Transforming Our Economy


Transforming Our Economy

Our economy has been failing for decades. The politicians have seen to it. It’s now time to change course and take the many steps, large and small, to restore the American Dream.

These steps do not include business as usual, which Senator Clinton appears to be offering. Nor do they include destroying our trade relations or reneging on our national debt, which Mr. Trump seems to advocate. The steps most certainly do include fundamentally reforming our tax, Social Security, healthcare and banking systems. They also entail leveraging technology to dramatically improve and equalize education at the primary and secondary levels. And they involve substantially upgrading our nation’s infrastructure and funding basic research at a much higher level.

All this needs to be done by someone who knows what she’s doing and is fully aware that every dollar spent by the federal government comes with a huge opportunity cost. It’s a dollar that taxpayers would otherwise be using to feed their kids, pay for college, pay off credit card bills, cover healthcare cost, etc.

Let’s start with tax reform, which is the quickest way to achieve rapid growth in jobs, productivity and real wages.

Tax Reform

Tax reform, if done right, can make a huge difference. A telling example is the Irish Miracle that started in 1987. Thanks primarily to a major and intelligent tax reform, Ireland moved from being one of the lowest per-capita income countries in the European Union to the second highest – all in the space of a dozen years!

My tax reform, detailed in the next chapter, would make the United States the most tax-attractive country in the developed world. This would bring large amounts of investment to our country. And this influx of capital will lead to many more jobs and significantly higher wages. These impacts won’t happen overnight, but they will happen quickly.

When I speak about tax reform, I do so with specific knowledge. First, I’m well versed in how other countries have changed their tax systems and the effects of those changes. Second, my main area of research is public finance. Hence, I know how to properly design tax and other fiscal reforms. Third, I’ve been heavily involved in building large-scale dynamic computer simulation models to evaluate fiscal reforms. Yes, the real world doesn’t fit perfectly into any economist’s model. But I wouldn’t substitute casual thought for disciplined thinking about the economy and economic reforms.

Alan Auerbach, a leading public finance economist at UC Berkeley (whom I mentioned earlier), and I began building computer simulation models starting in the late seventies. Our models feature neither supply-side economic voodoo (“tax cuts will pay for themselves”) nor demand-side economic voodoo (“increased government spending will pay for itself”). Instead, they are grounded in well-established economic behavior and standard economic theory. This includes the proposition that, absent better design of taxes and other policies, there is no free lunch. Stated differently, if we want to improve the economy in a way that benefits us all, we’d better do so very carefully. This is where having a trained economist at the reins can make a big difference.

Over the years, versions of what is known as the Auerbach-Kotlikoff (AK) model have been used around the world to study fiscal reform, demographic change, education policy, generational policy, trade policy and many other issues. Some of this work has been done at the governmental level. Indeed, both the Congressional Budget Office and the Joint Committee on Taxation have used versions of our model to assess the economy’s response to alternative fiscal reforms. For my part, I’ve used our model to help develop my proposed tax reform.

My Tax Reform – a Quick Overview

My tax reform is designed to stimulate the economy, raise real (inflation-adjusted) wages by at least 10 percent, increase GDP by roughly 15 percent, produce at least 25 percent more revenue, improve tax fairness (progressivity) and provide far better incentives to work, particularly for the poor.

My reform eliminates three highly complex and dysfunctional taxes and replaces them with four new and extremely simple ones. It also dramatically modifies the FICA payroll tax.

Here are the highlights. Apart from transition rules that would collect deferred taxes, I eliminate the corporate income tax, the personal income tax and the estate and gift tax. In their place, I institute a business cash flow tax, also called a value added tax (VAT), a progressive personal consumption tax, an inheritance tax and a tax on carbon.

Replacing the corporate income tax with a business cash flow tax will leave the U.S. with the lowest corporate tax rate in the developed world, namely zero. Yet the business cash flow tax will collect far more revenue from businesses than the corporate income tax. What it won’t do is tax, on an effective basis, any income that businesses, be they American or foreign, derive from making new investments in the United States. This is the reason that U.S. and foreign companies will rush to invest and hire here.

