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It’s hard to believe, but the debt ceiling isn’t America’s biggest problem right now. Our biggest challenge is job creation.
Arnold Kling and Nick Schulz are writing some of the most important articles on this topic right now. All of us – investors, business owners, lawmakers, educators, bloggers, you name it – should think about what they're saying.
Why? Because they are uncovering what is necessary to fix America’s economy. Our nation’s future depends not on getting the debt ceiling negotiations perfect (though that would sure help!), but on figuring out how to increase productivity and create jobs at the same time. It's not just going back to Reagan-esque tax cuts, though that would be nice. We need newer, more creative solutions.
Their writing comes at a good time. Both the Fed and the Commerce Department released reports yesterday showing our economy struggling this summer under declining manufacturing and durable goods orders. It’s tough sledding these days.
Building on their important recent essay in National Affairs, Kling and Schulz published an article yesterday at the American on what jump-starting a long-term recovery requires.
First, we need to understand that our problem is long term, while most solutions we employ are terribly short term.
The stimulus has failed because America’s problems are long term and stimulus measures are short term. How do we know our problems are long term? Kling and Schulz write, “For starters, the downward trend in the proportion of the working-age population with jobs predates the financial crisis and recession.”
They have a few useful charts that drive the point home, and then they say:
Government stimulus can sometimes be effective at returning people to their old jobs, but the market is telling investors and entrepreneurs that those jobs are not needed anymore. And so the stimulus fails to stimulate very much. It may sound cold to say this, but those old jobs are not coming back.
Second, we need to understand where the jobs are.
Washington wants to think we can re-start a new manufacturing push, and we all think of finance as an opportunity sector. But the jobs are, and have been, in education and health care. Demand is rising in both sectors, and yet government policy is more interwoven – and destructive – in both than in other sectors.
What to do?
To revitalize these sectors and revive the American job market, we must open up these industries to competition and entrepreneurial reform. This will require tolerating a certain degree of messy experimentation. But entrepreneurial growth in these sectors is what will get the American economy back to work.
They point out that both parties have had a hand in creating the government interference that is costing us jobs rather than producing them.
On education, they write:
Imagine what might happen if government involvement in education were restricted to giving school vouchers to households below the median income. Entrepreneurs would be free to redesign education completely. Perhaps the very concept of a school would ultimately be replaced by different educational components with entirely different business models.
They have plenty more to say about higher education. Read the article in full.
They encourage experimental thinking in health care, too:
Imagine if state governments experimented by setting up healthcare enterprise zones. These would be areas where entrepreneurs could set up healthcare delivery systems without any rules concerning what license would be required to engage in any particular activity. Perhaps medical services could be delivered by workers with fewer credentials but more rigorous on-the job training.
If these services rate at the same level as standard hospitals and clinics, they should be allowed to continue.
Again, read the whole article for their other ideas.
Here’s the main takeaway from their article: in the past, innovation in education and healthcare has been driven by ideology, but today it’s driven by necessity.
We are used to having fights, rooted in conservative or liberal worldviews, about education and healthcare. The conclusion we should take from Kling and Schulz is that our desperate economy won’t turn around unless we reform these two sectors, and doing so means opening them up to entrepreneurial endeavor. The solutions for both are not a right-left thing. They are the right (as in correct) thing.
If we care about making America an aspiration nation once again, we’ll follow their line of thought. Despite the need for everyone across the ideological spectrum to think this way, it won’t happen if conservatives don’t lead.
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