At IdeaFestival 2015, economist and writer Daniel Altman presented his assessment of the current state of the US economy and outlined eight ideas for fixing some of its biggest challenges.
The US has been experiencing a gradual slowdown in growth of living standards over the past three decades. Altman cited urbanization and technology adoption as the two easiest ways to grow, but said that the US has run out of gas on both of those strategies.
After relying on the two easy ways to grow, countries need innovation and entrepreneurship to maintain long term steady growth. Altman said the US has settled into a long, steady growth path of about 2% GDP per capita growth but, salaries aren’t rising in accordance with that growth.
The main reason for this disparity, Altman said, is a loss of labor’s bargaining power that is occurring in four distinct channels. Worker’s bargaining power has dropped recently due to de-unionization.
Additionally, competition from globalization is lowering bargaining power, as is technology like robotics. Also, consolidation in the corporate sector has limited bargaining power as there are fewer companies per worker to bargain with.
Outside of the US, Altman also noted the economic dysfunction in Europe due to the Euro, the changing growth path for China now that it is slowing, and the ups and downs faced by emerging markets. And, due to investment diversification, all of these factors play into the US economy as well.
So, what’s to be done?
Here are Altman’s eight suggestions for how we can begin on the path to improving the American economy:
1. New GI Bill
Just like the original GI bill helped returning soldiers get an education that would help them get back in the workforce, Altman proposes a “globalization intervention bill” to do the same thing for workers who were displaced by their job being sent overseas to cheaper labor.
2. Market for training
In the US, many businesses don’t train their employees enough due to the fear that the newly trained employees will leverage their new skills to walk away from the company and into a new career. If they do, Altman proposed that the future employer pay the old employer for training that employee if he or she did walk away.
3. Equity investments in students
For this concept, the question that Altman posed was: What if we allowed people to invest in a student’s future earnings, and funded education that way? So, someone could invest for an equity stake in the earnings of the class of 2020, for example, and earn a return based on what the students earned when they entered the workforce.
4. School randomization
There have been many initiatives to equalize the public school system. But, if we randomized the school selection process, it would force people to be be invested in the system as a whole, rather than a few select schools. This, in theory, would produce a better education experience across the board and better educated students, regardless of local geography.
5. Anti-hunger innovative
Food insecurity and hunger in the US affects the economy as a whole. An initiative to offer donations to anti-hunger organizations at point-of-sale systems in fast food restaurants is something that Altman said could help with hunger and the economy. Imagine being offered to donate a dime to end hunger when you check out at a restaurant, for example.
6. Golden rule budgeting
In the US, we balance the budget every year. Altman’s idea was that we should balance the budget over the longer economic cycle. So, we would prepare in the good times by putting money away, and be able to leverage that in bad economic times. Sounds simple, but the key is longer term thinking.
7. Sovereign wealth fund for risky, long-term investments
A sovereign wealth fund is simply a government-owned investment fund. By having a sovereign fund that focused on risky, long-term investments, it could encourage more people to make the type of long-term investments that help stimulate the economy.
8. Hybrid income and wealth tax
There’s been much political discourse around the concept of a wealth tax aimed at the wealthiest Americans. Altman’s proposal is a hybrid tax solution that makes you pay a tax on your income, based on how wealthy you are. He said it would be both easy to implement and constitutional.
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