How to make Obama's ecomomic ideas realities

President Obama's economy speech last week was a huge step in the right direction. Here are the concrete policies that can make his "we're in this together" agenda a reality.

President Obama’s speech last week in Osawatomie, Kansas was widely recognized as an important and revealing look at his domestic policy framing and agenda as the election year begins in earnest.   As I pointed out, the contrast between YOYO (you’re on your own) economics and the trickle-down, starve-the-beast agenda it implies, and the President’s we’re-in-this-together agenda has the potential to be deeply resonant with the vast majority of Americans for whom YOYO has been a terrible bust.

What that in mind, it makes sense to add some concrete to the structure the President began to build—to begin to think about which policies grow out of the contrasting views of political economy he compellingly introduced.

But first, I’d like to suggest a few criteria for what constitutes useful ideas in this context.

Move the Needle on Unemployment: Stuff like patent reform, free trade deals, “doubling exports” (with no regard to imports) doesn’t cut it.  There may be other reasons to undertake such measures, but the heart of the speech were new, real economic opportunities for the middle class.  This was not a call for fumbling around the edges or scoring points with interest groups.

Politically Viable in More Normal Times: In terms of helpful economic policy, I’m afraid almost nothing’s going anywhere useful for the next year.  When high-ranking members of one party publicly promulgate that their goal is to sink the President—even if that means sinking the economy as well…in such a climate, the concept of “political viability” has little meaning.

That said, our policy process cannot be driven by the current dysfunctionality.  We have to plan as if our system has regained its ability to self-correct, while working our butts off to help it actually get back there.

So, onto to the agenda.

The President targeted four areas in last week’s speech: higher education, infrastructure, progressive taxation, and financial regulation.  That’s a good start.  For now, I’ll just introduce what I think are the key policy issues in each case.

Higher Ed: Improving college access and particularly completion will not create jobs, but it will address both opportunity barriers faced by less advantaged kids and diminished economic mobility.  The President has worked hard to significantly increase Pell Grants for college affordability but these increases are very much in the YOYO’s crosshairs.  Income-based-repayment initiatives are important for highly indebted students.   Completion is trickier but helping low-income students with tuition costs may be less important here, especially for those in community college, then helping them with the costs of their lives while they’re going to school.

However, we must be mindful that education policy is supply-side.  It’s critically important, it’s a huge part of our everyday lives, and it’s an area of true interest to the President.  But as people realize much more than politicians these days, it’s a lesser part of the solution to our biggest medium term challenge: the quantity of jobs.  There are too many educated people out there that are all dressed up with nowhere to go.

Infrastructure: This is one place to invest a lot of energy in setting a jobs agenda.  As I’ve traversed the land in recent months, the idea that there’s much more we should be doing to improve the quality of the nation’s skeleton, as it were, is something I’ve heard from people from all walks of life.  It’s a great country, but it’s old and needs work.

FAST! is still a great marriage and problem and solution, and in fact is likely up for a vote in the Senate any day now.  Like I said, it’s a heavy lift for good ideas to get filibuster-proof majorities these days, but you’ve got to be in this for the long fight.

The key here is to not get hung up on shovel ready—like-it-or-not, we’ll need the work for much longer than that.  We need to think about large-scale ideas that go beyond roads and bridges.  An advantage  to projects like FAST! is that people can relate to this type of thing in their daily lives.  In that light, I’d like to see a national project to bury electricity and phone lines, something that would be hugely popular here in the aging Bos-Wash corridor, where you can easily lose power for weeks when hit by those 30-year storms that now seem to show up every six months.

Tax Reform: Again, there are no direct jobs here—it’s not demand side policy—so I wouldn’t get hung up on it.  But as the President stressed in the speech, public infrastructure investment costs money, so fiscal policy of course has to be in the mix.  And you can’t have an election without arguing about it.

But I’d keep it very simple.  In fact, I’d bring it down to one thing: we’re no longer going to favor one type of income over another.   The distortions in the tax code around “investment income,” like capital gains and dividends, are losing tons of revenue, feeding inequality, and at the heart of the “Buffett problem”—the fact that many of the wealthiest households face lower rates than average folks.  And, like all the above, this is both great politics and great policy.

Much more to come on all this…we’re just getting started.  I’d add manufacturing policy to the agenda, but even more so , I’d stress things we can do to improve the quality of low-wage, low value-added (at least in pure dollar terms), non-tradable, service jobs—I suspect we’ll be adding a lot of these once the recovery actually takes hold (think home-health aides, cashiers, security guards).

Whoever wins the R’s nomination, the competing vision will be between the YOYOs and their trickle-down on one side, and ideas like those above on the other.  In essence, the conservative vision will be looking back toward GW Bush, arguing that everything’s basically fine in the economy except that the President needs to go, the wealthy need to keep more of their pretax income, and the EPA needs to be shut down.

That will not resonate beyond the base.  And neither will it win the day unless there’s nothing on the other side.   In that regard, the President took a great first step in Kansas.