Plan B for the US Economy?

Over at the Financial Times’ Economists’ Forum, Thomas Palley has that plan.  He’s got five parts to his plan B:

1. Let the Bush administration tax cuts expire and use the savings for additional targeted stimulus

The economy needs a further demand boost to establish recovery momentum. The majority of the Bush tax cuts were an income redistribution program favoring the wealthy rather than a stimulus or growth program. That makes extending them bad policy. . . .

2. Cauterise the housing market . . . .

[Use] the Federal Housing Administration to refinance Fannie Mae and Freddie Mac mortgages with low or even negative equity and then have Fannie and Freddie repay some of their federal government borrowings. The test criteria should be whether the mortgage is viable once refinanced at low rates.

3. Neutralise the trade deficit. . . .

As China refuses to correct its under-valued exchange rate, it is long past time for the US to take protective action. That can be done via administrative interventions and legislation to make countries with under-valued exchange rates subject to countervailing duties.

4. Restore the wage – productivity growth link. . . .

One immediate measure is passage of the Employee Free Choice Act that will enable unions to organise on a level playing field.

A second measure is to index the minimum wage to the median wage. That will create a real wage floor and limit wage inequality because the minimum wage will automatically increase as median wages rise with productivity.

5. Do it all

It is important these measures are enacted as a comprehensive package. Implemented alone they will be far less successful. . . .

Sounds simple enough, right?  I guess this is Palley’s attempt to lay out his hope of audacity on the part of the Obama Administration.  The full post is here.

Enhanced by Zemanta
Top