David Wessel's Economic Questions
By Arnold Kling
He wants to ask them to Republican candidates for President, not me. But my answers are in italics. All below the fold.1. The unemployment rate is stuck at 9.1%. The U.S. isn’t adding enough jobs to keep up with the growth of the labor force. What’s done is done — the fiscal stimulus, the Federal Reserve’s quantitative easing, etc. What specific policies would you adopt today to quicken the pace of economic growth and hiring?
Shut down all attempts to rig the housing market. Only when buyers see that it is a free market, as opposed to a market that is rigged to keep prices high, will the market get unstuck. Reduce pay for Federal workers, and encourage state and local governments to do the same for their workers. This will allow scarce tax revenue to go farther, in terms of employment and services. Shut down the Department of Energy’s policies of picking winners and losers. With reasonable environmental protections, allow the oil and natural gas industries to develop resources in this hemisphere. Look for ways to reduce credentialism and allow greater flexibility in the delivery of health care and education services.
2. If raising taxes would be bad for the economy, how would cutting spending and eliminating government jobs now be good for the economy?
That’s a rhetorical question. You do not need to eliminate government jobs. You can instead cut salaries. As I said, this would allow tax dollars to stretch further. There might be some government jobs that you could eliminate that would help the rest of the economy. I am thinking of jobs that involve rigging the housing market or trying to rig the energy market. But those are relatively few jobs.
3. Housing remains a major drag on the U.S. economy. About one in five Americans with a mortgage owes more than the value of his or her house. More than half Americans with equity in their home have a mortgage with an interest rate above 5%, but hasn’t refinanced. Home-building is at historic lows. Can government policy do more to rescue housing? If so, what?
The situation is analogous to the 1970s, when government tried to “solve” the problem of high oil prices by putting on price controls. Now, we are trying to solve problems by monkeying around with mortgages and housing subsidies. The problem is more likely to be solved if government stops trying to implement solutions.
4. Several of you have expressed displeasure with Federal Reserve Chairman Ben Bernanke? Who would you prefer to see in that job?
5. Will the middle class have to bear some of the burden — either in higher taxes or fewer government benefits — to bring the federal deficit under control?
That is another rhetorical question. Relative to the promises that are embedded in a totally unrealistic budget, somebody is going to get hurt, because the promises do not add up. It’s not warfare against the middle class, it’s math.
6. Are there any tax increases of any kind that you would accept over the next decade?
Tax reform, with lower rates but fewer deductions and special breaks, should be on the table.
7. What’s the best way to slow the growth of health care costs in the U.S. over the next quarter-century?
Have consumers spend more of their own money and rely less on third-party reimbursement.
8. Mitt Romney backs the imposition of U.S. tariffs on Chinese imports if China doesn’t allow its currency to float freely on international markets. The Senate is taking up similar legislation. Do you support the pending Senate bill?
9. The living standards of our children and our grandchildren’s generation depend on investments we make today that pay off in future productivity later. What, if anything, should the government spend money on today with that objective in mind?
I think that private investors often do a lousy job of making choices for the future. But government technocrats tend to do worse.
10. How specifically, if at all, should government policy respond to the persistent widening of the gap between winners and losers in the U.S. economy?
Stop doing so much to protect the winners. Bailouts and credentialism come to mind as policies that protect winners.