earned Income Tax Credit], which targets “people who will spend, and not save, the money.”
She also recommended a long-term solution based on better education and training or retraining, and a stronger safety net coupled with subsidized jobs in either the public or private sector.
David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy, suggested reforming the federal disability program so that those who can work, even on a part-time basis, receive the type of accommodations prescribed by the Americans with Disabilities Act, including possibly government wage subsidies.
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3. Improve Productivity
Productivity growth, “the most important determinant of the growth in average wages and living standards over the long run” has been slowing, and needs a kick-start, wrote Martin Neil Baily.
But despite its importance to the economy, it rarely gets mentioned in the policy debate and has been completely absent in this presidential campaign. “The next president should turn her/his attention to it,” wrote Baily.
He recommended that the next president “scrub our regulations to make them more streamlined and efficient…[and] reform our corporate tax system, which discourages investment while generating very modest tax revenues.”
The next president should also “use her or his bully pulpit to preach the necessity of addressing the skills problem, which will require the combined forces of state and local government, businesses, academia, and the federal government to solve.”
“The best companies in the world should be able to set up shop in America, just as American companies have traditionally spread best practices around the world,” wrote Baily.
4. Reform Health Care
Slowing productivity growth is not the only economic issue that hasn’t been getting much attention in the presidential campaign. Health care policy is another, according to Brookings analysts.
That’s “unfortunate because the next president and Congress will face decisions about the future of the Affordable Care Act (ACA), the solvency of Medicare, and slowing the rising cost of health care in ways that contribute to better health,” wrote Alice Rivlin, former director of the CBO and vice chair of the Federal Reserve, now senior fellow, Economic Studies, Center for Health Policy at Brookings.
Moreover, health care now accounts for 18% of U.S. GDP, which makes it an important economic issue.
“Realistically, whichever party wins the White House will find themselves negotiating complex incremental changes in existing federal programs with representatives of the other party and a wide range of public and private stakeholders,” wrote Rivlin.
The two parties have diametrically opposing views of the ACA—Hillary Clinton favors the ACA but wants to reform it; Donald Trump wants to repeal it.
Still Rivlin is hopeful there can be compromise. “Health care is one of the few areas in which bipartisan cooperation has survived in the increasingly polarized Congress and even produced bipartisan legislation, such as the replacement of the unworkable Sustainable Growth Rate formula in Medicare with more powerful incentives to reward value rather than volume of health services.”
She advised the next president “to work hard to strengthen bipartisan cooperation in Congress” to preserve and enhance the ACA and Medicare. “There are no partisan magic bullets in health care—just hard work to make incremental progress,” wrote Rivlin.
Henry Aaron, however, noted that even if Clinton is elected, which would help ensure the survival of the ACA, the reforms she’s proposed such as a refundable tax credit for people with out-of-pocket medical expenses in excess of 5 % of income will likely be blocked if the Republicans retain control of both houses of Congress, or retain enough votes to sustain filibusters in the Senate.
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5. Fixing Social Security and Retirement Plans
