3/30/2011 11:27 AM ET|
7 ways to fix America
While we wade through the economic mud of a weak recovery, our leaders dither. These steps from a think tank may not hold all the answers, but they could be a start.
We're more than two years into a recovery. The economy is growing again. Stocks have more than doubled off their lows. Yet it's easy to be underwhelmed.
Job growth has been anemic at best. Home prices are falling again. Inflation is on the rise as food and fuel prices surge. Consumer sentiment is plunging at a rate typically seen ahead of recessions and on par with the declines seen in the wake of Hurricane Katrina and the 9/11 attacks.
Something's not right.
The American people know it. They can feel it. There are structural problems. How else can you explain a situation where corporate profits surge to all-new highs and small-cap stocks return to their 2007 bull market peaks, even as food stamp usage hits records and the labor participation rate falls to levels not seen since the early 1980s?
Yet politicians and policymakers are still fighting the remnants of the Great Recession. It's all very backward-looking. And it's all about repair and restitution rather than fresh growth on fertile new ground. They offer baby steps in the face of hard choices.
An economy of conundrums
Decades of fiscal impropriety is forcing Congress and the White House to hack away at budget largesse and even consider cuts to Medicare and Social Security as America's debt load nears its statutory limit of $14.3 trillion. Yet the nation's infrastructure, its schools and its energy system are failing -- at a time when we need the very best to compete with rising economic powers like China.
Likewise, just when we need consumers and business to spend more, regulators are putting new shackles on banks and lending, tightening the availability of credit to homebuyers and pushing housing prices down again.
And now, despite massive doses of fiscal stimulus and ultracheap cash from the Federal Reserve, the economy is showing signs of weakening once again as we reap the inflationary side effects. While we're clearly in better shape than we were in the dark days of 2008 and 2009, things are still very fragile.
Wall Street economists are already marking down their growth estimates to account for slower exports to Asia and reduced consumer spending. Since Jan. 28, Morgan Stanley's first-quarter GDP tracking estimate has fallen from 4.5% to 2.9%. Already, as I discussed last week, the burden of high energy prices has moved to levels not seen since 2008 and the 1970s ahead of deep economic slowdowns.
Enough with the half-measures. Something more is needed. We saw glimpses in President Barack Obama's State of the Union address two months ago, but his proposals have since been criticized for being too vague by even his supporters -- and outright ignored by an opposition that refuses to give him any credit.
Our leaders have other things to worry about, like the 2012 elections. So where do we look?
Well, the brain trust at McKinsey Global Institute set to work on ways to fix America. The institute has proposed seven steps the authors believe are needed to sustain the nation's historic growth rate and ensure the prosperity of the next generation. They may not have all the answers, but they at least nailed the key: productivity. We need more of it.
The economic problem
By definition, economic growth is driven by two big factors: The number of people working and how efficiently they can produce high-value goods.
Over the last 50 years, both of these have powered the United States forward and pushed up living standards here. Driven by the post-war baby boom and the influx of women into the workforce, increases in labor contributed 1.6% to annual GDP growth since 1960. The other portion, at an average of 1.7%, came from productivity gains via technological advances and more efficient business practices (think Amazon.com for warehousing or Boeing for manufacturing).
Together, these two factors have contributed to a 3.3% growth rate that's now considered normal. But that rate is set to slow. As fertility rates drop and the windfall from female empowerment fades, the rate will drop closer to 2.2%, according to McKinsey. That would translate into standard-of-living increases nearly 40% smaller for those born in 2000 than for those born in 1960. Watch out, "millennials," you won't be better off than your parents were.
Already, productivity gains are driving 80% of total GDP growth, compared with 35% in the 1970s. So if we're going to fix America's problems, we need to make the American worker much more efficient -- something on the order of 65% more efficient if we're going to keep chugging along at 3.3% growth.
VIDEO ON MSN MONEY
Step one, out law paid lobbyist, the people have the right to lobby congress, that doesn't mean special interest groups and corporations have the right to pay someone to lobby for them.
Step two, term limits on all political offices with no retirement benefit or continued health care benefits.
