U.S.  Policy and the Changing Global Landscape*

By Charles Steindel
Senior Vice President
Federal Reserve Bank of New York

The basic framework of U.S. policies in such areas as health care, economic security, trade, education, and environmental protection was erected in the middle years of the twentieth century.  Over the last 30 years, numerous piecemeal reforms have been made, starting with deregulation of airline fares back in the 1970s.  With the dramatic changes in the United States and world economies, a session at the NABE Policy Conference was devoted to discussing the broad reform possibilities.

Jeffrey Kling, a senior fellow from the Brookings Institution, sketched the principles of the Hamilton Project, an initiative to bring together a diverse group of analysts to develop policies based on a number of guiding principles, including the goals of broad-based economic growth—alleviating economic insecurity—and recognition that government has a role to play in fostering the achievement of those goals.  As an example of potential policies geared along such lines, Kling discussed the possibility of creating a wage insurance system:  workers would receive incentives to place funds in such a system; if economic change resulted in their taking a job at reduced pay, they would be eligible to draw from such accounts.  Such a system could potentially increase worker mobility—for instance, employees in high-wage industries would have somewhat less incentive to seek government protection for their jobs—and could, in principle, be simpler to administer than existing programs, where assistance depends on the precise reason jobs have been lost.

Douglas Holtz-Eakin, former director of the Congressional Budget Office and now economic policy chair of John McCain 2008, was also on the panel. Holtz-Eakin noted that it should be kept in mind that in some important areas, the general thrust of U.S. policies has been and remains correct, notably the long-standing support of free trade, open capital markets, and the general openness of the United States to immigrants.  However, in some areas the United States has been lax: while we are open to immigration, there is no stated economic rationale for our policies; our energy policies are unfocused; and we continue to have deficiencies in K-12 education, which may be starting to be manifest in stagnation in the college graduate share of the younger adult population.  When the issue arose of health care, an important current theme in fiscal policy, the panelists concurred that the policies they would envision could lead to a better allocation of individual risks with costs, but would not speculate on any linkage of reforms to aggregate cost savings.

*The views expressed here are those of the author only and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System.