Getting Our Economy Working Again

ECONOMY POLICY PAPER

AUGUST 2014

SUMMARY
The United States has moved past the Great Recession, yet our economic recovery has been slow
and faltering. It has taken four years for the U.S. to regain the 8.7 million jobs lost during the
recession, although in that same period of time 12.8 million Americans have dropped out of the
labor force altogether.1 Although post-recession economies tend to grow at faster than average
rates, the U.S. economy has failed to catch up to its pre-recession output levels, remaining 5-10%
below potential.2 The projected medium-term growth rate of the U.S. economy of 2.4% is a full
point below the average of the last six decades.3
American families are still struggling to get by with stagnant wages and rising costs, from gas to
groceries despite productivity gains over the last 35 years. Fewer Americans now identify as
middle or working class than at any time in recent history.4 Fifty million Americans fall below the
poverty line, including one out of five children. In Pennsylvanias 10th District, 14.2% of the
population fell below the poverty line in 2012.5 And a greater share of national income is
concentrating among those who are already well-off; the top 10% of Americans earned over half
of all income in 2012, the highest on record.6 At the same time, rates of mobility between social
classes remains constant and lags behind other developed economies.7
In short, our economy is increasingly benefitting those at the top, squeezing those in the middle,
and leaving far too many at the bottom behind with the same or less ability for individuals to
advance themselves up the ladder than a half-century ago. The toxic combination of rising
inequality and static mobility, tethered to slower-than-average economic growth, is the
central challenge to the American Dream in the 21st century.

1
2

Mutikani, Lucia. Reuters. June 6, 2014. US recoups jobs lost in recession as economy picks up.
Summers, Lawrence H. Business Economics Vol. 49 No. 2. 2014. U.S. Economic Prospects: Secular Stagnation, Hysteresis, and the Zero Lower Bound.

The Conference Board. May 2014. Global Economic Outlook 2014.

Associated Press. Fox News. April 2, 2014. More Americans feel they're slipping from middle class after harsh recession and slow recovery.
U.S. Census Bureau. 2012. My Congressional District, PA-10.
6
Lowrey, Annie. The New York Times. Sept. 10, 2013. The Rich Get Richer Through the Recovery.
7
The Economist. Feb. 1, 2014. Mobility, measured.
4
5

The federal government must (i) support economic growth by improving the environment for free
enterprise and enhancing human and physical capital; (ii) increase opportunity for all Americans
to work their way up the economic ladder by helping to build a foundation of a strong family, a
good education and a well-paying job, and (iii) provide a social safety net that is oriented to
helping those truly in need and getting those who are able to work back on their feet.
Governments role is not to create jobs or guarantee equal economic outcomes; instead, its role
is to maximize the potential of our free market by understanding how it can support growth and
mobility, knowing when to get out of the way, and having the wisdom to know the difference.

THE PROBLEMS
1. Growing federal regulations
There is significant evidence that the U.S. economy is overregulated, and that a gradual
accumulation of rules has slowed down long-term economic growth. While it is difficult to
measure the cost of regulations, every additional federal regulation forces businesses to devote
time and money to compliance, government agencies to expend resources to enforcement, and
individuals to bear the ultimate costs of foregone economic opportunities.
Every year, the federal government enacts thousands of new regulations, and the pace of
additional regulations is only speeding up. In the 1960s, 170,325 pages were added to the Federal
Register, a listing of all government regulations; in the past decade, 802,310 pages of regulations
were added. In 2013 alone, federal agencies finalized 2,594 new rules, which apply to every sector
of the economy.8

Crews, Clyde Wayne Jr. Competitive Enterprise Institute. 2014. Ten Thousand Commandments.

