Back in 2010 Mohamed El-Erian, the former CEO of PIMCO and fellow MoneyNews contributor, coined the term “the new normal” to characterize the stagnant post-Great Recession economy. Some commentators have since declared the term clichéd.
That, however, may just be an expression of how entrenched and indeed “normal” anemic growth, low wages and workforce participation rate, and not-so-temporary temporary emergency monetary policies have become in the years following the recession.
America’s next president, almost certain to be either Hillary Clinton or Donald Trump, will step into this landscape and be responsible with finally giving legs to the recovery which has been sputtering along since the Spring of 2009.
Unfortunately, as a previous post detailed, both are playing blame games rather than offering policies that will spur the economy to robust growth. The former faults the rich for the nation’s economic problems and wants to redistribute their wealth to help those left behind. The latter lays the blame at the feet of free trade and immigrants. And both agree that more government is an important part of the equation.
We can do much better than this. Doubling down on President Barack Obama’s policies and stoking class resentment won’t end the new normal that his policies helped create. And neither will protectionism and xenophobia. A well-considered set of economic policies, however, could ratchet up growth to four percent and get America moving again.
First on the to do list is normalize monetary policy. This would end the uncertainty surrounding the fate of interest rates. It would also end the overabundance of the Fed’s cheap money that has resulted in misallocated capital and played a central part in the concentration of wealth to Wall Street – something the class warriors too often fail to recognize.
Next, a new president should cut corporate and individual income taxes. Reducing these rates, especially America’s corporate taxes, which at 39 percent are among the world’s highest, will encourage investment and put more take home pay in the hands of working class Americans. This in turn will propel growth and create jobs. In fact, according to the Tax Foundation eliminating the nation’s corporate tax would grow the economy by up to 6 percent.
Also on the new president’s agenda, creating a sensible regulatory environment. In the years between 1997 and 2012 federal regulation increased by nearly 30 percent. Eliminating excessive and unnecessary, though certainly not all, regulations, would create new businesses and more jobs.
And, lastly, a few more items for the plan: the next president, along with Congress, should cut unnecessary government spending in order to reduce or eliminate the federal deficit (or even produce a surplus!), summon the will to reform entitlements, and aggressively expand trade agreements to boost GDP beyond domestic spending.
This political season hasn’t lacked for drama, anger and accusation. What’s been missing, from both parties, is a positive agenda that prioritizes growth and forward thinking economic policies.
Though the hour is admittedly late, maybe one or both of the candidates will change course.
It would be a welcome transformation, and give the nation a real chance to make the “new normal” a thing of the past.
Categorised in: News