Step three, honestly clean elections. No more paid for political ads for anyone. A series of debates that are covered by all networks free of charge as a public service. That's it nothing more allowed. Take the money train out of elections.
Step four, anything said during an election about a candidate by a candidate or anyone representing a candidate had best be true and provable not just your opinion of them or you get disqualified from all political offices for life as a result of trying to defame an opponent or to support yourself by lying to the public. Lets stop accepting lying cheating scum bags as political leaders!
Plus, who the hell does congress think they are? They think it`s ok if the government shut`s down for lack of money, but think they should continued to be paid? WTF? We are the idiot`s for electing these clown`s to office.
I personally loved the one who gave the SOB story about having six kids, having more debt then any of us, and needing his $177,000 paycheck.
And I note: Democrats tried to enter a stand-alone bill that would remove Congresses salaries if no budget was passed; ask Republicans why they refused to bring it to a vote.
as over 50 plus years have passed...
That, and stop being the worlds peace keeper~if we spent half of what we spend on defense on our own nation......instead of putting dictators in power only to overthrow them after a few years, and then spend billions rebuilding "other" countries....
And maybe get big corporations like GE, etc to actually pay taxes like the rest of us!
Geez...its not rocket science!
Step 1 Fix health care and education.
Easy, I’ll give you a hint. All men & women are created equal. Running 30 different healthcare systems at the same time is very inefficient. I don’t care which one you pick it will be ten times more efficient then what we have today.
Step 2. Increase innovation
Easy, pay the innovators instead of suing them, bankrupting them, and stealing their ideas. Who is john galt? I know at least 6 people mostly engineers with marketable ideas that will take them to their grave. Myself included.
Step 3. Close the talent gap
The canned solutions they came up with are sad. How can they call themselves a think tank?
Easy, pay people what they are worth. Wage suppression creates and maintains shortages. Industry needs to stop expecting government to supply them with worker drones. They need to go back to maintaining their own supply chains or pay shortage prices for the drones with the pedigrees desired when they don’t. Use seven figure salaries anytime a shortage develops as an incentive to management. If CEOs want to keep their seven figure salaries and not see them go to their key players then they better maintain a supply chain of viable employees robust enough to keep the salaries in check.
How about industry attracting skilled workers by not externalizing most of the costs onto the workers? Attract good skills by paying for things like over time and all the costs associated with continuing education; time and expenses.
Step7. Share ideas
Easy, but I have to keep them a secret so I can get paid.
Please people, STOP arguing that this is a Republican or Democratic started issue, IT IS NOT!
Every politician and President has participated in this debacle we are in.
While you all argue Dems or Reps, Independents got us to where we are, they are winning the war!
First rule of warfare, DIVIDE and CONQUER - wouldn't you agree that America is a divided country, while we argue for one side of the aisle or the other?
Americans are so trained we have become predictable, sadly, so was I. Get out from underneath your rock, the problems are everyone's and we need to recognize what is broken (clearly) before we can really make any progress to fix it. This guys article is eye candy with no real substance of truth.
We have to fix it or just let things happen, trusting whole or in part for your politician to do it, is a foolish gesture these days.
Here is the problem with a flat tax... The Federal government currently spends about 80,000 per family of 4 every year. Any kind of flat tax would require them to step up and pay their fair share. Of course this would immeadiately end the federal government spending as we know it.
My question to you is what do we get for the Federal government's spending of 80,000 a year?
We have a SPENDING problem, not a taxing problem.
By definition, economic growth is driven by two big factors: The number of people working and how efficiently they can produce high-value goods
Blatently incorrect. Economic growth is driven primarilly by one factor: Consumer Spending. Its this Supply-Side BS thats gotten us into these problems in the first place. You can produce all you want, if no one buys any of your product, you produce no economic growth. Its the act of exchange that drives growth, hence, the economy is Demand driven, or Consumer driven.
As long as the scale is tilted toward business, America will continue its decline. 30 years of Supply-Side nonsense has already lead to the majority of wealth being re-allocated to the few, leaving the many worse off then they were 30 years ago. This trend is now continuing, as business has learned it can shed workers and force productivity increases.