Estimates from economists and government agencies reveal the striking extent of overregulation.
The Office of Management and Budget (OMB) reviewed just 116 regulations of thousands issued
from 2004 to 2013, finding that these provisions cost the private sector between $68.5 and $101.8
billion a year. Given the thousands of regulations that the OMB did not review in its report and the
tens of thousands that have existed since before 2004, this figure represents only a fraction of the
full cost of federal regulation.9 Other estimates are even higher. A report from the Small Business
Administration estimates that regulations cost the United States $1.75 trillion in 2008.10
Federal overregulation slows down the economy in the long-term as well. Two economists found
that government regulations have slowed U.S. annual economic growth by an average of two
points every sixty years.11As the sheer amount of federal regulation has grown, so has the size and
cost of enforcement. One study finds that the cost of federal regulatory enforcement grew 75.5%
between 2000 and 2010, to over $59 billion.12 This figure represents more than three times the
amount the federal government spends on agriculture programs each year.13
Examples of ill-conceived regulations abound. Recently, the Department of Energy released a set
of dishwasher efficiency regulations that would cost dishwasher manufacturers $84.6 million, or
13.3% of the industrys net present value. While the Department estimated that the provisions
would ultimately save consumers money in energy costs, its calculations assumed that consumers
would use their dishwashers longer than the average life span.14 Almost 30% of professions in the
U.S. fall under occupational licensing regulations, some of which are federal, which significantly
impedes job creation and social mobility.15 Finally, the recent hastily created Dodd-Frank reforms
to the finance industry added thousands of pages to the regulatory code in the name of consumer
protection, which may increasingly cut off credit to individuals.16
Due to the sheer complexity of the regulatory code, it is often difficult to repeal old regulations
that no longer make sense.17 While most federal agencies review existing regulations, the process
is often slow, informal, opaque, and underfunded making it difficult to keep track of which
regulations are accomplishing their objectives.18

The OMB calculates that economic benefits of the regulations in question exceed costs, yet both its cost and benefit figures are drawn from
calculations made before any of the regulations were actually implemented, making the benefits figure especially unreliable. OMB. 2014. 2014
Draft Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities.
10
This report does not estimate regulatory costs directly, relying on a global index-based regression analysis. Crain, Nicole V. & W. Mark Crain.
SBA, Office of Advocacy. September 2010. The Impact of Regulatory Costs on Small Firms.
11
The results of this study are almost certainly exaggerated, but the macroeconomic model upon which it relies captures the large scope of missed
economic opportunities caused by regulation. Dawson, John W. & John J. Seater. January 2013. Federal Regulation and Aggregate Economic
Growth.
12
Dudley, Susan & Melinda Warren. May 2010. A Decade of Growth in the Regulators Budget.
13
Boccia, R., Fraser, A.A. & E. Goff. The Heritage Foundation. Aug. 20, 2013. Federal Spending by the Numbers, 2013: Government Spending
Trends in Graphics, Tables, and Key Points.
14
Miller, Sofie. June 12, 2012. Setting the Wrong Standard: DOEs Latest Appliance Efficiency Rules.
15
Kleiner, Morris M. & Alan B. Krueger. IZA. Feb. 2011. Analyzing the Extent and Influence of Occupational Licensing on the Labor Market.
16
Platt, Laurence E. AEI. July 21, 2011. Is Dodd-Frank Regulation Cutting Off Mortgage Credit?; Katz, Diane. The Heritage Foundation. Dec.
16, 2013. DoddFrank Mortgage Rules Unleash Predatory Regulators.
17
Cowen, Tyler. The New York Times. Nov. 16, 2013. More Freedom on the Airplane, if Nowhere Else.
18
GAO. July 2007. Reexamining Regulations.; see also, GAO. March 11, 2014. Regulatory Review Processes Could Be Enhanced.; see also,
Coglianese, Cary. RegBlog. June 10, 2013. Institutionalizing Regulatory Lookback.