The New York Times is very careful when it comes to publishing op eds advocating tax reforms, especially those that might seem, whether true or not, to help the rich. But the Times recently published a column I wrote entitled “Abolish the Corporate Income Tax.” The column was based on findings from the AK model. Persuading the very left-leaning Times’ editorial board that replacing the corporate income tax with a progressive alternative just might make sense for low- and middle-wage workers as well as for the economy was no minor feat. It’s testimony to the power of apolitical economic analysis — analysis that invokes neither right-wing nor left-wing free-lunch fantasies — to get people to listen and learn.

The personal consumption tax rate, the second new tax I’d institute, was first proposed in 1996 by former Democratic Senator Sam Nunn and former Republican Senator Pete Domenici. They called it the USA Tax. At the time, many people felt it would be hard to implement given the reporting requirements. But 20 years is a long time and what once needed to be reported on paper can now be reported electronically. Consequently, personal consumption taxation is now an eminently practical option.

My personal consumption tax would be highly progressive. Only the top 20 percent of households when ranked by spending would pay this tax. All other households would be exempt and file no returns. For them, April 15th would just be another day!

Moreover, the tax would exclude consumption paid out of wages. Hence my personal consumption tax won’t penalize anyone for working. What it will do, as explained in the next chapter, is make absolutely sure the rich, particularly the superrich, pay their fair share of taxes.

My proposed inheritance tax would tax all gifts and inheritances received above a high threshold. The tax would be extremely simple and permit no loopholes. The rich could not avoid it with trusts, life insurance policies or other estate-planning tools. None of them would be legal.

The remaining new tax is the carbon tax. This tax would be designed to actually reduce carbon dioxide emissions. As discussed below, given the timing of their implementation, our current carbon policies, including the recent Paris Accord, may actually be raising global emissions and thereby accelerating the increase in the planet’s temperature.

Another key provision of my tax reform is eliminating the ceiling on Social Security’s FICA payroll tax. Currently, only wages up to $118,500 are subject to the full 15.3 percent FICA tax rate. Under my reform, the FICA taxable-wage ceiling is eliminated. Hence, our nation’s highest earners will be treated like today’s lowest earners. They will pay FICA taxes on every penny they make.

Improving Incentives to Work, Especially for the Poor

Employment is a two-sided coin. It requires people eager to work not just people eager to hire. Our current federal and state fiscal system has roughly 40 different tax and benefit programs. Many are embedded in the federal income tax. None was designed with any thought as to their combined impact on work incentives. Consequently, for millions of Americans, working and earning more means not just paying a great deal in extra taxes but also losing a great deal of existing benefits.

Take a low-wage single mother with three children earning $35,000. If she earns an extra $1,000, she will pay $153 more in FICA taxes, lose $211 in Earned Income Tax Credits and lose $240 in food stamps. She will also pay state income taxes and state sales taxes (when she spends her wages) totaling roughly $100. Furthermore, this mom will likely be enrolled in Obamacare. In this case, earning the extra $1,000 will cost her $253 in extra healthcare costs. The sum of all these additional explicit and implicit taxes is close to $1,000! Hence, earning the extra $1,000 for herself and her children will produce almost no additional income, on balance. This mother, like millions of our poorest citizens, has been placed in a poverty trap thanks to our confiscatory tax and benefit system.

Abolishing America’s poverty trap, which, for decades, has been ensuring that the poor stay poor, requires radically changing not just our tax system but also how we provide government benefits. My tax and benefit-program reforms ensure that all Americans — poor, middle class and rich — face an identical 30 percent marginal tax on earning extra income. So the mom earning $35,000 who gets a $1,000 raise will pay $300 in taxes, not $1,000 in the form of additional taxes or lower benefits. A millionaire who earns an extra million dollars will pay $300,000 in extra taxes.

When you put together the effects of all 40 programs, typical U.S. workers now pay 40 cents on every dollar of extra earnings. But, as the above example illustrates, far too many American workers are in dramatically higher marginal tax brackets. Hence, having a uniform 30 percent marginal tax rate on labor income will significantly improve work incentives, particularly for the poor and for those in their early 60s.

