Monday, September 17, 2012

Opening Exercises 

I used to get a chuckle out of letters from disgruntled older alumni published in the Princeton Alumni Weekly several decades ago, whether it was over the advent of co-education, lack of mandatory chapel, or some other change in a university tradition.  Now that I am approaching my mid-50s, I find that I have at least a nit to pick with President Tilghman, and part of her speech during Opening Exercises on September 9.

As summarized in the News at Princeton from the Tiger E-News that hit my inbox today, under the headline "At Opening Exercises, Tilghman asks new students to 'occupy' Princeton," President Shirley Tilghman cited the Occupy movement in an effort to get students to think beyond themselves:  
Finally, Tilghman turned to the Occupy movement that began last September in Zuccotti Park near Wall Street in New York City. Just as the protesters drew attention to the gap between the top 1 percent and the bottom 99 percent in income, Tilghman suggested that there is a similar gap in opportunity. She asked the new students to recognize that now, in joining the Princeton community, they are becoming part of the 1 percent in terms of future opportunity, irrespective of their backgrounds. In acknowledging that such a privilege carries broad responsibilities, Tilghman urged them to conduct themselves with the protesters' spirit and to embrace the University's informal motto of "Princeton in the Nation's Service and in the Service of All Nations."
Let's set aside that a number of Wall Street people currently serve as Trustees at Princeton, and that obviously Princeton fund raising targets the 1% who can provide the large gifts necessary for success of programs such as Aspire over the last five years, so there is a degree of intellectual inconsistency in President Tilghman casting Occupy in any positive light.  I am greatly in favor of including a "with great power/privilege comes great responsibility" section in a speech to students, and I understand that such a lesson should go beyond the concept of noblesse oblige that might have been taught several generations ago.  I would simply expect President Tilghman to draw on an inspiration other than the Occupy movement, given all of the negative activities associated with the Occupiers (yes, the link goes to the righty National Review, but the links within that compendium are largely non-partisan news stories).

If I was giving a speech at West Point, and wanted to stress the importance of discipline and order within the military, I would not say, "I urge you to draw on the spirit of the SS and prepare yourself to follow orders which you may not fully understand."  That is, I would not be like the character John Gill in the Star Trek TV episode "Patterns of Force" and draw any positive lessons from any part of Nazi Germany (his dying words, "It was the most efficient system of government ever devised").

I don't think that the vast majority of Occupiers should be compared with Nazis or other criminals -- most Occupiers are probably nice, non-violent people who are deeply troubled by income inequality occurring in a constitutional republic, or the inequality of outcomes in general.  I just think that using either Luke 12:48 (in an ecumenical sense) or the first Spider-Man movie would be a cleaner way of delivering the same message that President Tilghman was trying to send.  Let's leave the Occupy movement out of it.

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Sunday, September 09, 2012

The official TigerHawk plan for restoring private sector job growth in the American economy 

Mort Zuckerman describes the incredibly dismal job situation, which is far worse than the headline unemployment rate number.

The alarming numbers proliferate the deeper you look: 40.7% of the people counted as unemployed have been out of work for 27 weeks or more—that's 5.2 million "long-term" unemployed. Fewer Americans are at work today than in April 2000, even though the population since then has grown by 31 million.

We are still almost five million payrolls shy of where we were at the end of 2007, when the recession began. Think about that when you hear the Obama administration's talk of an economic recovery.

Read the whole thing, including this bit:
Older Americans can't afford to quit. Ironically, since the recession began, employment in the age group of 55 and older is up 3.9 million, even as total employment is down by five million. These citizens hope to retire with dignity, but they feel the need to bolster savings as a salve for the stomach-churning decline in their net worth, 75% of which has come from the fall in the value of their home equity.

The baby-boomer population postponing its exit from the workforce in a recession creates a huge bottleneck that blocks youth employment. Displaced young workers now face double-digit unemployment and more life at home with their parents.

Many young couples decide that they can't afford to start a family, and as a consequence the birthrate has just hit a 25-year low of 1.87%.

This is not to make a partisan point -- one need not ascribe presidential "fault" for the current disaster to recognize that is exactly what it is. Young people are neither having the experiences they need to be productive in the future, nor are they having babies. We are borrowing an incremental $1.5 trillion a year, more or less, that will have to be paid back by fewer people who are less productive. We are supporting our own standard of living today, such as it is, by destroying the standard of living of young Americans, and those not yet borne. Is there anybody who can do even the most basic math who disagrees with that point?

So the question is, how do we restart the American job engine and turn our vicious cycle in to a virtuous one? Enact as many of the following proposals as possible, as quickly as possible. True, many of the prescriptions below will irritate left and right or gore special interests, but each and every one of them will unlock labor markets and create opportunity by reducing the risk, expense, and hassle of employing people and starting up small companies (that inevitably generate almost all of the net job growth in the economy). The good news is that none of these proposals call for big new government programs, corporate welfare, or industry-specific subsidies or deregulation (such as "drill more oil" or "approve the Keystone pipeline"). Nor do these proposals call for big tax cuts for the "rich" or require the political settlement of huge issues that closely divide Americans.