2. Shrinking federal investments

Education, infrastructure, and technological innovation are all essential to long-term economic
growth. Yet, the U.S. is falling behind in all three areas, limiting opportunities for future
generations of Americans. Public investment is being crowded out by mandatory spending on
consumption, mainly our health and retirement programs. According to the Office of Management
and Budget, in 1969, payments to individuals and investments in the future each made up onethird of the federal budget, but in 2012 payments to individuals reached 65% of the budget and
investments were only 14%.19

Economists have consistently found a strong link between education and long-term economic
growth, with some attributing rapid economic growth in the 20th century largely to education.20
However, a recent report from the Organization for Economic Cooperation and Development
showed that U.S. adults scored worse than those in most other industrialized nations in literacy,
numeracy, and problem solving skills that directly impact economic output.21 Furthermore,
American students seem to be on the same track as the adult population, receiving mediocre
scores on the latest Programme for International Student Assessment tests.22
The economic toll of the faltering U.S. education system is already clear: about half of employers
report difficulty finding qualified workers, especially in STEM (science, technology, engineering,
and math) fields.23 Meanwhile, higher education grows more expensive every year, with even
modest estimates showing an average real cost growth of 1.6% at private colleges and 2.3% at
public four-year colleges over the last 20 years.24

19
20
21

Brownstein, Ronald. National Journal. April 11, 2013. A New Budget for a New Party.
Ehrlich, Isaac. NBER. Jan. 2007. The Mystery of Human Capital as Engine of Growth, or Why the US Became the Economic Superpower in the 20th Century.

OECD. 2012. Country Note: United States.

Bidwell, Allie. U.S. News. Dec. 3, 2013. American Students Fall in International Academic Tests, Chinese Lead the Pack.
23
Jobs Council. Prepare the American Workforce to Compete in the Global Economy.
24
Leonhardt, David. The New York Times. Aug. 22, 2013. College Costs: Rising, Yet Often Exaggerated.
22

Just as education provides, among other things, the human capital to drive the economy,
infrastructure investment plays a key part in maintaining our nations physical capital. Yet, the
American Society of Civil Engineers rated the quality of U.S. infrastructure a D+ in 2013 and
estimated that it would take $3.6 trillion by 2020 to raise infrastructure quality to acceptable
levels. In Pennsylvania alone, there are 5,540 structurally deficient bridges and 852 high hazard
dams, and 57% of roads are in poor or mediocre condition.25
Unlike education and infrastructure spending, investment in research and development stayed
generally high throughout the recent recession.26 However, federal research and development
spending has fallen every year since 2008, and is set to stagnate over the coming years and reach
its lowest level on record by the end of the decade, relative to the economy.27 In particular, the
2013 federal budget sequester reduced federal research spending to its lowest level since 2002.28
The positive economic impact of federal research and development spending can easily be seen in
programs such as DARPA, the forerunner of the modern Internet.
3. Lack of Economic Mobility
The U.S. was once considered the land of opportunity, but recent studies have found that
intergenerational mobility rates in the U.S. are lower than to be expected. While many Americans
believe in the power of hard work and effort to get ahead, economic studies have found that
socioeconomic class is largely dependent on ones parents economic position.29

Another analysis found that this occurs more at the top and bottom of the earnings ladder,
especially at the bottom for American males.30 Only, 6% of Americans climb from the bottom of
the ladder to the top in one generation, compared to between 11% and 14% in other countries.31

25
26

27

ASCE. 2013. 2013 Report Card for Americas Infrastructure.

Strategy &. 2008. Despite Recession, World's Leading Corporate Innovators Increased R&D Spending in 2008, Finds New Booz & Company Study.

Plumer, Brad. The Washington Post. Feb. 26, 2013. The coming R&D crash.
Wren, Kathy. AAAS. March 25, 2013. Impacts of Sequestration Take Shape as Congress Drops R&D Spending Below 2012 Levels.
29
Isaacs et al. The Brookings Institution. Feb. 20, 2008. Getting Ahead or Losing Ground: Economic Mobility in America.
30
Jntii et al. IZA. Jan. 2006. American Exceptionalism in a New Light: A Comparison of Intergenerational Earnings Mobility in the Nordic
Countries, the U.K. and the U.S.
31
Isaacs et al. The Brookings Institution. Feb. 20, 2008. Getting Ahead or Losing Ground: Economic Mobility in America.
28