Progressivity of My Fiscal Reforms

My fiscal reforms are, collectively, highly progressive. The business cash flow tax represents an indirect consumption tax. Consequently, it taxes the resources – wages and wealth – used to pay for consumption. Hence, the business cash flow tax is, in part, a wealth tax. Second, the progressive consumption tax will tax all consumption of the rich that’s financed out of their wealth. So this represents a second major wealth tax. Third, eliminating the ceiling on Social Security benefits, without providing additional benefits under the old system (see Chapter 9), transforms the regressive labor income tax into a progressive tax. Fourth, the inheritance tax will limit the transmission of wealth across generations in a way that the estate and gift tax are certainly not doing. Fifth, as discussed in the next chapter, my reform includes a fixed payment per American in lieu of the Earned Income and Child Tax Credit. This is another progressive element since this fixed payment will represent a trivially small share of resources for the rich but an important source of income for the poor. Sixth, I replace the Food Stamps program with three free meals provided to children five days a week at schools located in low-income neighborhoods as well as direct food distribution to adults and children in these neighborhoods. Parents could join their school-age children for dinner at their children’s schools. The mechanisms for food distribution will be via local food distribution centers and mobile food distribution for those who can’t easily reach the centers because of travel time or problems with mobility. The last thing I want to do is stigmatize anyone. But we need to give food assistance to the poor while preserving their incentives to work. Providing Food Stamps and then taxing them away at 24 cents on the dollar earned will maintain the poverty trap the poor need so desperately to escape.

For those who believe the current income tax is a hallmark of progressivity and that its retention is essential to retaining a progressive fiscal system, I invite them to meet with some of our nation’s roughly 2,000 billionaires. If you ask them what they pay in income taxes, they will smile and say, “The rich don’t pay income taxes. We borrow against our wealth to consume as much as we want, don’t realize our capital gains or use like-to-like transfers when we want to trade real estate, leave our appreciated assets to our children with a step up in basis to avoid any end of life capital gains taxation, and then use a variety of trusts, life insurance, and other estate-tax avoidance mechanisms, all fully legal, to avoid paying estate taxes.” This game of cheat the tax man with high-class lawyers would come to an abrupt end under my presidency. And those lawyers would be forced to start doing something that’s actually socially productive.

‘The Business of America is Business’

This is President Calvin Coolidge’s famous 1925 quote. It was true back then. It’s not true today. Today we’ve saddled American companies with all manner of responsibilities that keep them from doing what they are here for – to make money and, in the process, hire us.

Putting employers fully or partly in charge of our defined benefit plans, our 401(k)s and similar tax-favored saving plans, our health insurance plans, our retirement account investment options, our life insurance holdings and our disability insurance – all of which help determine our taxes – should never have happened.

If businesses were doing a fine job of handling these responsibilities it would be one thing. But that’s far from the case. An entire generation of baby boomers is about to retire. According to a careful study by Boston College economist Alicia Munnell and her co-authors, over half of U.S. Baby Boomers are woefully ill-prepared financially for a retirement that may last longer than they worked. Many apparently thought someone else was handling their nest eggs — whether their employers or Social Security. Not the case. Their employers didn’t contribute enough to their workers’ retirement accounts. Nor did they cajole their workers into contributing enough. As for Social Security, it stopped sending out benefit statements years ago, so now many people have no idea how little they will receive.

It’s time to get employers out of our personal financial lives and get them back to running their companies. My healthcare reform, discussed in Chapter 8, would make employer-based healthcare largely redundant. My tax plan would eliminate federal tax breaks of all kinds to employer-provided benefits. My Social Security plan would provide adequate retirement benefits, life insurance and disability benefits to workers with no involvement by employers (or Wall Street). Eliminating all of these unnatural responsibilities of employers will, like the elimination of the corporate income tax, make the U.S. the place to do business.

Eliminating the High Fixed Costs of Starting and Running a Business

It’s also time to help businesses, particularly small businesses, operate in all 50 states without having to file, many on a quarterly or monthly basis, 50 state corporate tax returns, 50 annual reports, 50 sales tax returns, 50 state-tax withholding reports, 50 state-unemployment insurance contribution reports and so on. The U.S. Small Business Association is trying to make it easier for businesses to start up in a single day. Their strategy is to streamline all the local permits and licenses they need to apply for. That’s a major improvement, but what it is not doing is helping small businesses handle the massive paperwork on the next day and all the days thereafter.

