1. Boost consumer confidence. The very public food fight between Republicans and Democrats has been terribly damaging to public confidence. Our “leaders” need to discuss their differences in less hostile ways, reach a solution, and give Americans some reason to trust that their national government has their best interests at heart. Even if sharp differences remain, Congress and the White House should abandon their scorched-earth politics.
2. Agree on a long-term deficit reduction plan. Yes, this is a no-brainer. But we haven’t seen one yet. To be credible, the plan must address healthcare and other entitlement programs. Don’t expect seniors to applaud fiscal restraint that comes at their expense. But they know cuts are coming and will accept them, particularly if accompanied by higher taxes on wealthier Americans. Shared sacrifice must be apparent.
3. Start fixing the mortgage mess. It will take years to work off the excesses of the housing bubble. But the clock won’t start moving in earnest until and unless the government does a more effective job of speeding the review of troubled mortgages and helping to get them cleared off the books. These mortgages are a toxic overhang to a housing recovery, and the lack of home purchases and new-home construction is a huge drag on the economy.
4. Continue the payroll tax breaks for Social Security taxes. President Obama supports an extension through 2012 of this year’s two-percentage-point reduction in the employee share of Social Security payroll taxes. The reduction reduced the tax to 4.2 percent from 6.2 percent of covered payroll, up to $106,800 in annual wages.
5. Extend unemployment benefits. Long-term unemployment is becoming a terrible legacy of the Great Recession. As more and more Americans find themselves out of work for a year or more, their financial safety nets have become shredded.
6. Expand job-training efforts. Job skills erode quickly in a knowledge-based economy. If we want to help reduce long-term unemployment, we need to step up our efforts to refresh and enhance job skills. Many job openings now go unfilled for lack of skilled applicants.
7. Adopt a government stimulus program for public works. Much of our infrastructure is decaying and at risk of falling apart. What better time to address these needs, and will prices ever be cheaper? There is great unused capacity and labor for this work. But let’s do it smartly, with strong federal-local partnerships that define high priority work that’s ready to be done soon.
8. Let the government negotiate lower drug prices for Medicare beneficiaries. Medicare is not allowed to negotiate drug prices with pharmaceutical companies. Bills are regularly introduced to overturn this outdated nod to the myth of private price competition for branded prescription drugs. I guess we could all move to Canada, where drug prices are sharply lower than in the United States. But maybe there’s a better way.
9. Encourage just a bit of inflation. Somewhat higher interest rates would help to get capital off the sidelines in search of more attractive returns. It also would help reassure seniors by boosting their earnings on conservative retirement investments.
10. Strengthen the dollar. Higher interest rates also should boost demand for dollar-denominated assets. This will give American consumers more buying power for imported goods. If you want consumers to spend more money, give them more money to spend. A stronger dollar fits this bill. A stronger dollar would make it harder for U.S. firms to sell their exports. But the IMF study said that strong export activity by U.S. firms has not been contributing to overall domestic economic growth.