Putting the Brakes on American Decline

I originally wrote and posted this a few years ago and have gone back and re-read it since, and it still holds up.  Our big national problems are basically the same, only worse, so I felt this was worth a repost; particularly since it required only a few updates.

Baring stunning breakthroughs in longevity, I should probably be dead in 50 years or so.  But I care what happens to this country after I’m dead, and would like it to continue to be a great power.  Not just a good one, or an “OK power” but a great one.  So I thought of a couple of ideas that I think would help to guarantee American dominance through the 21st Century and beyond.  Not by any means a complete list of course, but just a couple of ideas to get us started.

Getting our fiscal house in order

This should be a no brainer, but given that we are heading for a 16 trillion dollar budget deficit, it’s clear that we are a nation that wants far more government than we are willing to pay for.  How we got in this situation is easy to see:  Republicans are no fan of taxes, but have made little headway (none actually) in cutting spending.  Democrats have a limited ability to raise taxes because the country doesn’t like to pay them, but have an unlimited appetite for Federal spending.  Add both parties in power; simmer for a few decades, and presto!   Of course that doesn’t even count the unfunded liabilities of our Social Security. Medicaid, and Medicare promises, that we have no ability to pay, now, or in the future.  That’s about 61 trillion dollars and growing.

The GOP has already put a proposal on the table to at least get the conversation started on that.  The Ryan Plan would convert Medicaid to block grants to the States and modify Medicare into a premium support plan that is similar to Obamacare’s exchanges to purchase individual healthcare plans.  It’s a start at least and it does reverse the debt to GDP ratio that the current administration has us on.

Any debt plan that doesn’t address the escalating costs of Medicare, Medicaid isn’t really a debt plan, it’s a stalling plan.

Fixing this problem should be a national priority of the first order.  It’s not of course but it should be.  The next place to start is with a balanced budget amendment.  We (both the Congress and the American people) have proven that we are not mature or responsible enough to handle an allowance without adult supervision.  We need some rules and that would be best one.  Just like we self righteously tell someone in credit card debt to cut up their cards, we need to cut up our national one.

In addition we need to redo the way federal budget is handled.  Social Security has a trust fund in theory.  In practice we spent the surplus from that year after year, for decades and in return gave the Social Security Trust fund an IOU.  Of course the days of the Social Security surplus are now over.  From here on out, we’ll be cashing those chits, not collecting them. But that’s not even the only one.  The federal gas tax is supposed to go to a transportation trust to fix our roads and bridges; infrastructure in other words.  What happened to that money?  Same place as the Social Security money, into the general pork fund.  I’m not an accountant, but even I know that taxes that are being collected for dedicated purposes, like the gas tax and Social Security, shouldn’t be spent on anything other than what was intended.  They should be in off budget separate accounts.  Fix these fiscal problems and maybe a dollar will still be worth a dollar 50 years from now.

Tapping into the brain drain

We are a nation of dummies.  We’ve allowed the K-12 educational system in this country to fall apart and since we still don’t have a national consensus on what the problem is or how to fix it, I don’t expect that to be solved soon.  However our system of colleges and universities are still some of the best in the world.  As a consequence they attract the best and brightest from all over the world to come and study. Foreigners dominate our technical graduate and PhD programs. On the world market, a degree from a US University still means something.  So naturally, as soon as one of these foreign students graduates from a degree program with useful technical skills, what do we do?  We kick his or her ass out.

We do have a Visa program to allow people with technical skills to come to this country, but we limit it to 65,000 per year.  That’s a drop in the bucket compared to refugees, family “chain immigration” and other categories that allow people in this country.

And that’s not even counting the illegals.

What should we be doing?  We should gradually increase the number of H1-B technical skills visas and reduce the percentage of the some of the other categories of Visas.  We should also make it easier to allow foreign students to convert their student visa to an H1-B.   Since we can’t produce enough home grown professionals and technically trained people, let’s just import them.  If we are going to maintain our economic dominance in science and technology, we need engineers, IT professionals, and scientists of all types.  We are able to provide domestically all of the sociology and feminist studies graduates that this country will ever need.  Maybe we should export those.

Another useful visa type is the E-2 Visa, which allows foreigners to come to the US to live as long as they invest and start a new business in the US.  The requirements on this visa are tough.  Although a spouse can come over on this visa, children can’t.  Also, if the business fails, you can be deported even if you’ve lived in the country for years.  It’s astounding to me that so many in this country want to give amnesty to people who’ve entered the country illegally, but people who’ve followed the rules, worked hard and done everything we’ve asked we can’t wait to give the boot to.

Between these two Visa types, we can get almost all of the high quality immigrants this country needs. This country is still the number one destination for immigrants worldwide.  As long as that is the case, we should take advantage and get the cream of the crop.  Long term, they provide a bonus to our country by generating upper middle class wages and paying upper middle class taxes.  You want to reduce poverty in this country?  Stop importing so many poor people and start importing an educated, English speaking middle class.

Tax haven to the world

With New York losing its battle with London as the financial capital of the world, we should be concerned that capital is finding other places more attractive than the United States.  We are losing to a European country?  There are a variety of reasons, the financial crisis, Sarbanes Oxley, and even Eliot Spitzer gets some blame for chasing away companies from New York.

And of course there is the tax treatment.  US corporate taxes are among the highest in the developed world.  Although personal income taxes in most of Europe are far above the US level, we make it up by kicking in the crotch the companies that provide jobs and economic growth.   I’ve always found it interesting that “socialist” Europeans want their businesses to succeed worldwide, while in the “capitalist” United States we hate and incessantly attack our most successful companies.  We attempted to break up Microsoft and investigated them for years for anti-trust violations; one of the most successful US companies of the 90’s.  One of the other successful companies, Wal-Mart, is on the liberal ‘sue’ list. You don’t see Finland attacking Nokia for having too large a market share of the cell phone market.

We need to redo our regulatory and tax structure to encourage capital to come to the US to invest, not chase it away.  There are several options to do this, such as the fair tax, or a flat tax.  We should have as a goal to reduce and gradually eliminate the capital gains tax.  Basically, whatever rules and regulations that successful tax havens have, we need to emulate them so people worldwide will want to put their money here.

These are just a couple of ideas and I’m sure other people have their own wish lists for what they would like to see and this is by no means a complete list.  But we need to start recognizing that the US continuing as a superpower isn’t inevitable, or even particularly likely.  It will take much effort and work to continue that status.