4. Broken Immigration System

Federal immigration laws and policies pose two divergent long-term challenges to the economy:
the cost of undocumented immigrants to federal and state budgets, as well as missed opportunities
that come from turning away high-skilled immigrants.
There are an estimated 11.7 million unauthorized immigrants in the U.S. today, and studies show
that the number is rising.32 A CBO review from 2007 concluded that these immigrants pose fiscal
challenges to local and state governments, as up to half may not pay taxes, while they still benefit
from government education, health care, and law enforcement.33 Attempts to reform the U.S.
immigration system have failed repeatedly since at least 1986. Most recently, due to gridlock and
partisan disagreements, Congress failed to pass a bill providing emergency border funding to
address tens of thousands of new undocumented immigrants, mostly children.
Meanwhile, studies have shown that U.S. companies have a shortage of employees with the
requisite skills in STEM fields.34 Many of the 4.3 million individuals waiting to immigrate to the
U.S. are highly skilled in STEM fields, yet with waiting lines of up to twenty-five years, are
unable to contribute their talents to the U.S. economy.35 Immigrants have been responsible for
over half of new Silicon Valley tech startups and over two-thirds of patents at some companies,
indicating that continuing to turn away high-skilled immigrants will create missed economic
opportunities for the U.S.36 In fact, one study found that metropolitan areas with more high-skilled
immigrants who arrived in 2007 and 2008 saw less economic decline during the recession.37
5. Ineffective Safety Net
In the long run, a faster-growing, more innovative economy will benefit all Americans; however,
in the short run, economic shifts and disruptions can cause individuals to fall below basic levels of
wellbeing. The recent recession has left record numbers of Americans below the poverty line, but
the federal safety net, which is intended to protect societys most vulnerable, has become
inefficient and ineffective hurting both those it was intended to serve, and the economy as a
whole.38
It has been fifty years since President Johnson declared the War on Poverty yet, although total
welfare spending has grown from 1.2% of GDP in 1964, to around 3.5% in the 1980s, to 6.1% in
2011, poverty remains more prevalent today than ever.39 The federal government alone spends
more than $700 billion every year on anti-poverty efforts, yet this total is split between 83 distinct
means-tested programs, each with separate objectives and directed by different bureaucratic
offices.40
The problem is not only how much is spent on anti-poverty programs, but that the income gap
(the difference in income between not working and collecting benefits, and working and being
eligible for fewer or no benefits) is too small. Currently, there are high baseline benefit levels that

32

Preston, Julia. The New York Times. Sept. 24, 2013. Number of Illegal Immigrants in U.S. May Be on Rise Again, Estimates Say.
CBO. Dec. 2007. The Impact of Unauthorized Immigrants on the Budgets of State and Local Governments.
Rothwell, Jonathan. The Brookings Institution. July 1, 2014. Still Searching: Job Vacancies and STEM Skills.
35
Nwosu, C., Batalova, J., & G. Auclair. MPI. April 28, 2014. Frequently Requested Statistics on Immigrants and Immigration in the United States.
36
Partnership for a New American Economy. Highly Skilled Immigrants.
37
Lind, Dara. Vox. June 4, 2014. This study showed that high-skilled immigrants create jobs for Americans.
38
Kneebone, Elizabeth. The Brookings Institution. July 31, 2014. The Growth and Spread of Concentrated Poverty, 2000 to 2008-2012.
39
Rector, Robert. The Heritage Foundation. April 17, 2012. Examining the Means-tested Welfare State.
40
CRS. 2012. CRS Report: Welfare Spending The Largest Item In The Federal Budget.
33
34

