If you haven’t been disappointed by politics lately, you haven’t been paying attention.
Today’s political fantasies may not become some major change immediately, but they do set the tone for where things are going in the next few years.
So the latest craze, the so-called “Green New Deal,” currently sounds too crazy to pass. The market isn’t fazed. But give it time! In politics, the range of ideas falls into what’s called the “Overton Window.”
This latest idea is an attempt to move that window to places far beyond the realm of common sense, where the laws of economics tend to hang out.
The Green New Deal is a hodgepodge of ideas. Some of them are pretty far out there. One proposal could end air-travel as we know it for cleaner-burning high-speed rail lines. If that sounds familiar, it’s much like the one recently abandoned by Governor Gavin Newsom in California. When uber-liberal politicians start making arguments based on fiscal conservatism, pay attention.
Another plank of the Green New Deal suggested razing every existing building to rebuild and replace with more energy-efficient methods over the next ten years. That would require razing and rebuilding over 10,000 properties—per day.
In the investment world, something can’t just be in the Overton Window to impact markets. Ideas only start to get priced in the more likely they are to pass and become reality. So don’t worry about the crazy things you read. Mr. Market will give you a heads up far before we ground all airlines.
But, in candor, we do have some huge issues that need to be resolved.
While both parties may want to continue bickering endlessly, I do have a few ideas based on economic reality. I call it my “Red, White, and Blue Deal.” This deal involves fixing immigration, addressing income inequality, and dragging some lagging institutions into the 21st Century.
My proposals are all based around one simple concept: Incentives matter.
Consider illegal immigration. We don’t really need a multi-billion dollar comprehensive wall. We do need some increased physical border security in some places that’s an improvement over what we have. I expect we’ll get there. But we could do more with less. Specifically, we could require that only U.S. citizens are entitled to, well, entitlements.
Previous generations of immigrants had no safety net when they came here, and they still did in droves. Many still will, legal or otherwise, under those conditions today! But ensuring welfare benefits only go to U.S. citizens will create a powerful disincentive to come to the country… at least illegally.
Again, let anyone who wants to come here do so, as long as it’s legal, and as long as they’re willing to forego benefits. Making employers check their workers for illegal immigrants through an E-Verify type program would also do much to ensure that only those here legally have a job.
That ensures America will continue to be a beacon of freedom, and to ensure we get the best and brightest from other lands who want to become part of the American tradition. And if they become citizens later, great, they can then qualify for whatever benefits we have.
Another plank of my Red, White, and Blue platform is to address income inequality.
Income inequality exists under all political systems. While it can lead to a lot of strife, it’s important to understand that, under capitalism, the poor tend to become better off too. The poorest among us have found tremendous savings and even job opportunities thanks to businesses built by now-billionaires who took on the initial risk.
Fortunately, technology has us covered to address income inequality in a way that ensures the poorest among us can live in dignity.
That’s because, in the coming decades, we’ll see a large disconnect in how we work, thanks to the rising use of robotics, artificial intelligence, and other technologies that we know about.
So what if we had a system where everyone was required to own a robot?
While the downside has been feared in movies like The Terminator or Blade Runner, the rise of robotic labor could actually be the best thing to ever happen to mankind.
Maybe your robot would work in your home or community, creating some value there. Maybe you’d never even see your robot, because it’d be fixed in position in a GM plant in Michigan while you live in Alaska or Hawaii.
Such a robot robot would work 24/7 building self-driving cars or other gadgets. The value that it created doing so would go partially to you as owner, partially to the company making the gadget and employing your robot, and a little bit to the government for upkeep and taxes (so you don’t have to).
Under this system, everyone would have some kind of minimum income, but it would still be tied to some kind of productive work in the underlying economy. This is the important difference between my notion and many of the “negative income tax” or “guaranteed universal income” schemes starting to appear in the Overton Window that simply provide money with no underlying labor or value creation for society.
With the “A robot in every factory” plan, people would be free to undertake other pursuits. Perhaps some of those would be for additional money, perhaps not. But given the fact that physical human labor will radically shrink in the coming decades, it’s better to have a system of ownership to address the changes rather than embrace a system that has no ties to work.
Finally, as we’re rethinking labor in light of changing technology, it’s time to rethink how we do other things.
Our primary K-12 school system has seen little change since the 19th century. But we have seen a disproportional rise of administrative and support staff relative to teachers. Likewise, the rise of administrative and support staff in healthcare has been a huge driver of higher costs.
That kind of top-heavy structure is more interested in preserving its employees rather than address its core mission. A more dynamic system is needed. And it’s no surprise that in both education and healthcare, government plays a heavy hand. It’s time to work on deregulations, and remove the perverse incentives in place that have led to the rise of administrative/support roles over primary roles such as doctors and teachers.
In politics as in everything else in life, incentives matter. I’m thrilled to see some new ideas out there like the Green New Deal. I may disagree with them, but we do need new ideas. Capitalism is all about building a better mousetrap, and our politics should be too. That makes my Red, White and Blue deal as American as our fixes can get.
The best ideas should take incentives into account. Ditto new technologies and methods of doing things.
By creating top-down, one-size-fits-all ideas, we move further away, not closer to, the American idea of freedom and self-determination.
Andrew Packer is a Senior Financial Editor with Newsmax Media. He currently writes the Insider Hotline investment advisory, serves as investment director for the Financial Braintrust, and writes the monthly newsletter Crisis Point Investor.
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