If you all want to really solve this economic problem you only have to do ONE thing. It is not the politically correct thing to do, mainly due to the amount of money that flows into the campaigns of both parties because of it.
DO NOT ALLOW PUBLIC SPECULATION IN THE OIL MARKETS IN HIDDEN EXCHANGES.
Reserve this trade for only those that can prove they are hedging the cost of fuel to run their corporations. Those such as Airlines, Electric generating facilities, and like kind.
The public investor and the large hedge funds that are controlling the big pensions are ruining this country by artificially raising the cost of oil in these hidden trades. They need to be on open exchanges and limited to hedging actual use. The notional value of these hidden trades is somewhere between US $8 - 30 Trillion according to Dan Dicker, oil market trader. That is way too high and is a disgrace for the leaders of this country to allow it.
At over $100 a barrel today, the real cost is only $32 a barrel. Look what happened in 2008 when the economy collapsed. Oil went down to the $32 mark because that is what the market will sustain without all the speculators upping the price.
Why won't our leaders do this? Democrats and Republicans alike get campaign contributions from the hedge funds to not limit the trades. Environmentalists want the high price of oil so we go to alternative fuels of which there are none available in the volumes we need. And finally, we have no leadership in this White House. Not once has he mentions market speculation as the driving force of the high price of gasoline for the American Consumer.
Give us low gas prices and the economy will pick up speed faster than you can say, "Fill'er Up!"
Somehow, someway both sides need to compromise and come to a long term agreement and detailed plan on exactly where and how much we need to invest in innovation, because this is linked to education, energy, health care, and jobs.
The problem is that this type of investment gives long term rewards, not short term as the politicians prefer so they can get re-elected and sit around and count how many seats each party has.
Right on a lot of counts in this article. But they left out three items.
No corporate executive can receive base monetary compensation in excess of 50 times the lowest wage of the company (with cash bonuses capped at 50% of the max). All other compensation must be in the form of stock (not stock options) that can be cashed at a maximum rate of 10% per year in the first 5 years after earning. Anything over 10% and the entire sale is taxed at 80%. This will certainly help America's corporations become more focused on long term performance instead of quarter to quarter share price.
The other thing they left off is to put in place a penalty system for all carmakers. 50% of the vehicles they sell should fall into these categories: electric, plug-in-hybrid, CNG or deisel. If less, the company is fined (which the car companies can pass to the people who buy the non-complying vehicles).
For our politicians, not only term limits, but include laws with stiff penalties dictating that the only money elected representatives get is their government salary. No monies, goods or services other than what their position provides should be allowed. Public speaking engagements can be compensated when they are out of office but while in office they should be concentrating on the job of working towards the common goal of keeping this country self sufficient, safe and relevant in the world. If they own businesses their profits should be held in trust until they are done with their public service. If their businesses or any of their investments rely on government contracts then they must relinquish ALL interest in those buisnesses/investments in order to take office. "Held in trust" just defers any benefit and still allows them to profit from their positions.
The biggest fix we can do to the education system is to encourage better parenting; at least 50% of all failures in education fall on the parent. Teachers can teach but it takes the parent to ensure the child is "motivated" to do well. Even the best teachers are powerless against unmotivated students.
Infrastructure - we need to increase our use of rail and public transportation. But yes, our roads need a major rebuild. Our grid needs to be built out to reach all these green projects we always read about.
Energy - the technology is there. It's still expensive but with gas at $4 a gallon it's close to competitive. The more we do it, the cheaper it will get. The side benefit is it will all be domestically produced keeping BILLIONS of dollars at home. Solar, wind, nuclear and hydro-electric and coal (capped at 25% of energy production) could supply the grid; CNG, Bio-gas, ethanol, dio-deisel, syn-gas, electric and petroleum could be the transportation fuels (with the goal being that petroleum is the smallest piece of the pie).
