President Barack Obama recently extolled the virtues of what he called “middle-class economics” or “the idea that this country does best when everyone gets their fair shot, everyone does their fair share, and everyone plays by the same set of rules.” The president is on to something.
Ours is not a country where everyone plays by the same set of economic rules. Many longstanding federal and state policies privilege some businesses and not others. This tilted playing field isn’t just unfair; it’s grossly inefficient. It undermines competition, discourages innovation, and prompts businesses to expend billions of dollars in socially wasteful efforts to win the favor of politicians. But it need not be this way.
A serious agenda to level the economic playing field appeals to both the progressive impulse to stick up for the powerless and the conservative urge to check government’s scope and power. The president and Congress will soon deliver more detailed agendas. Here are three ways they could level the economic playing field:
The Dodd-Frank regulatory overhaul may have strengthened this perception by directing the Federal Reserve to designate certain firms “systemically important financial institutions,” broadcasting the federal government’s belief that these firms are important enough to save. A good first step would be to repeal this designation.
A next step could be a constitutional amendment prohibiting bailouts. With the knowledge that they alone bear the costs of their mistakes, firms would be more prudent, and the entire financial system would be more secure.
The typical congressperson is generally in favor of freer trade but wants to make exceptions for hometown industries. For the better part of a century, the way to get around congressional parochialism has been to give the president “fast track” trade negotiating authority: Congress lets the president negotiate trade agreements and agrees to simply vote up or down without amendments. Democrats first came up with this idea. They should embrace it once again.
Congress can end protectionism in other ways. They could start by letting the Export-Import Bank’s authorization expire this summer. Taxpayers shouldn’t guarantee a loan that J.P. Morgan makes to Air India to buy a Boeing. Then-Senator Obama was right to call this corporate welfare, and he is wrong to have abandoned that view.
All of this should go.
There’s much more. Congress could end both traditional and “green” energy subsidies; it could reform corporate taxes by closing loopholes; and it could shut down programs that promote specific industries like tourism, shipping, and air travel.
It’s easy to oppose “special interest” politics. It’s much harder to get down to specifics and recommend that particular programs go. With a detailed and specific agenda to level the playing field, we could turn the president’s words into deeds.
Matthew Mitchell is a senior research fellow and director of the Project for the Study of American Capitalism with the Mercatus Center at George Mason University, where he is also an adjunct professor of economics. He can be reached at email@example.com.