The Democrats and the Economy II. A Path Forward


On Monday the Democratic Congressional leadership held a rally in rural Berryville, Virginia. They laid out a program designed to appeal to the middle class and blue-collar workers who voted for Donald Trump.  However many of their proposals involve expensive government programs and therefore would add significantly to the national debt.

What is needed is a greater emphasis on free-market ways of helping middle- and low-income workers such as:

  • Increasing basic economic growth which has stalled to a relatively slow 2% per year of GDP since the end of the Great Recession in June 2009. For example:
  • Revenue neutral tax reform, lowering rates for both individuals and corporations, paid for by closing loopholes and shrinking deductions, would have many benefits. It would stimulate business investment, create new demand by lowering the taxes paid by the approximately 2/3 of taxpayers who do not itemize deductions, and provide an incentive for multinational corporations to bring their foreign profits back to the U.S. for reinvestment.
  • Targeted deregulation of the financial sector by exempting main street banks from the onerous requirements of the Dodd-Frank Act would enable these smaller banks to lend more money to small businesses.
  • Fundamental healthcare reform to lower costs from the current 18% of GDP to the approximate 12% average of other developed countries. This would save the American economy $1 trillion annually which could be spent far more productively. The Democrats are on the right track here by refusing to accept Republican half measures.
  • Improve educational opportunities such as early childhood education for low-income families, expanded career education and job training in high school and community colleges, and more emphasis on income-based repayment for student college debt. There would be some cost involved here.
  • Modest increase in the national minimum wage from the current level of $7.25 per hour to perhaps $10 per hour and then index it to inflation going forward. The Democratic proposal for a national $15 per hour minimum wage would put too many people out of work.

Conclusion. This collection of proposals involves both Democratic and Republican ideas and should be implementable with a bipartisan effort.

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4 thoughts on “The Democrats and the Economy II. A Path Forward

  1. It should be really hard to ignore the implications demonstrated by this level of data. I particularly agree with the GOAL of health spending at 12% of the GDP. Meanwhile, the Beltway folks continue to dither, and our nation’s economic growth continues to stagnate.

    • Now that the one-sided Republican effort for healthcare reform has completely collapsed, I think that we will see bipartisan efforts emerge in both the Senate and the House.

  2. How exactly are you thinking we cut health costs to 12%? That’s a lot of doctors and nurses you’re going to have to fire. As a side note, personal health consumption is around 15%, not 18%. The other 2% is mainly capital investment, which isn’t really the same thing.

    • If every other developed country can get by with only spending 12% of GDP on healthcare, why shouldn’t we be able to do as well? It is our third party payment system which is the crux of the problem.

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