begin to fall away as recipients begin to earn income, meaning there is diminishing returns for
those that start working. Our current system does not incentivize work because the lowest-income
households face high marginal tax rates and receive too little take-home pay for every additional
dollar they earn. For example, Pennsylvanias secretary of public welfare found that a hypothetical
single mother with no earnings might receive $45,000 in benefits, which is comparable to what
she might take home if she worked a job that paid $50,000 a year.41 Without a large enough
income gap, workers might not take an entry-level job that would eventually lead to better
opportunities and greater economic mobility.
There is further evidence that the net effect of federal welfare programs and tax provisions is to
discourage work among low-income Americans. A 2006 study by Laurence Kotlikoff and David
Rapson found that a 45-year-old Massachusetts couple with children would have the same post-tax
and post-benefit income whether their salaries totaled $25,000 or $50,000, due to rising marginal
tax rates and federal benefit programs with sharp income cutoffs. The authors of the study
conclude that, the U.S. fiscal system provides most households with very strong reasons to limit
their labor supply and saving.42

The minimum wage is an important tool that ensures baseline compensation for those who work.
While the minimum wage has been raised several times since it was instituted in 1938, it has never
been indexed to inflation, leading the value of the minimum wage to decline gradually over time.43
Had the minimum wage risen with inflation since its peak in 1968, it would be worth $10.86
today; instead, the lowest-wage workers earn $7.25 an hour.44

41

Cass, Oren. National Review. Oct. 14, 2013. The Height of the Net.
Kotlikoff, Laurence J. & David Rapson. NBER. Sept. 2006. Does it pay, at the margin, to work and save?
43
Grossman, Jonathan. U.S. Department of Labor. Fair Labor Standards Act of 1938: Maximum Struggle for a Minimum Wage.
44
Raise the Minimum Wage. $10.90.
42

NICKS PLAN
To boost economic growth and mobility, Congress should first do no harm by putting an end to
manufactured political crises, getting its own fiscal house in order, and streamlining federal
regulations. Second, Congress should enhance human and physical capital by modernizing our
immigration system and making targeted investments in education, infrastructure, and research.
Third, Congress should redesign our safety net to increase the effectiveness of anti-poverty
programs and provide greater incentives for full-time employment.
These are the first steps, but certainly not the only ones, to get our economy working again.
Congress must also work to encourage strong families, foster innovation, support small business
and promote free trade.
1. Do No Harm
Getting our Fiscal House in Order
Congress should avoid unnecessary political brinksmanship. The constant lurching from crisis to
crisis fuels economic uncertainty, and has had a negative impact on job creation. During the debt
ceiling fight in 2011, the U.S. never added more than 100,000 jobs a month between May and
August. In September, once the debt ceiling was resolved, more than 200,000 jobs were added.45

The senseless across-the-board cuts of the budget sequester in the spring of 2013, which occurred
as a result of Congress failing to achieve a budget deal, reduced federal outlays by over $80 billion
and led to reductions in important investments, higher unemployment, and less economic
activity.46 Further, the partial government shutdown in the fall of 2013 took $24 billion out of the
economy, about $1.5 billion dollars a day.47 This includes not only federal wages and lost
productivity, but also all the ripple effects and associated costs.

45

Klein, Ezra. The Washington Post. July 30, 2012. 14 reasons why this is the worst Congress ever.
Bipartisan Policy Center. From Merely Stupid to Dangerous: The Sequesters Effects on National and Economic Security.
47
Walshe, Shushannah. ABC. Oct. 17, 2013. The Costs of the Government Shutdown.
46

These crises can be avoided if Congress were to implement a long-term plan to deal with rising
debt and return to regular order for annual budgeting and appropriations. A plan to reform major
social insurance programs and the tax code as laid out in other campaign policy papers
would not only restore confidence in our economy but would contribute to greater growth.
Streamline Regulation
Reducing the complex regulatory burden on U.S. businesses will allow companies to focus on
growth and job creation. Nevertheless, arbitrarily eliminating federal regulations would also cut
out necessary provisions that address market failures, ensure public safety, protect public goods,
and hold companies accountable for fraud and misinformation.
Two main strategies exist for improving the simplicity and quality of federal regulation: ensuring
that regulations are more carefully analyzed and discussed before they are implemented, and
putting procedures in place to periodically review the effectiveness and necessity of regulations
after they become law. Both of these approaches will be necessary to simplify the federal
regulatory code, eliminate unnecessary and harmful regulations, and create a healthier economic
climate for businesses and jobs.
Specifically, Congress should:

