In Face of Crisis, Policy Makers Should Plan, Not Panic

How should policy makers react to the turmoil in the stock market and anxiety about the global economy felt on Wall Street and Main Street? My answer: Don’t panic. Policy makers should be crafting and presidential candidates should be debating longer-term policies to foster real economic growth without being overwhelmed by fear from short-term events.

We can start with human capital. The employment rate for prime-age workers hasn’t recovered from the Great Recession, male workforce participation has been declining for decades, and female participation is trending down recently as well.

Policies should provide incentives to work, such as expanding earnings subsidies like the Earned Income Tax Credit. They should facilitate work, by improving public transportation to reduce commute times in sprawling metropolitan areas and making it easier for some former prisoners to get jobs when they reenter society. And they should get the government out of the way by relaxing occupational licensing requirements, avoiding likely harmful policies including $15 minimum wages, and reforming disability insurance.

We need to build workers’ skills by exploring work-based learning programs like apprenticeships, reorienting K-12 education to the realities of the 21st-century economy, and crafting alternatives to traditional four-year college degrees. And we need to welcome highly skilled immigrants who want to bring their talents and energy to the United States.

In addition to human capital, we need to encourage savings so that businesses can invest and make American workers as productive as possible. Moving toward a progressive consumption tax would perhaps be ideal, but making sure that we reduce existing savings penalties in our tax code is the least we can do. Significantly reducing the corporate income tax rate is essential, as is reducing future entitlement spending to put the national debt on a stable trajectory.

Making the United States a magnet for global business and talent, encouraging and supporting work, increasing the financial rewards for savings and investment, and modernizing our education system will foster a climate wherein innovation thrives. America should strive to keep our place as the land of technological breakthroughs, enjoying the growth effects that should follow.

Adopting such policies will require presidential leadership. Though the 2016 presidential campaign is heating up, candidates seem to want to talk about anything but policies to advance prosperity through a growing economy, like the ones discussed above.

I know, I know: It’s August. Fine. But here’s a question for the candidates as we head into the fall: Economic seas will always be choppy, and there is little a president can do about that. Today it is uncertainty about China and global markets; tomorrow it will be something else. We’ll always have deviations around a trend. As individuals seeking to lead our nation, what policies do you think are needed to ensure that that trend is as solid as possible?

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