03 Mar EXPANDING ECONOMIC OPPORTUNITY
As in every presidential election of the modern era, the U.S. economy was at the top of Americans’ concerns during last year’s campaign season. Our nation has clearly come a long way since the depths of the Great Recession eight years ago. But despite a low unemployment rate and a stock market that has reached new heights, the insecurity and uncertainty many American families and businesses still feel fuel much of the passion on all sides of the political divide. From millennials worried about crushing college debt to former factory workers who face a dramatically altered job market and worry that they can no longer afford a mortgage, let alone save for retirement, millions of Americans are losing faith in the ideals of opportunity and merit-based mobility that define our nation’s unique economic history. The idea that our system is “rigged” transcends partisan divisions.
This common anxiety suggests that re-energizing the American economy should be the common goal of our president and Congress. Lawmakers on both sides of the aisle should agree that Americans need new tools to build financial security from youth to old age. U.S. businesses need an updated tax structure that will allow them to compete more effectively in the globalized economy, while creating high-quality jobs. We must broadly evaluate and modernize policies developed for a pre-digital economy. Most challenging, all of these essential efforts must be pursued against the backdrop of a U.S. economy burdened by rising and unsustainable debt.
Policy Priority: Support Entrepreneurship
The financial crisis of 2009 was a shock to the global economy that few saw coming. Americans lost their jobs, homes, and retirement savings at a rapid rate. Not surprisingly, the impacts of the crisis fell hardest on middle- and lower-income Americans. Unfortunately, one of the principal responses—the Dodd-Frank Act—is also having a disproportionate impact on the working class. Six years after enactment of this sweeping law, it is necessary to explore opportunities that maintain the fundamental stability of our financial markets while encouraging economic growth and entrepreneurial opportunity.
- Responsibly expand access to mortgage credit. In the wake of the financial crisis, the mortgage credit box has shrunk considerably and the national homeownership rate has dropped significantly. While there are a number of reasons for these developments, regulatory policies have contributed to a substantial tightening of mortgage underwriting standards. Credit score requirements remain very high by historical standards and only the most pristine mortgages are being originated. The administration should ensure that its regulatory review includes assessing whether or not existing rules are creating inappropriate and unnecessary barriers to responsible mortgage lending. The administration should also support the ongoing development of new tools to more accurately assess the creditworthiness of mortgage borrowers.
- Establish a commission to regularly assess effectiveness of the financial regulatory system. The president and Congress should establish an independent commission to develop a formal and periodic process to assess whether the financial regulatory system appropriately balances financial stability, economic growth, and the needs of consumers, small businesses, and others who rely on financial services.
- Improve the portability of pensions by facilitating a Retirement Security Clearinghouse. With Americans changing jobs frequently, there needs to be an efficient way for workers to transfer their retirement savings to a new employer’s plan. The Department of Labor should convene stakeholders to reach agreement on a solution that could particularly benefit the millions of savers with orphaned accounts from previous employers.
Policy Priority: Increase Economic Growth and Competitiveness
While much election coverage focused on the divisiveness and polarization of the 2016 campaign, some of the most passionate voices on either side of the blue-red divide struck a surprising note of convergence on one key point: That the globalized economy is not working for all Americans. Addressing this anxiety requires more than nurturing entrepreneurship—it requires a tax structure that allows U.S. companies to compete globally without shipping jobs overseas; responsible fiscal policy; long-term investment in the “fundamentals” of the U.S. economy; and an immigration policy that ensures our nation has the workforce and talent it needs to sustain a vibrant, diversified economy for decades to come.
- Reform business tax provisions. The United States needs a tax code that is globally competitive and conducive to economic growth. Policymakers should lower tax rates and restructure the code in a fiscally responsible way that simplifies the system for large and small businesses alike.
- Better integrate a long-term perspective into the federal budget process. When Congress develops its spending priorities, they are often myopic, with little attention given to unsustainable debt burdens being placed on future generations. Among other changes, policymakers should insert long-term goals into the budget, which would help to keep policy on track and encourage more-sustainable outcomes.
- Do not default on U.S. debt. In recent years, policymakers have taken the country to the brink of failing to pay all of its obligations in full and on time. With the debt limit reinstated this year, it will once again be on the agenda, and ensuring the full faith and credit of the United States should be priority number one.
- Align our immigration system with our economic needs. Immigration to the United Sates has served as a hedge against serious economic impacts that have affected other developed societies—like Japan, Italy, Russia, and China, who are experiencing declining populations—and have brought us many of the innovators who have driven our economy for more than two centuries. The United States needs to continue to view immigration as an avenue for economic growth. But too many view immigrants as competition instead of compatriots. Congress can help by creating a system that strategically aligns employment-based immigrant visas with legitimate labor and economic needs. These caps should be flexible and regularly updated to reflect the current state of the economy.
Policy Priority: Financial Security From College to Retirement
Many Americans are hurting financially as they strive to achieve the American dream. The costs of college have skyrocketed, while at the same time, individuals are now expected to shoulder much of the burden when planning for their own retirement. Policy reforms have the capacity to dramatically improve the situation for millions of households that may have borrowed large sums to receive a higher education or that struggle to save for short-term needs or retirement.
- Make universities have more “skin in the game” so that fewer students end up saddled with debt and no degree. This could be done by tying federal aid eligibility to loan repayment rates, or by making institutions pay a fee based on the number of borrowers who are unable to pay down their loans.
- Create Retirement Security Plans, which would allow small businesses with fewer than 500 employees to band together and offer employees access to retirement plans administered by a third-party financial expert.
- Encourage employers to offer automatic enrollment into two accounts. When starting a new job, employees should be automatically enrolled in two different savings accounts unless they opt out: One account would be similar to a standard savings account, and the other would be a retirement savings plan.