An Economic and Security Policy Blueprint for America

A timely new policy book, Blueprint for America, edited by George P. Shultz, is being released today online for the first time. The release coincides with the start of platform writing by Republicans this week and Democrats the following week, and then by national political conventions and the general Presidential campaign.  But the book is purposely meant to be non-partisan as ten contributors with experience in economics, national security, finance, health care, energy, and education join Shultz in laying out novel and practical reforms for governing as well as for campaigning during the election.Shultz_Blueprint_cover

In my view, the book is worth a serious look because it endeavors to bring a greater focus to economic and security policies than we have seen in the campaign. It candidly describes and diagnoses the serious economic and security problems America now faces, and it offers solutions to those problems.  Importantly it combines practical ideas on economics and national security, stressing the importance of getting back to long-term strategic thinking with the goal of improving people’s lives.

The book consists of 12 chapters (all online here)

  • The Domestic Landscape by Michael J. Boskin
  • Entitlements and the Budget by John F. Cogan
  • A Blueprint for Tax Reform by Michael J. Boskin
  • Transformational Health Care Reform by Scott W. Atlas
  • Reforming Regulation by Michael J. Boskin
  • National and International Monetary Reform by John B. Taylor
  • A Blueprint for Effective Financial Reform by John H. Cochrane
  • Education and the Nation’s Future by Eric A. Hanushek
  • Trade and Immigration by John H. Cochrane
  • Restoring Our National Security by James O. Ellis Jr., James N. Mattis, and Kori Schake
  • Redefining Energy Security by James O. Ellis Jr.
  • Diplomacy in a Time of Transition by James E. Goodby

cleverly interspersed with four insightful essays by George Shultz on why out-of-control entitlement spending is a problem, on human resources, on a world awash in change, and on the art and practice of governance. Shultz reflects on his time as secretary of state in these essays, writing that “I worry about the sorry state of the world and my instinct is to say something constructive about the problems.”  A good way to get into the book is to read Shultz’s poignant essays first, and then go on to study the reform proposals in individual pieces.  Here is a quick overview of some of those proposals.

Michael Boskin starts off by documenting the need for general government reform asking, for example, why we have “forty-six job-training programs, sprawling over nine government agencies.” He also considers the need for tax reform, demonstrating why lowering rates and broadening the base will raise growth and create simplicity, and for regulatory reform, proposing an overall regulatory budget cap and a requirement stating that an old regulation of comparable cost must be removed for every new regulation imposed, as a means of balancing of benefits and costs.

John Cogan offers proposals to reform social security and other entitlements arguing that “returning the welfare system to the states is long overdue.” Addressing impediments to reform he notes that “discussions about welfare are too often ideological.” He shows that “reformers are incorrectly cast as heartless people who are unwilling to help the less fortunate. State governments are erroneously cast as uncaring entities…. An effective welfare reform… improves the actual outcomes for the targeted citizens. Welfare reform should be judged on such results.”

Scott Atlas proposes a novel six-part health care reform plan that “restores the original purpose of health insurance: to protect against the risk of significant and unexpected health care costs.” He shows how the Affordable Care Act “has made private insurance less affordable and pushed health insurance reform in the wrong direction. It has furthered the erroneous view that insurance should subsidize the entire gamut of medical services, including routine medical care.” In contrast he shows that his plan “enhances the availability and affordability of twenty-first century medical care for all Americans, ensures continued innovation, and reduces health care costs by trillions of dollars over the decade.”

Rick Hanushek gives a comprehensive overview of the problems in K-12 education and then delves into the role of the federal government versus state and local governments. He puts forth the important principle that “The federal government is in the best position to specify what needs to be produced, but it is quite unprepared to direct what 100,000 schools should do to accomplish this. The states should be given the ‘how’ role.”

John Cochrane offers reforms to deal with financial crises and the too-big-to-fail problem including a novel proposal for equity-financed run-free banks. He also makes a refreshingly unabashed case for free trade backed up by history and basic economics, and he shows the rule of law and immigration benefit America.

In an essay on monetary policy I make the case for a proposal for domestic monetary reform that has already been written into legislation passed by the House of Representatives, and I show how this reform can be extended to create a rules-based international monetary system.

The book then shifts to national security policy with a thoughtful chapter by James Ellis, James Mattis and Kori Shacke that proposes several key strategic reforms. They argue that the current approach to developing a National Security Strategy is too unfocused: “Rather than cataloguing every interest, strategy should consist of decision rules that allow for application to events as they unfold,” a statement that would equally apply to economic policy proposals in the book.  They also emphasize that America needs a “strategy of security and solvency, showing that “economics are integral to military power. In fact, they are dispositive: no country has ever long retained its military power when its economic foundation faltered.” This is also theme that is echoed through the book.  Stressing the need for alliances they argue that a strategy which America adopts “must, foremost, be ally-friendly,” suggesting a simple guide that “those countries that are not against us are for us.”

James Ellis then reviews energy policy. He describes how dramatically circumstances have changed for US energy policy, noting that “The US energy situation today is by almost all accounts better than it has been for decades.” He documents that in 2014, “just 16 percent of our country’s net petroleum use was imported from OPEC. That is now less than 6 percent of our total energy consumption, putting OPEC behind the total energy supplied by, for example, the state of Pennsylvania (7 percent) and just ahead of Colorado (4 percent).” Nevertheless, he argues that energy policy still has problems to deal with including the need to reduce carbon emissions and maintain a diversified portfolio of energy supply.

In the chapter on diplomacy, James Goodby summarizes an interview with George Shultz on governance of foreign policy in the state department, and offers proposals for a range of reforms, including better training and a greater focus on improving the foreign services.

In the concluding essay of the book, George Shultz puts these proposals into perspective observing that the American people have dealt with similar problems in the past and arguing that they can deal with today’s problems if they work at it, reminding us that “democracy is not a spectator sport.”

This entry was posted in Budget & Debt, Financial Crisis, Fiscal Policy and Reforms, International Economics, Monetary Policy, Regulatory Policy. Bookmark the permalink.