Problems: the Big Three
The U.S. Bureau of economic analysis reports that our economic recovery has been, at best, sluggish. We’ve averaged a rate of 2.1% growth since the great recession.1 This is actually below our potential!
Much of the growth in our economy has been concentrated in the top one percent of the income distribution. Corporate profits have hit record highs since the great recession, reaching 10 percent of GDP in 20122 (that’s $1.6 trillion), yet middle class wages have stagnated. We are approaching an income disparity between the 99 and 1% that we haven’t seen since before the crash of 1929.3 This affects everyone, no matter their level of income, because it stifles the consumer demand that is necessary to keep the economy growing. Another hindrance is growing anti-competetive behavior in some industries.4
Less startup, less innovation
“Young, fast growing firms account for one-fifth of all U.S. job creation, and nearly all of the net-new job creation.”5
Over the past few decades, the rate of firm entry (startup companies) has steadily declined, from 15% to less than 9% from 1978 to 2015.6
Invest in people, by reducing barriers to entry, creating a simpler tax code, and tackling college debt that keeps would-be entrepreneurs from starting up new businesses.
Invest in people, with key improvements in the right places. We can boost productivity by spreading technology, reduce barriers to allow small companies to reap the benefits of global trade, capitalize on low interest rates and private sector investment to build up our infrastructure, and improve k-12 and higher education opportunities to build a high-skill, high efficiency workforce.
Invest in people by addressing concentration in both market share and economic gains. Giving the Federal Trade Commission the tools it needs to enforce antitrust laws will make our economy more competitive, driving prices down and wages up. Offering tax credits to businesses that create profit sharing plans is an approach to reducing income disparity in a way that benefits businesses and workers.
Protect our economy from financial future financial crises, by amending the Dodd-Frank Act to increase regulatory efficiency, allow for more lending to individuals and businesses, and create a faster path to ending the banking phenomenon known as “Too big to fail”.
Pay for good activity with harmful activity- by taxing products that damage general welfare in the long term, such as tobacco, alcohol, industrial agriculture pollution, and fossil fuels. Each industry that produces such products passes a certain amount of long term cost onto tax payers- called an externality7- that they should be responsible for paying. The revenue can then be used for things like education and servicing the debt.
Move towards Energy Independence, by helping individuals add renewable energy systems to their homes, which will increase disposable income and free up capital for more productive economic activity.
1. Chartbook: The Legacy of the Great Recession. Ausgust 4, 2017. Center on Budget and Policy Priorities.
2. The U.S. Economy, an Agenda for Inclusive Growth. Mckinsey Global Institute. November 2016.
3. A Guide to Statistics on Historical Trends in Income Inequality. November 7, 2016. Center on Budget and Policy Priorities.
4. Benefits of Competition and Indicators of Monopoly Power. May 2016. White House Council of Economic Advisors.
5. John C. Haltiwanger, Ron S. Jarmin, and Javier Miranda, Who creates jobs? Small vs. large vs. young, National Bureau of Economic Research working paper number 16300, August 2010
6. Harrison, J.D. “The Decline of American Entrepreneurship in 5 Charts”. February 12 2015. The Washington Post.