Ten Missed Economic Opportunities In 2013
On the last day of 2013, here are ten economic opportunities we missed this year. If we could implement even some of these in 2014, we could substantially increase our GDP growth rate, enriching Americans and lowering our unemployment rate.
Boosting Labor Force Participation. While the unemployment rate declined by nine tenths of a percentage point from January to November 2013 (data for December 2013 will be available on January 10), the labor force participation rate also fell by six tenths of a percentage point over the same period. If the labor force participation rate were the same today as it was in 2000, over 9 million more people would be employed, adding to economic growth. The trend is particularly pronounced among young people, whose participation rate has declined by 5 percentage points since 2007, the beginning of the recession. In 2014, we need to attract Americans back into the labor force.
Overhaul Obamacare. Republicans tried to delay Obamacare, but President Obama said that the law could not be changed. Then the president delayed the penalty for companies who did not comply with the law; suspended income verification for those applying for subsidies; and waived the individual mandate for those whose policies had been canceled and who face higher premiums under Obamacare. Changing the law by regulation poses serious constitutional questions, especially in the waiver of the individual mandate, because some are treated differently from others. In 2014, more people will likely be uninsured than in 2014. We need to overhaul Obamacare in 2014.
An Earlier Taper. The Federal Open Market Committee made a small step in the right direction earlier this month by opting to start slowly tapering quantitative easing from $85 billion to $75 billion a month. However, the decision should have been made earlier and the reduction in Fed purchases needs to be increased. The Fed's accommodative monetary policies have not been working and need to be reevaluated. Let us hope that incoming Fed chair Janet Yellen can do this in 2014.
Pension Reform. Reasonable people might think that the news of Detroit's bankruptcy would spur state and local governments to pursue pension reform in order to avoid the same fate. In 2012, the total amount of public pension unfunded liabilities in the United States was $4.4 trillion, with outstanding state and local municipal debt at nearly $3 trillion, according to a report by the Republican staff of the U.S. Senate Committee on Finance. Little was done in 2013 to shore up pension funds. Detroit's bankruptcy gave public leaders a great opportunity to pursue reasonable reforms, such as raising retirement ages, converting defined benefit plans to defined contribution plans, and structuring out different plans for new government employees.
Tax Reform. According to Politico in July, the House Ways & Means Committee was planning to introduce tax reform in October and negotiate with Senate Democrats to have it tied to a debt-ceiling increase. The reform would have cut the top corporate and income tax rates to 25 percent and repealed the Alternative Minimum Tax. Such reforms would have spurred economic growth by increasing the incentives for consumption, work, production, and investment. However, the opportunity for tax reform evaporated when Senator Max Baucus produced a plan that dramatically raised the cost of capital for firms. Tax reform in 2014 would be a boon to the economy.
Immigration Reform. The Senate passed the Border Security, Economic Opportunity, and Immigration Modernization Act, an imperfect bill, but one which could have been the basis for a conference with House legislation. Let us hope that immigration reform passes in 2014 to enable more high- and low-skill immigrants to come legally. Immigrants disproportionately fund start-ups and take low-skill jobs in agriculture and cleaning services that Americans prefer not to do. The world is engaged in a global race for talent, and if it is difficult for talented immigrants to enter America, they will go elsewhere, to our detriment.
Farm Bill. The farm bill is a relic of Great Depression-era price controls and subsidies. In 2013, the farm bill went through re-negotiation, with the Senate passing a version cutting $4 billion from the Supplemental Nutrition Assistance Program (SNAP) over ten years. Many House Republicans decried these cuts as much too small for deficit reduction, and instead proposed their own bill that cut SNAP by $40 billion over the same time period. Their version passed the House in a close vote. In 2013 Congress missed an opportunity to bring some small reforms to the agricultural industry. Will it be more successful in 2014?
Entitlement Reform. The December budget agreement completely neglected entitlement reform, particularly changes to Social Security and Medicare. In 2013, the national debt surpassed $17 trillion for the first time, driven by record federal spending. Over 60 percent of federal spending is entitlement programs. Every passing day in which entitlement reform is not considered by Congress is a missed opportunity to fix our budget problems.
Lost Energy Boom. Even though production of crude oil and natural gas has increased over the past three years, production of these resources on federal lands has dropped significantly. Harsher regulations and a complex permitting process keep energy producers from providing energy as cheaply as they could otherwise. Since 2008, the amount of federal land leased for mineral rights has dropped by over 20 percent. Additionally, federal regulation of hydraulic fracturing threatens to hinder collection of one of the cleanest and most efficient ways to provide energy. In 2014, the states should be given more control over their energy resources.
Keystone XL. In 2013 President Obama failed to approve the Keystone XL pipeline, which would bring oil from Alberta, Canada, to American refineries. Will he approve it in 2014? The pipeline would be a boon to U.S. energy production. Construction alone would create 20,000 jobs and generate tax revenue for the federal government and several state governments. Plus, pipelines are the safest form of transportation for oil, with the lowest rate of incidents, injuries, and fatalities, according to the Transportation Department.
It is probably too much to hope for that Congress will consider these changes in 2014. But hope springs eternal. And if the current Congress does not tackle these problems, Americans may elect a new Congress in 2014 that will do so.