George P. Shultz: How to Get America Moving Again - WSJ:
"The world is in turmoil and needs a stronger U.S. It's time to wake the sleeping giant by taking these specific steps to rev up the economy."
(1) Cleanse the personal income tax system of deductions and lower the marginal rate on a revenue-neutral basis. The template is right there in the 1986 Tax Act, which passed the U.S. Senate 97-3.
(2) We all know that
corporate taxation is an anachronism. Why do we want a system that encourages American companies to reincorporate abroad? Let the earnings they make in other countries be taxed there, and that's it. Why give incentives for companies to keep their cash offshore rather than invest it in the U.S.? And let's lower the corporate tax rate to be competitive with the rest of the world. How about 20%?
(3) We all know that the maze and uncertainty of the
regulatory octopus is stifling the economy. Regulations are needed, but they can be made simpler and designed to work better. Overhaul the current complexity so that even small businesses can see how to comply without having to hire compliance advocates they can't afford.
(4) While we are reducing uncertainty, why not
take the mystery out of the Federal Reserve? The Fed can establish a rules-based monetary policy with the ability to deviate from the rules as long as they publicly explain why, using cost benefit thinking in the explanation.
(5) Get control of spending. Otherwise the burden of servicing government debt when normal interest rates return—a burden that already amounts to hundreds of billions annually—will be unbearable.
The problem is entitlement spending. There are many well-known ways to put the Social Security system back on track so it will be there for young people in the future. One way is to change from wage-indexing to price-indexing as a method of calculating benefits, and apply the change only to people under the age of 55. That means younger people will receive benefits at least as large as those now being paid with protection against any future inflation.
Another change is to index the normal retirement age—when people can receive full benefits—to longevity. And when workers reach age 65, stop any payroll deductions and employer contributions to encourage them to stay in the labor force. Their pay will increase and they will be less costly employees. Incentives work.
(6) Health-care finance is more difficult, but here is a simple formula to use as a basis for further work. Right now, health-insurance companies are pass-through agents that receive money from the government, employers, and other sources that they spend on a wide variety of health services. But insurance is about risk. The main risks in the health-care area are catastrophic events that have high costs, so high-deductible catastrophic insurance is what is needed. Even young people will buy such coverage because the cost—particularly if insurance companies have to compete across state lines—will be low and the protection these policies give is important for everyone.
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