America's problem is we keep waiting for the next best thing. Everything I've mentioned, is here and here now, ready to do it's part. We need to build it out now. Efficiencies and improvements will follow. The longer we wait, the more we are just hurting ourselves.
7 ways to fix America - Certainly the authors of these articles are always going to explain why the current broken money system needs to be kept in play and in doing so, you will be able to profit again, soon, very soon we promise!
LoL America is so far beyond corrupt, the rest of the world for that matter, and the best thing you can do is shut down. No more spending, saving only, cut up credit cards, don't take out loans, refinance Dudley, get resources stocked up! It's every man for himself at this point and if you participate in the debunked system, then don't cry to anyone anymore when you get taken for a ride.
Seriously folks our great way of life is gone and the people who are in there making their profits want you to stay with them, don't fall for it.
There has to come a time in one's life, where you can say, I don't need any more money.
Make your investments count, insist upon corporate responsibility, profits with out regards for the environment or the economy, is bad profit. And if you don't care how the Corporations get you your profit, well then your just another part of the problem too.
1) Abolish the FED
2) Dismantle the WORLD BANK
3) Make it illegal for Corporate sponsored political candidates
4) Make legislation to monitor and report conflicts of interest, prosecute wrong doers.
5) Bring back the Lobbying guidelines that have been revised, edited for the favor of Corporations
6) Revise and reissue certain Patents that allow multi national corporations rights to take over a farmers crop, because they think their GMO Seed is in that farmers field. Ever hear of wind pollinating? Why punish a farmer for a natural occurring phenomena
7) STOP SELLING OFF AMERICA - be proud of who you are, not ashamed of the bad choices we made by electing these idiots.
We can still fix the problems, but not by the advice of people who want to keep the system status quo... Bad suggestions Anthony, they only prolong the inevitable collapse we are in store for.
Get smart folks, these guys writing the articles, speaking at engagements, being on TV don't have the real answers we need for our real problems. They are only devised to plug the hole in the cracking Dam.
Right on. Education Sucks because teacher have no power to teach, they are parenting. My wife is, (herself disabled by a stroke), a special ed teacher. Healthcare, in some fashion, needs to be revamped, Status quo does not work. When the changes are made Congress and Senators CANNOT EXCLUDE THEMSELVES FROM THE SYSTEM The current system already has "death boards" created by the insurance companies. Just ask anyone who has been denied life saving treatment. Fix energy, we keep importing oil. Evidently evidently do not have a comprehensive to become imported oil independent. A third world country, when brazil started their energy program. We need a flat tax with no exemptions, to include the corporations that go offshore to avoid taxes. How about 5, 8, or 10%?
We need to stop giving tax breaks to big oil, big drugs, big finance and hold them accountable. Why are we allowing oligarchies AND MONOPOLIES?
CALL YOUR CONGRESSMEN AND SENATORS, TELL THEM TO STOP TAKING BRIBES UNDER THE GUISE OF LOBBY FUNDING. LET'S GET TERM LIMITS. THESE ARE NOT SUPPOSED TO BE LIFE TIME JOBS.
CALL YOUR REPRESENTATIVES. I DO NOT CARE WHICH PARTY YOU ARE AFFILIATED WITH, JUST VOT!!!!!!!.
Half of this article doesn't make sense in the face of the facts and alot of solutions are omitted. Higher education should be FREE like it is in other countries, provided you keep your grades up. There are people who aren't going to school because they can't afford to and a lifetime of debt slavery to student loans should be criminal. As for the US SICKcare system why not allow people to use natural remedies that WORK like real cures for cancer (google Budwig Protocol or Gerson Therapy) instead of what makes Big Pharma money in the ponzi scheme of for profit health care? And how about ENDING illegal immigration (by making it illegal to rent or sell property to them with jailtime mandatory), cutting immigration drastically (we really don't need any more), and ending the H1 worker Visa program so Americans can have jobs? How about making companies pay their fair share of taxes? GE offshored loads of US jobs and paid nothing in taxes while making over $10 billion in profits. They got money back for crying out loud! While the working class is taxed six feet under. China has a 24% tax tagged on to imported US products, why aren't WE doing this?
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