Direct federal agencies to develop several regulatory options and evaluate each for
projected costs and benefits before proposing a rule to address a particular market problem.
The agency must then publically justify its eventual choice.
Require greater online transparency from federal agencies by updating the Federal
Advisory Committee Act and the Government in the Sunshine Act, following recent
recommendations from the Administrative Conference of the United States.48 Specifically,
require agencies to:
o Adopt uniform procedures for the public to attend open agency meetings and for
summarizing agency business conducted outside of open meetings;
o Post agendas and relevant documents online in advance of meetings;
o Use listservs and video streaming technology to engage interested parties in agency
decision-making.
Expand staffing capacity and funding for the Office of Information and Regulatory Affairs,
which plays a vital role in reviewing proposed regulations but whose budget has shrunk
27% since the 1980s and whose review times have risen accordingly.49
Require federal agencies to periodically review each existing regulation, perform
retrospective cost-benefit analyses on major rules, and modify or eliminate ineffective or
unnecessary rules.
o While several legislative statutes and presidential administrations have sporadically
required the review of existing regulation, retrospective analysis is relatively rare.50
Establish an independent commission to assess the cumulative effects of regulation on
various economic sectors, identify areas of regulatory overlap, assist with regulatory

48

Bull, Reeve T. Administrative Conference of the U.S. May 7, 2014. Government in the Sunshine Act.
Ellig, Jerry & James Broughel. Mercatus Center, George Mason University. Oct. 17, 2013. OIRA Spending Falls as Agency Spending Swells.;
Copeland, Curtis W. Administrative Conference of the U.S. Dec. 3, 2013. OIRA Review Report.
50
McLaughlin, Patrick & Richard Williams. Mercatus Center, George Mason University. Feb. 11, 2014. The Consequences of Regulatory
Accumulation and a Proposed Solution.
49

consolidation and retrospective analysis, and issue non-binding recommendations to

agencies.
Include five-year sunset clauses in all laws that significantly expand the federal
governments regulatory authority.

2. Strengthen Physical and Human Capital

Invest in Education, Infrastructure, and Research and Development
Increasing federal investment in education, infrastructure, and R&D is a rare policy opportunity to
kill two birds with one stone: First, such initiatives provide the opportunity to immediately add
jobs in vital sectors of the economy. Additionally, nationwide advances in human capital, physical
capital, and technology will ensure faster economic growth for decades to come.
The ability of education, infrastructure, and R&D to add jobs to the economy should not be
underestimated. Out of the 55 million jobs that are projected to open by 2020, 35% will require
bachelors degrees demonstrating the importance of higher education in filling these positions.51
Infrastructure jobs account for 11% of national employment, and tend to have low barriers to
entry.52 R&D investment has a strong job-creating effect.53
Furthermore, there is evidence that all three of these areas have promise for significant long-term
economic and social returns. Studies have shown that investing in education has powerful
economic effects, and that countries with higher test scores predictably see more robust growth.54
According to the American Society of Civil Engineers, a failure to fix Americas infrastructure
could cost up to $3.1 trillion in lost economic growth over eight years.55 Finally, two Federal
Reserve economists estimate that the rate of return on federal R&D investments may range from
30% to 100%, and that the optimal level of investment might be four times the current amount
due to weak R&D incentives for individual companies.56
Specifically, Congress should:

Increase federal support of education by:

o Expanding early childhood education through a competitive federal grant system
that holds new programs accountable for educational outcomes;
o Supporting robust national K-12 educational standards, especially in STEM fields,
but leaving the development of curricula at the local and state level;
o Repurposing federal higher education funds to establish Americas Promise
Scholarships, which would provide all academically qualified students from lower
or middle-income families with up to $8,500 a year to attend a two-year or fouryear college program.57 Some elements the scholarships should include are:

51
52
53

Center on Education and the Workforce. Georgetown University. June 26, 2013. Recovery: Job Growth And Education Requirements Through 2020.
Kane, Joseph & Robert Puentes. The Brookings Institution. May 9, 2014. Beyond Shovel-Ready: The Extent and Impact of U.S. Infrastructure Jobs.