1. To lift up the poor, allow any employer to hire any worker for less than $10 per hour without filling out a single piece of paper or paying a single tax. No payroll taxes (of which more below), no immigration forms, no Social Security number, no nothing. Pay cash if you want. Above $10, scale incremental tax expense so that the marginal effective tax rate never exceeds the top marginal income tax rate. Substantially reduce the paperwork requirements for all employers, including government contractors.

2. Lower the risk of hiring people by making it much easier to fire them. Immunize employers for slander in the giving of job recommendations so that they can give real information rather than "name, rank, and serial number." Limit damages for individual employee liability (such as for discrimination) to twice lost wages, capped at one year of pay. In return, immunize former employees from slander or libel damages for things they say or write about their former employer, online or otherwise, after the fact (which will give a strong incentive to employers to treat people fairly and respectfully, even on dismissal).

3. Uncouple health benefits from the employment relationship (a virtually essential element of any health care reform plan other than Barack Obama's). The relationship between the two is an accident of history, a function of government wage controls during World War II. The linkage deters hiring every day, especially for the poor.

4. End payroll taxes entirely. To do this, we have to kill off the Social Security tax and uncouple Social Security from employment (that is, you get it whether you worked or not -- consider taxing benefits as ordinary income to make up for the added cost). Fund it from general revenues by eliminating all payroll taxes and substituting income taxes, since that is what we are going to end up doing anyway when all those Treasury securities in the "trust fund" mature. Revise the personal income tax to tax all income, from the first dollar, at some rate adequate to make up for the elimination of payroll taxes. Assume for this exercise that the aggregate tax burden at any given level of income will be no more or less progressive than under the prior system.

5. Bring back shop class in our schools (a sentence I never thought I would write, insofar as I hated shop). At all times in all schools, require discipline, honesty, punctuality, and above all, respect for the work. Send the message that work for money makes a contribution to our society by allowing paid employment at a local business to satisfy "community service" requirements. Teach students how to be good employees, even if you have to bring in non-teachers to do it.

6. Recognize that state and local regulation in many parts of the country makes it a lot harder to start or expand businesses than it ought to be (the differences between Austin, Texas and Princeton, New Jersey, both liberal college towns, are startling). How long does it take to get a building permit? How many jobs require a "license" and how hard is it go get one? How difficult is it for businesses to do simple things, like putting tables on the sidewalk or selling alcohol? To what extent do state or local regulations establish wasteful anti-competitive schemes, such as taxi monopolies and rent control? To address this, order the federal Department of Commerce to develop an agreed upon "score card" that measures state and local regulations and identifies best and worst practices from the perspective of business formation and expansion. If sunshine does not drive reform, tie federal funds to the elimination of "worst practice" state and local regulations that unreasonably interfere with business formation or expansion.

7. Require that all new federal regulations be accompanied by "an employment impact statement," the data in support of which is fully available on line and subject to open-source critique.

8. Require that all existing federal regulations be eliminated or reviewed for their impact on employment during the next five years, and once per decade thereafter. Consider an aggregate cap on regulation: For every job killed or prevented by new federal regulations, other regulations must be eliminated to compensate. This will force our regulators and politicians to make difficult and serious choices.

9. Make it a lot easier to raise capital to start a business by making it a lot easier for venture investors to "exit" a successful one. Make it a lot easier for privately-issued shares to trade after they have been issued. Direct the SEC to favor public stock offerings of venture-backed businesses (this is as much a question of attitude as anything else, so it may require some cleaning of house in that agency). Eliminate Sarbanes-Oxley Section 404, which requires a costly "internal controls" audit that makes public companies (and aspiring public companies) of all sizes far less nimble and encourages a culture of risk aversion in virtually all American public companies. Eliminate the Public Accounting Oversight Board, the mere existence of which has massively increased the expense of financial statement audits with no obvious benefit in transparency.

10. Annual revisions in generally accepted accounting standards are both expensive and wholly confusing for the people who actually use financial statements, lenders and equity investors. Agree that GAAP will be revised, either directly or by SEC pronouncement, no more often than once per decade.

11. Not only do we need for winning investments to have a ready and quick exit, we need for losing investments to do as well. Allow taxpayers to deduct all capital losses against ordinary income. That will allow for much faster recognition of losses which will return capital to the system for reinvestment much more quickly. Raise the capital gains rate a bit if necessary to fund full deductability.

12. Reconfigure immigration policy to attract skilled and wealthy immigrants who are likely to start new businesses.

13. If the political price of #1 and #12 above requires it, fund a massive expansion of the border patrol. That will both generate jobs (the only "make work" proposal on this list) and choke off the supply of new illegal aliens.

Of course, these proposals do not fundamentally touch macro considerations, such as fiscal policy, corporate tax policy, individual income tax policy (except to the extent necessary to eliminate payroll taxes and decouple health benefits from employment), international trade, national labor relations, or our system of civil liability. There are, no doubt, a great many things we could do in those areas to help employment as well, but they each touch fundamental and closely divided disagreements in American public life. The point here is to show that there are relatively low cost policy moves that could be done now and in the medium term to fire up the jobs market without requiring the "settlement" of these huge issues (recognizing our utterly dysfunctional political class would struggle to enact even my relatively minimal program).

Release the hounds.

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