By Evan Soltas
While most discussion of the Democratic Party's 2012 platform has centered on God, Jerusalem and abortion, the document does offer useful insight into what the party wants to do in terms of economic policy. At 70 pages, it is somewhat longer than its Republican counterpart, yet it has fewer specific proposals. Nevertheless, as a follow-up to Matt Yglesias' inspection of the Republican platform at Slate, here are my picks for the Democrats' 10 best economic ideas:
1. Government support for early childhood education: "We have invested in expanding and reforming Head Start and grants to states to raise standards and improve instruction in their early learning programs." The work of Nobel laureate economist James Heckman has provided strong evidence that early childhood education matters in future achievement and functions powerfully as a public good, with a social rate of return of 7 to 10 percent.
2. A new immigration policy focused on admitting and retaining high-skilled immigrants: "We need an immigration reform that creates a system for allocating visas that meets our economic needs, keeps families together, and enforces the law... to make this country a destination for global talent and ingenuity ... we will work to make it possible for foreign students earning advanced degrees in science, technology, engineering, and mathematics to stay and help create jobs here at home." As the economists Adam Ozimek and Noah Smith wrote recently in the Atlantic, this is a "no-brainer" that would provide a substantial -- and easily implemented -- boost to employment and economic output.
3. Retraining for the long-term unemployed: "A 'Bridge to Work' to help the long-term unemployed reconnect with the labor force," originally an item in the American Jobs Act, proposed again in the platform. More than 40 percent of the unemployed have been so for more than half a year. Policies to help them renew job skills and to draw discouraged workers back into the labor force will help prevent what is currently cyclical unemployment from turning into a permanent increase in the structural unemployment.
4. Government investment in public health: "We will continue to invest in our public health infrastructure -- ensuring that we are able to respond to emergencies and support community-based efforts to prevent disease." Public-health infrastructure to prevent epidemics and health disasters may be the purest case of a public good existing in the real world. Infectious diseases create horrendous external costs for societies, and their prevention represents a role of government as fundamental as law enforcement and national defense.
5. Free trade: "President Obama signed into law new trade agreements with South Korea, Colombia, and Panama that will support tens of thousands of private-sector jobs, but not before he strengthened these agreements on behalf of American workers and businesses. We remain committed to finding more markets for American-made goods -- including using the Trans-Pacific Partnership between the United States and eight countries in the Asia-Pacific, one of the most dynamic regions in the world ... We expanded and reformed assistance for trade-affected workers, and we demanded renewal of that help alongside new trade agreements." Although the President's record on trade issues is not especially strong, this pledge to free trade in the platform is thorough and encouraging. Pairing free trade agreements with measures to adjust the American workforce helps to make trade more nearly what economists call a "Pareto improvement" -- a net benefit to everybody.
6. Government support for basic research: "The President also proposed to double key investments in science to educate the next generation of scientists and engineers, encourage private sector innovation, and prepare at least 100,000 math and science teachers over the next decade ... We support expanding and making permanent the Research and Experimentation Tax Credit." Federal investments in basic research are near historic lows as a percentage of gross domestic product. (Though private spending has risen, it is not a perfect substitute, as government and corporations finance different sorts of research and development.) The support for so-called STEM education (science, technology, engineering and math) is particularly critical; a study by Austan Goolsbee, the former economic advisor to President Obama, found that without expanding the supply of scientists, the effect of subsidies is limited and results in higher wages rather than expanded research.
7. Regulatory sunsetting: "There’s no question that some regulations are outdated, unnecessary, or too costly. That’s why President Obama asked all federal agencies to review and streamline outdated regulations, an effort that will save at least $10 billion over five years, and will eliminate tens of millions of hours in annual paperwork burdens." These burdens fall disproportionately on small businesses, so it's little surprise that owners polled by Gallup last year cited "complying with government regulations" as their top concern. While the Democrats hesitate to institutionalize deregulation by requiring rules to come up for automatic periodic review, even a discretionary effort to trim back bad regulation will do economic good in the long run.
8. School choice: "We will continue to strengthen all our schools and work to expand public school options for low-income youth, including magnet schools, charter schools, teacher-led schools, and career academies." Considering that teachers' unions are a major Democratic interest group, this soft-spoken support for school choice represents a big step forward for the party. While the U.S. remains a leader in school choice, it may soon be surpassed by the U.K., which is moving half of all British students into charter schools and academies by the end of 2012.
9. Foreign aid reform: "The President this year announced a new strategy toward sub-Saharan Africa that commits to promoting economic growth, including through increased trade and investment ... we are providing robust trade and investment support to Africa and building a trade and investment partnership with the countries of East Africa -- because we believe that the private sector will be the engine of prosperity in the developing world." Government-to-government foreign aid is often inefficient and fuels corruption, so shifting U.S. money toward private-sector development and targeted public assistance in areas such as disease control represents a smart path forward.
10. Transportation infrastructure: "We will give our businesses access to newer roads and airports, and faster railroads and Internet access. We will fight for immediate investments for highways, transit, rail, and aviation and for the creation of a national infrastructure bank to help modernize our infrastructure." Investment in the key arteries of commerce and international transport produces huge marginal benefits. The reduction of one day in transit time can cut the effective cost of goods and services by 0.6 percent to 2.3 percent, which amounts to a major permanent gain in competitiveness for U.S. products.
Though there is much to dislike in the Democratic platform, such as its continued support for farm subsidies and its call for a special tax break for manufacturing, there are at least 10 proposals to warm the heart of any policy wonk.
(Evan Soltas is a contributor to the Ticker. Follow him on Twitter.)
-0- Sep/06/2012 15:27 GMT