I’d establish a free federal website that companies could use to file all these documents and tax returns for all 50 states via a single return that would spit out the various tax liabilities for all 50 states. This would not preclude states from setting their own tax policies. It would simply facilitate filing the various returns across states based on the company’s profit and loss statement. The system would be set up to strongly incentivize states and localities to base their tax collections on a uniform set of inputs.

Can this be done? Yes. Private accounting and back office management companies do this now. It just costs businesses an arm and a leg in time and money. The federal government could hire the best of these companies to build and maintain the free website I have in mind.

Expanding High-Skilled and Reducing Low-Skilled Immigration

As noted earlier, America has a negative net rate of illegal immigration but a large positive rate of legal immigration that adds an extra million or so primarily low-skilled workers to our population each year.

We are a land of immigrants, and we have and always should welcome large numbers of immigrants each year, especially refugees (regardless of their religion!) to our shores. But if we admit a large enough number to materially damage the earnings prospects of low- and middle-income workers, we’ve gone overboard. I think our current rate of low-skilled legal immigration has done just that.

I’d cut legal immigration of low-skilled workers by half. This will start taking pressure off low-skilled U.S. workers. By the same token, I’d raise high-skilled legal immigration by one-third. This will enhance the productivity of low-skilled workers, who will have more high-skilled workers with whom to work. It will also shrink the skill gap in wages. Over time, I think, it will make a very big difference in restoring our middle class.

For those who differ on this proposal, ask yourself whether you would open our borders to everyone in the world and who would be most hurt by such a policy. This would quickly lead the U.S. to Third World status as measured by income inequality. We’d have a relatively tine number of massively rich people and a massively large number of incredibly poor people with very few middle-class people in between. This, unfortunately, is what our immigration policy is promoting, albeit to a far smaller degree.

Or if you are a CEO and are making a bundle hiring low-skilled workers, ask yourself: how would you feel about a policy of permitting we allow in 1 million of so immigrants each year with exactly your skill set – all eager and prepared to take away your job?

Federal Support of Day-Care/Pre-School

Paying for childcare is another major work disincentive, whose alleviation can boost the economy in both the short and long run. In the U.S., new mothers from low-income households pay roughly 30 cents of every dollar they earn on childcare, making it much harder for them to rejoin the workforce and get ahead. In Sweden, on the other hand, the figure is just 3 cents. Why the difference? The Swedish government, like a number of other advanced economies, provides highly subsidized daycare and pre-K centers for young children. No surprise, then, that in Sweden the labor force participation rate of mothers with young children is one-third higher than in the U.S.

We need to help mothers get back to work when they feel the time is right. Given the extra taxes that working moms pay, providing subsidized childcare could well pay for itself or at least cover much of its costs. Subsidizing daycare and pre-K centers can also help children learn critical socialization skills.

Let me quote Nobel Laureate James Heckman on this subject. Heckman has spent much of the last decade studying the importance of and economic returns to investing in very young children, particularly those in economically disadvantaged households.

The highest rate of return in early childhood development comes from investing as early as possible, from birth through age five, in disadvantaged families. Starting at age three or four is too little too late, as it fails to recognize that skills beget skills in a complementary and dynamic way. Efforts should focus on the first years for the greatest efficiency and effectiveness. The best investment is in quality early childhood development from birth to five for disadvantaged children and their families.

Supporting Family Planning

The Republicans, particularly Carly Fiorina, have had a field day attacking Planned Parenthood. They did so based on a fraudulent film. This is the depth to which our politicians have fallen — paying for the production and distribution of lies. Let me be very clear. I strongly support Planned Parenthood. It is helping women access their legal right to have an abortion within roughly the first 22 weeks of a pregnancy. Equally importantly, it is heavily involved in family planning.

There is an enormous fiscal payoff to family planning. I view it as a crucial long-term investment for the economy. Opponents of family planning appear to be focused on whether or not a woman has a right to terminate unwanted, unplanned or forced pregnancies within the legal parameters set by the Supreme Court. I fully support the Supreme Court’s decisions on this matter. But regardless of your feelings on abortion, family planning in advance of pregnancies is an entirely different manner. In our country, a quarter of a million teenagers have children annually. Partly as a result, one in 10 children are growing up with grandparents. A total of 25 million children — more than one in three children — are growing up in single-parent households. Even worse, children from single-parent households are, themselves, much more likely to have children as teenagers and much less likely to obtain secure jobs, let along well-paying jobs.

