lunes, 10 de noviembre de 2014

lunes, noviembre 10, 2014

A Growth Pact for America

Glenn Hubbard

NOV 5, 2014
           US Capital Building winter
NEW YORK – America, once again, will have a divided government, with the Democrats holding the White House, and the Republicans controlling both houses of Congress. But that does not necessarily mean that the final two years of Barack Obama’s presidency need to be defined by stalemate and mutual recrimination.
 
The electorate’s desire for change and fear of continuing slow growth, which pushed the Republicans to their victory in this week’s mid-term congressional election, will invariably prompt discussion about new policy options designed to raise growth, employment, and incomes. Of course, America’s experience with divided government can leave one pessimistic about the two parties’ ability to compromise; but, as Mexico recently demonstrated when its three big parties agreed on a market-oriented “Pact for Mexico,” even bitterly opposed political parties can overcome their suspicions to embrace needed reforms.
 
The list of potential policy actions that could benefit the United States – trade liberalization, comprehensive regulatory reform, and immigration and education reform, among others – is long. But only two policies are particularly promising for such a “Pact for America”: federal infrastructure spending and corporate-tax reform. Enactment of these reforms would generate a win for each side – and for both.
 
But such a bipartisan consensus requires removing both the left and the right’s ideological blinders, at least temporarily. On the left, a preoccupation with Keynesian stimulus reflects a misunderstanding of both the availability of measures (shovel-ready projects) and their desirability (whether they will meaningfully change the expectations of households and businesses). Indeed, to counteract the mindset forged in the recent financial crisis, spending measures will need to be longer-lasting if they are to raise expectations of future growth and thus stimulate current investment and hiring.
 
The right, for its part, must rethink its obsession with temporary tax cuts for households or businesses. The impact of such cuts on aggregate demand is almost always modest, and they are poorly suited for shifting expectations for recovery and growth in the post-financial-crisis downturn.
 
Politics complicates matters further, because the exclusively short-term focus on the fiscal impact of spending and revenues clashes with policies whose benefits accumulate over time. While such benefits may not appear to be “stimulus,” their mounting effect better serves the objective of raising expectations of future demand and growth.
 
But the concerns of serious people, whether on the left or the right, are not so different. Will economic growth accelerate sufficiently to boost job and income growth? Can the barriers that exclude many Americans from recovery and future prosperity be removed?
 
Federal infrastructure spending and corporate-tax reform should top the list of policies capable of attracting bipartisan agreement, because they promise significant long-term productivity, income, and employment gains, while also supporting short-term growth. A commitment to a multi-year federal infrastructure-spending program, for example, could increase demand, private investment, and employment, even though projects may not be immediately available.

And such a program, normally proposed by Democrats, can and should be crafted to secure Republican support as well.
 
To that end, an infrastructure program should give states and localities a key role in selecting the projects to be funded, and these governmental units should have “skin in the game” by funding part of the costs. Policymakers should also give serious consideration to regulatory reforms that would reduce the expense of new projects and assure their timely completion.
 

Read more at http://www.project-syndicate.org/commentary/economic-reform-america-growth-by-glenn-hubbard-2014-11#e5vq7bvGJHKTRkcx.99
 

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