Ricochet is the best place on the internet to discuss the issues of the day, either through commenting on posts or writing your own for our active and dynamic community in a fully moderated environment. In addition, the Ricochet Audio Network offers over 50 original podcasts with new episodes released every day.
Structural Reform and 2016
I have a prediction: Whoever wins the 2016 presidential election will serve only a single term in office. There are simply too many structural reforms that have to happen over the next four years for it to be otherwise. Here is a brief list:
- Healthcare, costs too much.
- Entitlements, too generous.
- Labor markets, too rigid (in oh so many ways).
- Immigration, needs controlling.
- Education, too expensive and corrupt.
Then there are the nasty ethnic crises waiting to pounce on America once it becomes clear that the government cannot keep its entitlement promises without transferring large amounts of wealth from younger, less-white workers to older, lilly-white retirees.
That said, I think a Republican president could do a lot of good. As the party of smug, upper-middle-class narcissists, the Democrats have a built-in incentive to inflame ethnic conflict. The GOP, on the other hand, has a big incentive to minimize it. That could make all the difference in whether we wake up to an EU-style American Union in 2020, or if we continue as the United States of America.
Published in Politics
Disagree: there’s a >75% chance the next President serves 2 terms. Both parties are disliked, and unless the incumbent President does terribly they’re usually re-elected. Look over the 20th century: Roosevelt screwed Taft, Hoover faced The Great Depression, Ford was stained by Nixon, Carter was terrible, Bush was screwed by Perot. Besides them, incumbents won (if you’re counting, thats Roosevelt, Wilson, Coolidge, Roosevelt x 3, Truman, Eisenhower, LBJ, Nixon, Reagan, Clinton, Bush, Obama).
Clinton would be a tough re-elect (especially if Warren runs), but if she wins this year, I can’t count on R’s being any more competent in 4 years. If Republicans win this year, the new R President will blame all their problems on the Dems, who will discover the virtues of a strong minority party. All the issues you listed can be kicked down the road as usual. The cry of “But they’re coming to a crisis!” underestimates Washington’s can-kicking ability.
I’m pretty sure I’d trade a reelection defeat for an effective one term presidency that takes almost a scorched earth approach to turning the ship around. This would assume a working majority in Congress. The primary downside would be only one term of SCOTUS appointees.
Healthcare , given the result, is priced too high only because of regulation and lawyers.
The only fix to your list is to rapidly pull the government out of each problem and let the market sort it out.
Pull the feds out and the union mandates and do NOT try and “Solve” the problem. That can be done with much squealing and angst.
The solutions for entitlements will require the same old plan, raise the retirement age and really stop fraud in the disability side. We either adapt to living longer or we go broke.
If someone just stopped things , we would have a chance to recover. If we keep using more government to fix government, we get what we have.
Fix taxes to be activity neutral, fix retirement age in entitlements and fix the military.
Get the hell out of everything else.
The question for me is, if a Republican president and Congress act boldly, but the voters are too resistant to reforms, wouldn’t a Democratic landslide be the result, with a reversal of most reforms?
All of these issues are serious, all have been present for many years. What is your reasoning as to why the crisis point for any of them will be reached within the next four years?
That danger certainly exists, which is why we need to be softening the ground NOW with public policy rather than the stupid sideshow that passes for the usual news cycle.
I’m assuming long-term interest rates start rising before 2020 (as the “global savings glut” evaporates), and also that we have a recession within the next 1-2 years (which will worsen our fiscal position).
The reasoning is simple. Imagine that you are a bond trader in 2018 or 2019. The U.S. has just recovered from another recession, and productivity is (presumably) low, and has been for a decade. Interest rates are rising, and so is the U.S. government’s debt service costs. The combination of a weak economy, rising interest rates, and a fiscal deficit that, while low now, is expected to rise in only a few years makes you question whether the U.S. is still a good investment.
That’s the pleasant situation, where the U.S. current account/trade deficit remains sustainable. If it does not, than all bets are off. The risk of a balance of payments crisis would become so high I think our political system would act to preempt it. If not, market crises (up to and including a run on the dollar) would force Congress’s hand.
It’s too early to see which scenario is more likely—a simple bond market scare, or a run on the dollar—since it’s not clear yet how the CA deficit is likely to evolve. Hopefully it’s the former.
This is a great question. I think the answer depends on your view of America.
I believe both of us think American individuals are the most productive and industrious in the world. I trust individuals far more than government.
To that end I think if we go full throttle repeal and get government out of the way, as TKC suggests, then prosperity will be the result.
Get the government out of the way, let private enterprise grow, and I think the party in power will stay there a while. The key is to do it early in the first year. Have to feel the pain early so things are on the mend closing in to the election. Voters have short memories and are more liable to remember and vote their circumstances of the past 90 days than the past 18 months.
First I’m not sure they can or should do anything about education. If anything the Federal government should do less.
Second, if the president finds successful solutions to those problems, he will be rewarded, not thrown out. Reagan faced a number of those issues, including Social Security, and he solved them (except for the deficit) and won handily.
This is the first time I’ve heard the [higher] education system described as corrupt, and it feels very apropos. In fact, we may improve higher education best by focusing on that rather than on how expensive it is.
Yes.
I think we are in for a long term secular deflationary environment due to demographic issues. So while I see short term interest rates rising (less saving seeking yield), I see long term interest rates staying low.
Brent- A coworker is a conservative Trump supporter (he likes it that Trump does not back down), a 20-year Army vet and a veteran of Afghanistan. He is now taking on-line university courses. When I told him that cutting off student aid for 3-4 years would be the effective way to drive down tuition, he looked somber and said he’d have to stop his education. So change’ll be painful, unpopular and difficult.
Doing less counts as reform too, especially for higher education (nothing would improve higher ed more than if all federal subsidies for it were cut).
We’ve almost past the deflationary phase, don’t you think? Interest rates were held down by hundreds of millions of Boomers across the world saving for retirement. Once they actually retire and start drawing down their savings, rates will go up.
Even if you buy Larry Summer’s hypothesis that the return on capital is on a downward trend, if the savings pool shrinks fast enough than interest rates will still go up.
Yes, that’s true.