The composition of families has changed radically over the years. In 1970, single women with children comprised 11 percent of the population. In 2010, they comprised 41 percent. The majority of these single-parent families are living in poverty. Worse still, 43 percent of the children in these families will remain impoverished into adulthood.

The societal costs are staggering. They include healthcare, welfare, food stamps, education and other subsidies, women not being able to enter the workplace, higher crime rates, and higher costs of incarceration. Effective family planning can go a long way to mitigating these costs. In 2010, the government spent $2.4 billion on family planning services. The savings from reduced Medicaid, food stamps and welfare benefits appear to be vastly larger than these costs.

Colorado recently funded free contraceptives for all the safety-net health centers in the state. Women who voluntarily wished to plan their families were able to freely choose the method and get educated in its use. The result was a 40 percent reduction in teen birth rates, a 35 percent drop in abortions and a 25 percent decline in high-risk pregnancies.

Conservatives should love family planning because it greatly reduces government outlays, reduces abortions and gives more single women a chance to enter the work force, all at a modest cost that is more than made up in the first years. Liberals should love the huge potential reduction in poverty rates and the greater flexibility women have to manage their lives.

A greater investment in family planning may be the single most effective way of solving many of our most difficult domestic problems. Effective family planning requires not only investment but also education, so that every teenager and young adult, male and female, understands the benefit of family planning for their future.

Meaningful Educational Reform

Our educational system has been and is playing a major role in turning America into a society of haves and have-nots. The No Child Left Behind educational reform passed in 2002 held great promise, but it didn’t work. Too many students failed the standardized tests and too many schools received failing grades. The response in our latest education bill — Every Student Succeeds – retains standardized federal testing in grades three through eight, but lets each state decide, within limits, how to handle failing schools.

Unfortunately, Every Student Succeeds is also no guarantee that every student will succeed. In many ways the new law simply throws up Uncle Sam’s hands and tell state and local governments, “You figure it out.” That said, this may well be our best move. By restoring more autonomy to states and local governments, we’ll effectively end up running thousands of experiments across the country that can help each school district, each school and each teacher learn the best means to educate their particular students. This may involve charter schools, vouchers, magnet schools, home schooling, reliance on the Common Core and other current educational initiatives.

In short, when it comes to elementary and secondary education, if the federal government doesn’t know what’s best, it’s in no position to dictate what’s best. On the other hand, it has an obligation to intensely study what is and isn’t working and make that knowledge instantly available to educators around the country.

Mr. Trump wants to shut down the Department of Education (DOE). I think doing so would be deeply misguided. The Department of Education is here to help determine what works and not just here at home but in other countries as well.

Making Vocational Education a Business Profit Center

One example of where the DOE can matter is vocational education. The DOE can learn and disseminate key lessons from Switzerland, Germany and other countries where education, particularly vocational education, is a major success. Those countries have lower youth unemployment rates and their education systems know how to work with businesses, large and small, in providing vocational education that pays off directly in terms of concrete, reliable jobs. These vocational programs often start and end in high school. Others extend to community colleges. Australia provides a successful example of using technical colleges, called TAFEs, to produce task-specific certifications that lead to immediate employment.

Companies that become truly engaged in vocational education do so, in large part, out of self-interest, namely to recruit new hires. The DOE should be working with top education officials Switzerland, Germany, Australia and other countries to understand the precise nature of their vocational-education success stories and relay these formulas not only to educators but also to heads of human resource departments of American companies, both large and small.

This connects to my message to American CEOs, to wit:

“You have an obligation to your bottom line. And yes, we need to get government out of your hair and let you do your job. But you have an obligation to society at large, particularly when it comes to employing Americans and paying them decent salaries. You also can play a major role in educating and recruiting today’s youth. Bear in mind that today’s workers are your current customers and that today’s students are your future customers. The more you automate, outsource, offshore, etc., the less money your customers will have to buy what you make. And the less you help train America’s youth, the fewer qualified workers you will find to hire.”

It’s time for American business to understand that the welfare and education of Americans are in large part its responsibility and that having each U.S. company act penny wise will be dollar foolish for overall American commerce, including their own businesses.

