Presentation on theme: "By: Steven Clark. Setting Goals Goal #1: Jobs Crisis- Unemployment rate should drop below 5% by 2015 and remain there until 2020 Goal #2: Education Crisis-"— Presentation transcript:
Setting Goals Goal #1: Jobs Crisis- Unemployment rate should drop below 5% by 2015 and remain there until 2020 Goal #2: Education Crisis- By 2020 50% of those aged 25-29 should have a bachelors degree or higher, up from 31% in 2009\ Goal #3: Honest Approach to Poverty- the single most important way to end the cycle of poverty is to enable children growing up in poverty to realize their full human potential. One-fifth of children today are growing up in poverty.
Setting Goals Continued Goal #4: Fixing Environmental Catastrophe- need to introduce smart and sustainable energy. Goal #5: Control Public Debt- taxes will have to rise on top income earners in order to get the budget deficit to around 2% or below. Goal #6: Government Efficiency- Stop letting corporate lobbies run the show and plan for the long-term not just band-aid fixes.
Setting Goals Continued Goal #7: Smarter Foreign Policy- shift from “hard power” (military) approaches to “soft power” (diplomatic and foreign assistance) Goal #8: Goals Should be Societies Objective- greater satisfaction in life, both for todays and future generations.
New Approaches to Medium-term Economic Policy To achieve the previous goals, we will need a new to adopt a new economic policy. Mixed economy approach- relying on the two pillars of government and markets. Need a commitment to not only efficiency but also fairness and sustainability.
A New Labor Market America’s job crisis reflects mainly a failure in the labor market itself, not a failure of the macro economy. Several countries in Europe, including the Scandinavian economies, Germany, and the Netherlands, have achieved great success through a range of “active labor market policies” targeted at building skills, creating flexible and satisfying work conditions, and matching workers with appropriate jobs.
Breaking the Poverty/Education Trap All along the path from preschool to the bachelors degree, a stark income gradient prevails: poor kids are left behind in a society in which individual households and local communities, rather than the society as a whole, bear the brunt of education cost. One current fad is to put the lions share of the blame on poor teachers and then attack the teachers unions as coddling bad teachers. Sachs says its important for the government to invest in early education programs to help close the education trap.
Real Healthcare Reform Expanding coverage to the poor and making sure people with preexisting conditions are covered are the benefits of Obamacare, otherwise the law will do very little to slow the increase in healthcare cost for a given amount of real healthcare delivery. The Scandinavian countries run their healthcare systems at half the cost of the U.S and have higher life expectancies and lower child mortality rates. Healthcare is publically financed in these countries, but privately provided.
A Pathway to Energy Security The greatest infrastructure challenge of the coming decades is to wean America from its dependence on fossil fuels. This is a complex challenge with four goals: national security, energy security (plentiful, low- cost energy), environmental security, and industrial competitiveness. The problem is our attitude towards projects it used to be NIMBY (Not in my back yard) now it is BANANA (Build absolutely nothing anytime near anything).
Ultimate Economic Goals The ultimate purpose of economic policy is the life satisfaction of the population. The GDP does not allow for the health of our children, the quality of their education, or the joy of their play. HDI is a index that puts together economic indicators with social indicators to give a better picture of a countries economy. The Asian nation of Bhutan established a Gross National Happiness Commission to increase happiness in their country. The United States ranks in the middle of the pack when it comes to happiness and quality-of-life compared with other developed countries.
Government Spending Gone Wild In fiscal year 2011, the federal government covered around 39 % of it’s spending, roughly $1.4 trillion of $3.6 trillion, by borrowing. As debt rises, the burden of paying the interest on it will rise as well. Congress needs little cajoling by lobbyist; it has itself become a millionaire’s club, with 261, almost half, of todays Congress holding at least $1 million in assets.
Basic Fiscal Arithmetic Reagan put the government on a system of repeated tax cuts Clinton managed to balance the budget and revenues soared up to 20% of GDP Interest rates were around only 2% mandatory programs only accounted for 10% of GDP Politicians use “earmarks” or pet projects within congressional districts as examples of how they can cut the budget Reagan wanted to cut the “welfare queens” who stole from the pubic purse and illegally collected welfare
To Cut or Not to Cut Earned Income Tax Credit rebates taxes to poor working families and is incentive for the poor to work TANP or temporary assistance for needy families only makes up.1% of GDP If the government eliminated foreign aid, earmarks, and TANF progrmas, they could save.5% of the GDP Sachs also says we need to end wasteful agriculture subsidies
Simpson/Bowles Commission Recommendations White house and congress pending – 800 million 3 year wage freeze on fed workers – 20 billion Reduce size of fed workforce – 13 billion Reduce fed travel – 1 billion Sell excess fed real estate – 100 million Eliminate all earmarks – 16 billion Reform Medicare – 3 billions Repeal long term affordable care act – 11 billion Reduce Medicare fraud – 1 billion Reform Medicare cost sharing – 10 billion Restrict Medicare supplemental insurance – 4 billion Dual eligibilities – 7 billion Based on GDP in 2015 which is expected to be $18.6 Trillion
Budget Lessons from Abroad We have to augment certain spending programs Ireland has the high budget deficit spending problem in the world The countries in the deepest budget crisis in 2010 weren’t the ones with the highest government spending but those with the lowest tax revenues of citizens like Greece, Ireland, Portugal, Spain, the U.K, and the U.S
Difference between U.S and E.U Though Europe generally has higher tax rates on all kinds of incomes, the biggest difference between the U.S and Europe is that all European countries have a value-added tax (VAT). In Europe the VAT routinely collects around 10% of the GDP, in contrast, the U.S federal budget collects less than 1% of GDP from excise taxes. Americans will have to pay higher taxes to balance the budget and “pay for civilization”
Tax Gap The corporate income tax is now a sieve, with so many loopholes and ways to hide and shelter income in foreign tax havens like Switzerland. The IRS concluded that the tax gap the amount not paid that should have been paid was roughly $345 billion (implying a noncompliance rate of 16%)
New Governing Majority For 30 years, tax increases have been vilified and rejected at the polls. A new fiscal framework is needed to lift the United States out of it’s current economic crisis and it dangerous budget deficit. The U.S is set for a fundamental realignment of the governing majority on fiscal issues as a younger and more progressive generation come to power.