Bogliacino, Francesco & Marco Vivarelli. IZA. Jan. 2010. The Job Creation Effect of R&D Expenditures.
Hanushek, Eric A. & Ludger Woessmann. Hoover Institution, Stanford University. 2010. Education and Economic Growth.
ASCE. 2013. Failure to Act: The Impact of Current Infrastructure Investment on Americas Economic Future.
56
Jones, Charles I. & John C. Williams. Feb. 1997. Measuring the Social Return to R&D.
57
See: Redeeming Americas Promise.
54
55

A restriction of scholarship use to educational institutions that successfully

control costs and tuition, to ensure the continued affordability of higher
education;
Provisions to encourage high school students to consider attending college,
particularly potential first generation college students;
An expansion of federal income-based-repayment loans, which could be
used to cover living expenses.
o Continuing to promote career and technical education for those seeking jobs that do
not require a traditional four-year degree;
Provide a stable, long-term source of funding for the Highway Trust Fund through user
fees, to reduce uncertainty and last-minute funding crises;
Create a national infrastructure bank that would be funded by and accountable to the
federal government, but would leverage additional private investments;
Restore federal research and development funding to pre-sequester levels.

Enact Immigration Reform

Comprehensive reform that is tough, fair and practical can help grow our economy, reduce the
deficit and strengthen our national security. Reform can also end our current system of de facto
amnesty for our nations 11 million undocumented immigrants by implementing a new system that
would force them to take responsibility and earn a legal status, or that would deport those who
remain here illegally.
Specifically, Congress should:

Secure our border, including by expanding funding for border agents and other security
enhancements;
Increase enforcement of our current immigration laws, including by advancing the
adoption of a strengthened employer-based e-verify system;
Modernize our immigration system to recruit and retain additional high-skilled labor and
entrepreneurs, including by lifting the cap on H-1B visas;
Upon achieving the above objectives, providing opportunities to undocumented
immigrants to work toward a legal status by meeting various criteria, including clearing a
background check, passing a civics test, paying a fine and waiting in line.

3. Redesign the Safety Net

Several reforms of the federal safety net have the potential not only to better serve Americans
living in poverty, but also to increase prosperity for the country as a whole. There are several
mechanisms through which safety net reforms can strengthen the economy, including
incentivizing participation in the labor force, streamlining and improving an expansive welfare
bureaucracy, and strengthening consumer demand. One particularly promising approach to
accomplishing all three of these objectives is for the federal government to bifurcate safety net
support between those individuals and families who are employed and those who are not
allowing more targeted and more effective support.

On one hand, the federal government can put the states in charge of administering anti-poverty
programs to those who are not employed. Allowing states to design their own programs, funded by
federal money, will almost certainly lead to positive innovations in how the U.S. provides for its
most vulnerable, tailored to regional and local challenges. On the other hand, the federal
government can boost support for the working poor through more direct, transparent and
predictable means giving it the ability to better control the income gap between the working
and not working, and thereby encourage greater labor force participation.58
While the minimum wage is an important protection for workers, it is neither an effective antipoverty or economic growth tool. Nearly two-thirds of workers earning minimum wage are second
or third earners in households at twice the poverty line or above, while only 11% come from poor
households.59 An absolute raise in the minimum wage to $10.10 could cost the economy 500,000
jobs.60 Still, the minimum wage ought to keep pace with inflation so that workers earnings do not
depreciate over time and doing so would help boost consumer demand.
Specifically, Congress should:

Implement a Flex Fund to consolidate and block grant to the states all support for
eligible non-working individuals and families. The funding formula would be determined
by the size of the states low-income population and the poverty threshold;
Consolidate all support for eligible working individuals and families and repurpose these
resources as a direct wage subsidy (for example, for those below an income threshold, the
SNAP program and the Earned Income Tax Credit), essentially as a reverse payroll tax;
Index the minimum wage to inflation.