Leveraging Technology to Equalize Educational Opportunity

I don’t know enough yet about primary and secondary education to say for sure how to improve it. But I have two strong prior beliefs. The first entails leveraging technology to equalize educational opportunity. The second is to promote pre-K education. 

Let me start with technology, where we have a unique opportunity at extremely low cost to do two major things: a) effectively lower classroom size and b) dramatically improve the quality of teaching. As President, I’d instruct our Department of Education to offer, free of charge, online learning to all schools across the country, as well as subsidies for equipment to deliver this learning to students on a one-on-one basis – learning that proceeds at the student’s own pace.

These online courses would be available for each subject in each grade and would be produced by the top teachers in our country. The online classes would be engaging and challenging. Each lesson would be linked to an online test that checks a student’s absorption of what was taught. Advancement to the next lesson would be predicated on achieving a passing score on the prior lesson. This makes learning dynamic and responsive to each student. None of us learn the same way. Technology can help us cater the educational experience to the learning style of every student. For example, if a particular way of explaining fractions doesn’t work, the online education would automatically try an alternative method.

This type of educational innovation is already underway. New York City is now engaged in a massive experiment in online and blended learning. The term blended is critical. It means blending hands-on traditional teaching with new online educational tools. What’s definitely not involved here is putting teachers out of jobs. Instead, it’s using new technology to help teachers do their jobs better and more easily. It also gives teachers more one-on-one time to spend with their students.

Very Early Education

The work by James Heckman and many other top researchers on educational achievement points to the need for early educational intervention with children not just to learn basic skills but also to learn patience, determination, perseverance, grit, call it what you will. There is growing evidence that developing grit and its close relatives as well as the ability to cooperate, work in teams, respect authority and respect one’s peers — in short, to play well in the sandbox — may be as important as one’s inherited genes in determining future economic success.

On that score, let me quickly point out that no one has yet discovered a smart gene. Moreover, which genes get activated is not predetermined at birth but is influenced in part, if not in the most part, by one’s environment. This is why there is a pressing need for pre-natal education and parental education to assist parents in having and sustaining healthy babies during and after their pregnancies. It’s also why I support universal federally funded pre-K education.

Halving Class Sizes in Low-Income Schools

There appears to be good evidence that dramatically reducing class size can materially improve educational outcomes. As President I would establish a federal version of Teach for America, which would add a federally paid teacher’s aide to assist each teacher in each low-income school in the country. These aides would be available only to schools that did not cut back on their own number of teachers and teaching aides per student and that used their classroom space to the extent possible to reduce class sizes in half. 

Getting Parents Involved

Children have two sets of educators – their teachers and their parents. It’s beyond time for parents to step up and make a serious commitment to their children’s educations. To help make this happen, I’d make the abovementioned online courses available to parents so they could learn precisely what their children are learning. In this regard, I’d ask Congress to subsidize Saturday-morning parent education classes, which would teach mothers and fathers the skills needed to reinforce their children’s educations when they are with their children at home. Some of these classes need to be centered around social, i.e., non-cognitive skills, so that parents can better teach their children the behaviors that will make them successful in the workplace.

Other Initiatives

What else can the federal government do to improve primary and secondary education? Plenty. It can subsidize smaller class sizes. And it can expand its assistance to teachers in enhancing their own subject-matter educations by obtaining masters or doctoral degrees or otherwise furthering their subject-matter knowledge and teaching skills. I think No Teacher Left Behind should be an integral part of our country’s educational agenda. Finally, teaching cannot be an occupation that pays less than plumbing, nor can it be done by just anyone regardless of their established knowledge. We need to pay our teachers better and, in exchange, expect a higher level of competence and achievement.

Letting Students Borrow for Higher Education at the Federal Borrowing Rate

These days far too many students are going broke going to college. Outstanding student debt exceeds $1 trillion. Saddling an entire generation with excessive debt will leave them unable to buy homes, cars and start families, especially given their relatively low wages and high rates of unemployment. It will also push them to default. Over 7 million young men and women are currently in default on their student loans.

As President I would ask Congress to permit students to borrow for college tuition, as well as for room, board and books at the 30-year Treasury bond rate, which currently stands at 2.6 percent. This is far lower than prevailing student loan rates, which range from 4 to 8 percent. I would impose a 1 percentage-point higher rate for those not completing their degrees. If the government is going to co-invest with students on their education, students have to fulfill their end of the bargain.

