8 ‘consensus policies’ for economic growth and less inequality

On April 14, Senior Fellow Alice Rivlin delivered the SIEPR Prize lecture at the Stanford Institute for Economic Policy Research. The prize “recognizes economists who have made significant contributions to economic policy.” Rivlin, the 2016 winner (the prize is awarded every other year), won “for her contributions to economic policy, including her tenure at the Fed and when she served as the Founding Director of the Congressional Budget Office and Deputy Director and Director of the Office of Management and Budget.”

In her lecture, “It’s not the economy, stupid—its failed politics!,” Rivlin offered her views on how to translate Americans’ anger about the economic and political system “into realistic policy solutions.” Noting that the state of the economy is strong at the macro level, she focused on the failure of the political system to enact new policies “that could command broad public support and could move us toward a higher level of sustainable prosperity in which all groups share.” In particular, Rivlin argued that:

It is our political system that has broken down—not the economy. The problem is not so much polarization of policy views. The problem is that we have forgotten that our Constitution, which politicians and Supreme Court justices laud to the heavens, requires that politicians work together across party and ideological lines to get anything done at all. Recapturing the lost art of political compromise is essential to realizing our economic potential.

Rivlin offered eight consensus policy ideas that she believes “can be designed to foster both faster [economic] growth and less inequality.” These are:

1. A big investment in modernizing public infrastructure. “Modernizing infrastructure could raise productivity as well as creating the jobs we need to restore tighter labor markets and give more people chances to move up,” she said.

See also: “Expanding opportunity through infrastructure jobs

2. Early childhood nurturing and high quality preschool programs. Rivlin noted the “strong evidence that the early years of life matter a lot to brain development and language skills and young children can be permanently damaged by violence, fear, and neglect.”

See also: “Parenting, politics, and social mobility

3. More funding for basic science and increased access to post-secondary education, especially technical education. “We should shift the mix to more generous grant aid and less reliance on student loans, especially for low-income students.” However, Rivlin stated that “free college is not a smart idea. It would be a taxpayer-supported windfall for more affluent families who would have paid for college anyway.”

See also: “How to improve education for low-income students

4. Comprehensive immigration reform. “In addition to reducing illegal immigration and enforcing the laws, we must get law abiding undocumented immigrants out of the shadows and into more productive jobs.”

See also: “ What everyone is missing about the immigration debate

5. Reform the tax system to make it both more pro-growth and more progressive. We can have both growth and progressivity, and more revenue, Rivlin argued, “if we were willing to cut back on the special provisions that narrow the tax base and mainly benefit higher income people.”

See also: “How do we get to tax reform? Lessons from the Bush Panel,” and “A carbon tax in broader U.S. fiscal reform

6. Simplify regulations and get rid of unnecessarily burdensome ones. While conservatives “exaggerate the economic burden of regulation,” Rivlin said, “there is some fire under all the smoke and many ways to accomplish the same goals more efficiently.”

See also: “An opportune moment for regulatory reform

7. Restructure and modernize federal spending programs. “[W]eeding out antiquated, less effective programs—or combining them into a block grant for states—would help reduce the widespread impression that the federal government does too much and meddles too much.”

See also: “Can evidence trump ideology?

8. Reduce the growth of future debt. Noting that the debt-to-GDP ratio doubled from 35 percent at the end of 2007 to about 76 percent now, Rivlin noted that the “serious worries come in the future as the baby boom population ages in Medicare, Medicaid, and Social Security.”

See also: “The Fiscal Ship,” a new computer game from the Hutchins Center on Fiscal & Monetary Policy at Brookings and the Woodrow Wilson International Center for scholars.

Despite widespread consensus among economists around these economic goals, Rivlin argued that “our political system is too broken to focus on its job [of] creating compromises that move us toward sustainable, inclusive prosperity.” A “failure to communicate across the ideological chasm” is the root cause of gridlock and incivility in Washington, she said.

“But which part is most to blame is not the right question,” Rivlin argued. “The right question is what can we to do restore elected officials’ ability to make policy, especially economic policy.”

Read the entire speech here.