4. Increase Economic Mobility

To enhance economic mobility, the federal government should do what it can to encourage
education, employment, and marriage. Research has found that 74% of individuals who complete
high school, work full time, and wait until age 21 and are married before having children are
middle class or above; three-quarters of those who do none of the above are at the poverty line or
below.61 As mentioned previously, investments in education are critical, as low-income students
are still almost 6 times more likely to drop out than high-income students. Education attainment is
also correlated with lower fertility rates.62
The federal government should strengthen families and marriage by continuing marriage grant
programs, social marketing campaigns, and taking measures to reduce unplanned pregnancies
through support for family planning. Poverty rates in single-parent households are roughly five
times as high as in two-parent households, and climbed to 13.2% last year.63

58

Cass, Oren. National Review. September 2013. The Height of the Net.
Brooks, David. The New York Times. Jan. 16, 2014. The Inequality Problem.
60
Congressional Budget Office. Feb. 18, 2014. The Effects of a Minimum-Wage Increase on Employment and Family Income.
61
Haskins, Ron & Isabel Sawhill. The Brookings Institution. Oct. 27, 2009. Creating an Opportunity Society.
59

62
63

Reeves, Richard V. & Kerry Searle Grannis. Center on Children and Families at Brookings. Jan. 9, 2013. Five Strong Starts for Social Mobility.

Sawhill, Isabel & Ron Haskins. The Washington Post. Nov. 1, 2009. 5 myths about our land of opportunity.

5. Other
Foster Innovation
American power and prosperity has always been derived from our unparalleled ability to create
and innovate. We must continue to spur innovation by reducing government intervention and
empowering entrepreneurs to create new jobs that will increase growth and opportunity.
Specifically, Congress should:

Reform certain legal and regulatory structures in a way that allows greater market access to
new participants, rather than excluding new competition as our current environment does;
Reform our patent system to expedite the process, improve quality, curb excessive
litigation, and prevent monopolies;
Reform our copyright system to allow greater power to free markets, permit consumers
more personal freedom, and encourage innovation and content creation.

Support Small Business

Providing greater support to American small businesses is an important step to help the economy
and job growth in the short term, as the nation moves further away from the recent recession.
Overall reforms to government programs such as streamlining regulations, reining in health care
costs, and reforming the tax code are the most important steps the federal government can take to
aid small businesses. Additionally, the federal government can help small businesses more easily
navigate the federal bureaucracy and ensure that federal small business loans, loan guarantees, and
grants continue to provide necessary finance for companies.
Specifically, Congress should:

Exempt small businesses from fines for first-time paperwork violations, except if public
health or safety is immediately at stake or if violations are not fixed within six months;
Create a common application for federal grants that small businesses can use to apply for
a large range of federal assistance programs;
Require the Small Business Administration to more frequently review its loan guarantee
programs to prevent defaults and improper payments.

Promote Free Trade

Free trade consists of markets that cross international borders, and as our economy becomes more
global we should promote free trade. Free trade makes us collectively richer and is the most
powerful force for improving poverty rates around the world.64 In 2012, world trade stalled at
2.5% growth, compared to 13.8% in 2010.65 Free trade would allow the U.S. to stimulate its
economy, while at the same time establishing a broader economic presence in Asia. Congress
should pass a Trade Promotion Authority (TPA) bill that would allow any trade deal to move
quickly through Congress without allowing lawmakers to amend or filibuster trade deals.

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65

Wheelan, Charles. W. W. Norton & Company Ltd. 2013. The Centrist Manifesto.
Sols, Mireya & Justin Vasse. The Brookings Institution. Jan. 17, 2013. Free Trade Game Changer.