Four Steps to Fixing the Economy (and Why it Won’t Work)

The State of the Union address that the President gives annually has most recently focused primarily on the state of our economy. This is no surprise as the economy and related problems have been on everyone’s mind since it crashed in 2008. While the discussion and debate about how to get the economy back on track has included plenty of finger-pointing and grand solutions, few people have yet stepped back and looked at a long term, well reasoned solution to this problem or its roots.

The Problem

At the end of the day, our problem is simple. We have too many jobs that involve regulation, paperwork, management and financial products and too few jobs that create new wealth through agriculture, forestry, mining or manufacturing. Initially this was caused by dreaded “out-sourcing” but today this problem continues because of complacency. We, as Americans, have become used to the idea of being able to buy a whole host of electronic gadgets and other items for incredibly low prices. It may not seem that way, but if one considers the actual amount of labor and cost of materials for manufacturing most items the price we pay for those items does not match up well with the cost of manufacturing. Mostly this is due to the fact that the manufacturing (by and large) has been outsourced to other countries where they can pay workers a fraction of what we are required by law to pay our workers in the United States.

A secondary aspect of this problem is that lack of manufacturing has led to the creation of management jobs. Most of these jobs manage the movement of people, money and goods and most require a degree from a four year college. This has led to the advancement of the idea that a college education is required to succeed in the United States. This idea is true in today’s society, but I submit that it doesn’t have to be true.

Step One: College Education

If we are going to change, one of the first things we need to do is to change the idea that college is the inevitable continuation of education after high school. I want to be very clear that I am not against education, but I have never believed that a college education is the right fit for every person nor that it should be a requirement for everything. The best way to change this is to end federal loans for students in college. This idea has multiple benefits.

First, it will limit the number of students who graduate from college with massive debts to the government based on their education. As a recent college graduate myself, I can say with authority that it is much too easy to get money to pay for college and that often students don’t have a good understanding of the level of their debt until after they graduate. Private loans will still be available, but with their higher interest rates and more difficult application process the number of students who enter college will still be limited.

Second, it will help to weed out those students who go to college simply because it is what they are “supposed” to do. Students will need to make better and more informed decisions about what they actually want to do in their lives and what steps they need to take in order to achieve their goals. This will likely have the added benefit of having more students enter technical colleges and the military so we can create a new working class in the United States.

Third, students who do decide that college is right for them will be more motivated to pay for college as they go through it by getting a job or saving when they are in high school. This teaches responsibility and will end up paying dividends that will last long beyond the classroom as they mature into better adults because of their experiences.

Finally, the government can save a huge chunk of money each year by not offering loans and grants to college students.

Step Two: Manufacturing

One of the great myths of the United States in the present day is that there aren’t any jobs but the truth is that there are plenty of jobs available that most Americans are simply unwilling or unable to do. The Keystone pipeline, recently rejected by President Obama, is a prime example. Republicans attacked this rejection saying that he was limiting the creation of new jobs but the reality is there are very few people who have the skills to be able to build a huge pipeline and most of the unemployed aren’t qualified to do it. If we are going to create a new working class, we need to insure that there will be jobs available for them when they graduate. This means creating new manufacturing opportunities within the United States. Part of this solution is to lower the current corporate tax rate to encourage businesses to move back to the United States to manufacture their goods.

The biggest part of the solution is to raise tariffs for goods coming into the United States so that we can compete with good produced overseas. It’s no secret that the goods that we buy are much cheaper than they would be if they were produced domestically. Largely this is due to the fact that employees in foreign countries are treated poorly and paid very little. We tend to turn a blind eye to this so we can buy a new toaster for $8. If we raised tariffs on goods coming in to compensate for this difference in labor costs, we could have goods produced domestically that could compete in a free market with goods produced internationally. This idea also has the advantage of earning additional money for the government through manufacturing.

Step Three: Making Manufacturing Jobs Worth It

If we are going to lure manufacturing back to the United States, we need to make these jobs attractive to workers and college graduates. This means raising the minimum wage. I would propose that instead of raising the minimum wage arbitrarily, we create a “living wage” that is based upon the cost of living. That would mean that hourly employees can be paid enough to pay for the basics while they gain experience before moving up in the organization.

In addition to raising the minimum wage to make manufacturing jobs as attractive as management jobs, I propose creating a federal health insurance pool that is available to the self-employed and part time workers. This pool would require a premium just like private health insurance does now, but with such a large number of workers and possible government subsidy, premiums could be low enough to make health insurance affordable and encourage new business enterprises, help young Americans get on their feet after they finish their education and support those people who are creating new wealth. Under my plan, businesses would still be responsible for health care for all employees working over 30 hours/week.

Step Four: Changing National Culture

If we are to change all of these things (and we need to do all of them in order for the plan to work) we also need to change our national culture. Quite simply, the prices of many goods through this plan are going to rise dramatically. I believe that we have become a “throw-away” culture which simply buys something new and cheap anytime we feel like it. This change would encourage us to make our purchases more carefully and would encourage American companies to make high-quality merchandise so that you can purchase one toaster or one computer and use it, fix it or upgrade it for the rest of your life. This plan encourages reuse and recycling and forces us to focus on hard work instead of consumerism. To me it sounds immensely satisfying. If we prepare for and accept that these changes are going to come, we can be ready for them and make the most of them. Furthermore, we will have a renewed sense of pride in anything labeled “Made in America” and we will be able to compete within the United States (the richest consumer base in the world) with foreign countries. After all, if we aren’t willing to invest in ourselves, who are we to invest in.

I’m sure many will mock this part of the plan, but if we combine the movement of manufacturing with higher tariffs causing the prices of your favorite goods to be equal whether you purchase ones made in America or made in Taiwan suddenly the playing field becomes level. Right now we are importing more than we export and we exist in a world where it would be suicide for the giants of American industry to manufacture in the United States. We are simply outmatched because we demand more for our citizens that other countries do of theirs.

Epilogue: Why it Won’t Work

The sad truth is that this plan could never work. The ideas are sound (though I admit they are far from perfect and certainly need some tweaking) but the politics is poor. Recent history has told us that political gamesmanship is more important in Washington DC than actual solutions are. This plan has things for both sides of the aisle. Republicans should appreciate the return to manufacturing and lower tax rates while Democrats should be able to latch on to the expansion of federal health care and lowering of the national debt. Even Libertarians should find something to like through the end of federal college education loans and reduction in foreign trade.

The fact of the matter, though, is that all sides will likely work to undermine this plan because it wasn’t theirs. Simply put, they didn’t come up with it first and therefore won’t get the credit. This means that they need to block is, gut it, or run against it. It is a sad state of affairs, but seems to be the way our country currently runs.

I put this forth to show that there are people out there, ordinary citizens, who are concerned about the problem and thinking about solutions. This isn’t a perfect plan but it is a plan. I believe that if we come up with something, if we rally together and find new leaders who are citizens and not just politicians we can restore the prosperity of America to what it was in the past and help reclaim our place as the premier manufacturing center in the world.

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