Yesterday the Center for American Progress released a wide-ranging, long-term plan to grow our economy by strengthening and growing America’s middle class. Josh Barro at Business Insider took issue with some of it.
Let’s start with where we agree. We’ve identified some important structural problems holding back the economy: stagnant wage growth, inequality, etc. Barro doesn’t disagree with any of that. In housing, we call for just the solution he proposes: aggressive mortgage modification programs, including reducing principal for underwater borrowers. He wants a more progressive tax system. Our plan has one. The report includes a reprise of the progressive, efficiency-enhancing tax reform plan that we released last November with Robert Rubin, Larry Summers, Roger Altman, Neera Tanden, John Podesta and others.
But there are some areas where we’ll have to agree to disagree, like on raising workplace standards. The United States is the only country in the developed world without paid sick days. That increases turnover, unemployment, and inequality, and has a disproportionate effect on women in the workforce who can far too often be put in the position of jeopardizing their job to care for a sick child or ailing parent. It’s also bad for business.
Barro disagrees with some of the investments we want to make. For example, he doesn’t like our call for expanding early childhood education. He cites international data about U.S. spending in K-12, but ignores the fact that when it comes to 4-year-old preschool enrollment, we rank 26th among developed countries. Human capital can account for up to two-thirds of economic growth, and according to Nobel prizewinning economist James Heckman, investments in early childhood have the highest rates of return of any educational spending. In an era of tight budgets, the imperative is even greater that government seeks the highest return on taxpayer dollars. Starting with our next generation of workers makes good economic sense.
Barro objects to our plan for investing in infrastructure. But U.S. infrastructure gets a D+ grade from the American Society of Civil Engineers, and falling behind in infrastructure hurts productivity and constrains growth. Not only that, as leading economist Laura Tyson and the president’s Jobs Council have pointed out, infrastructure represents a great “two-fer” in which each dollar invested lays the groundwork for future growth as well increasing employment today – often good, middle-class employment. Barro says that we should make sure that we aren’t paying too much for what we build. We agree: Investment and reform aren’t mutually exclusive; they go hand in hand.
The fact is that federal investments in future economic growth are currently on track to dwindle to the lowest share of our total economic output in 50 years. The government owes it to all of us to make smart public investment decisions. This is why we also seek investments with high rates of return and dovetails with efforts to support private sector job creation.
It’s hard to understand Barro’s objection to more streamlined government. Consider that a student applying to college can submit a single common application to universities around the country. But a business applying for government support has to file things many times and in many places. Why not organize our business and trade agencies to be more efficient, improving the speed of decision-making that he calls for?
We agree that the private sector is best placed to adapt to changing economic circumstances. We also agree that interventions can occasionally be justified as Barro suggests – the auto rescue he cites is a good example. We favor the government being more transparent about when it is supporting industries and how. Right now there are a host of ways government plays a role in supporting the private sector – from procurement to tax law to convenings. It’s better to be up front about what we’re doing and to let taxpayers know what’s happening. And at a time when we are facing increased competition from around the world, having a clear strategy for which type of interventions are helpful and when makes good sense, rather than continuing with opaque, ad hoc interventions.
There are several other areas where Barro raises objections, but he is mostly attacking straw men. For example, nowhere in our report do we argue that there is shame in renting. We do think it’s a problem that 25 percent of renters pay more than half their income in rent, which is why we propose policies to make housing more affordable.
Despite these disagreements, we welcome the discussion. After three years where the predominant debate in Washington has been about deficits and cutting government, it’s important to have a conversation about jobs and growth. That’s the conversation America’s almost 12 million unemployed workers need us to have. That’s the conversation America’s businesses – large and small – need us to have. And that’s the conversation the Center for American Progress is determined to contribute to.
Jennifer Erickson is the Director of Competitiveness and Economic Growth at the Center for American Progress Action Fund.