I would also permit those with outstanding student loans to refinance them at the same rate. These loans would be 30-year loans. Repayment would be limited to 10 percent of one’s salary. Loan repayments would be deferred during spells of unemployment, periods of disability, periods of military service and periods of service with the Peace Corps, AmeriCorps, Teach America and other federal service agencies. The balance of loans not repaid after 30 years, regardless of the length of deferment, would be forgiven.

This policy invests in our children’s education. It’s something we should do even were the payoff low. But the payoff will be high given current data on the college-high school wage premium and the significant difference in unemployment rates between those who complete high school and those who complete four years of college.

Basic Research and Development

Government support of basic research and development within government research centers or via government peer-vetted grants is particularly high on my agenda. This R&D has brought us the internet, GPS, the human genome project, heart monitors, solar panels, optical digital recording technology, fluorescent lights, communications and observation satellites, advanced batteries now used in electric cars, modern water-purification techniques, supercomputers, more resilient passenger jets, better cancer therapies, and the list, which includes some key technology used by Google, goes on.

What a spectacular record. Yet we’ve let federal R&D fall from 10 percent of GDP in the 1960s to less than 1 percent today. Funding of NASA, the National Science Foundation, the National Institutes of Health, the Department of Energy and the Department of Defense have all been reduced and continue to be reduced relative to the size of the economy. In the field of particle physics, our country seems to have simply left the field when it comes to constructing large-scale particle accelerators. The big breakthroughs these days are occurring at CERN in Switzerland — the European Union’s Organization for Nuclear Research.

As President, I would ramp this research back up. I think this is one of just two kinds of spending that can potentially pay for itself. The other is infrastructure investment.

Infrastructure Investment

The American Society of Civil Engineers grades our country’s infrastructure every four years. The year 2013 is the most recent year it awarded a grade. The grade was D+. The Society also estimated that raising our infrastructure grade from D+ to A would cost $3.6 trillion. Infrastructure here refers to everything from our electrical grid to our airports, to our waste and drinking water systems.

The Society of Civil Engineers, like all guilds, past and present, is self-interested. More infrastructure work means more employment for its members. So we have to take its assessment with a grain of salt. Yet the Society backed up its D+ with significant detail. For example, it determined that precisely 85,033 bridges are “functionally obsolete.” This is polite language for saying the bridges are unsafe. It’s actually a worse rating than the “structurally deficient” rating given to the I-35W bridge in Minneapolis before it spectacularly collapsed on August 1, 2007, killing 13 people and injuring 145. Another example is the 14,000 damns the Society rates a “high hazard,” meaning they can fail at any time and will kill people when they do.

The Flint lead-water poisoning of up to 6,000 children that occurred from 2014 through 2016 and Amtrak’s 2015 train derailment near Philadelphia, which killed eight and injured 200, are more evidence of what the Society of Civil Engineers is warning about. It’s not just the failure to replace failing infrastructure. It’s also the failure to properly inspect, maintain, oversee and update the infrastructure that still has useful service lives.

We also aren’t creating much in the way of new infrastructure. Take subways. We have 10 or so major cities, including Houston, Phoenix and Dallas, with over 1 million inhabitants but no subways, even on the drawing boards. This would be less of a problem if our population wasn’t on pace, as mentioned, to increase by 100 million in 45 years. But it is. That extra 30 percent more people are going to need transportation not just within but between cities. Yet we have achingly slow movement when it comes to high-speed rail and airport infrastructure that is also being updated at, according to the engineers, so slow a pace as to merit a grade of D.

Inadequate infrastructure investment is not just a matter of public safety, although public safety is paramount. It also engenders major economic costs, as the Society’s report makes abundantly clear. Much of this cost comes in a form that we may not immediately recognize. I’m referencing here the cost of our time, whether it be wasted sitting in traffic, traveling on slow trains or waiting to take off from overcrowded airports. Time is money, and, when we waste it due to ancient infrastructure (or outdated, mindless government bureaucracies), our living standards are lower as a result. It’s high time to fix, upgrade and update our existing infrastructure and pay for it with taxes or reductions in less critical spending – not by printing or borrowing money, either on or off the books.