Foreign and Domestic Policy Can Be Good Economic Policy (Part II)

From Thinking Outside The Boxe’s Sydney Correspondent: The first part of this article discussed the need for the US Government to be smarter in the way it determines foreign policy, particularly in a military sense. As mentioned, the Pentagon seems to hold the view that the military should contribute in a very broad role.

This is not smart strategically and certainly not financially. In this article I will argue that the US Government needs to run more like a corporation. Domestic and foreign policies should focus on the goal of acting in ways that are economically beneficial to the nation. Some of the following suggestions may seem a little controversial but the nation cannot afford to keep spending in the way it has in the recent past. Certainly the end of the Afghanistan war will help but that is a not a panacea that will rescue the economy and stop the debt.
Tough economic decisions and budget cuts are never popular, especially when the economy is struggling under debt and high unemployment. However, there is no way that any nation can enjoy economic prosperity if it continues to give everyone a free ride. In a somewhat tongue in cheek article Kelly Campbell points out that the US Budget contains a number of “unfunded liabilities. These are programs such as Social Security and Medicaid that have no budgetary limit placed upon them. The Kaiser Commission stated in a report that Medicaid cost $339 billion in 2008. No corporation would run like this and expect to stay solvent. Campbell points out correctly that these programs must be limited or capped in some way. One option might be to instigate a “red card lottery”.Under this green card lottery in reverse the long term unemployed would go in a lottery and the people selected would either have to find stable employment within 12 months or be deported. Obviously factors such as age, some aspects of health, and perhaps even the economic climate, would have to be taken into consideration. If enough people were deported the immigration quotas could possibly be increased so that more highly skilled and educated people could become citizens.
There has long been a debate on whether illegal and legal immigrants are beneficial to the American economy or not. It is true that illegal immigrants are often employed in a lot of low paying jobs that legal citizens often prefer not to do. But on the other side of the coin they are sometimes blamed for ‘stealing’ the jobs of American citizens. This is particularly true when unemployment is high. It was interesting to read a Brookings Foreign Policy Paper written in 2011 which revealed that the 1.5 million Salvadorans living in the U.S send $4 billion back to their relatives in El Salvador annually. This figure is around 17% of El Salvador’s GDP. This is a huge amount of money that is being sucked out of the American economy. Obviously these individuals are employed and contributing to society, otherwise they would not be sending money back. It would clearly be beneficial to the US Government if that money was being spent in America but there would be few practical ways of achieving that aim. The Brookings Paper also points out that if the 220,000 Salvadorans living in the U.S under Temporary Protected Status were sent back it would be disastrous for the nation. And as they are contributing to American society as well it is in the Government’s interests to keep them there.
Obviously El Salvador is not a good option but the U.S could benefit by incorporating nations with much more robust economies as States. The candidates would probably have to be small nations or territories with relatively strong economies. By becoming States of America these former nations/territories would contribute to the American economy through taxation. In return they would benefit by accessing trade with one of the world’s largest economies. Puerto Rico would probably be the first option that most people would think of. After all there have already been lengthy debates over whether it should become a State. However Puerto Ricans already pay most American Federal taxes. In fact, in 2009 the nation contributed $3.742 billion to the US Treasury. So Puerto Rico is a good example of the kind of nation or territory that the U.S should consider incorporating but it does not need to be incorporated as it already contributes to the economy.
In the Brookings Paper mentioned earlier the author discusses the huge potential for the development of renewable energy resources in Central America. The author also mentions that the Partnership for the Americas Commission, convened by the Brookings Institution, has suggested that this potential could be harnessed by establishing a Renewable Energy Laboratory in Central America that would develop and promote alternative energy technologies. The author suggests that this should be done in collaboration with the US Government. This could provide a great financial outcome for the nations of Central America but the American Government must recognize that as a senior partner in the venture (as it no doubt would be) it should expect to share in the rewards.
There are far more innovative, and also more obvious ways U.S policymakers could run the nation more like a business. The Iraqi oil, mentioned in the previous article, was clearly a missed opportunity but one that can be learnt from. If the U.S is looking at territories or nations to incorporate, either through diplomatic or military means, it should focus upon those with abundant natural resources. And it hardly needs to be said that the U.S Government already acts overseas in a way that serves its interests. This can be done in more cheaply, smarter, and in a way that might even benefit our economy rather than drain it. Smarter domestic policy can also make a huge difference to the economy. Regardless of whether the Government ever considers the examples provided here, running the nation like a business must mean reducing spending where possible and encouraging all citizens to be productive members of society.

http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2011/09/14/5-reasons-the-government-should-be-run-like-a-business

http://www.kff.org/medicaid/upload/7235-04.pdf

http://en.wikipedia.org/wiki/Puerto_Rico

http://www.brookings.edu/research/papers/2011/06/central-america-casaszamora

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