Teachers and government workers did not cause the deepest recession since the Great Depression. Ironically, it was the mandated absence of government regulators from derivative markets that led to the downturn with which we are still struggling: 9.0 percent unemployment rates, state revenue reductions of 30 percent, federal deficits as high as 9.9 percent of gross domestic product, and a middle class whose income and numbers continue to fall.
When the financial markets imploded from the huge stock of bundled mortgage securities that turned out to be worthless, the American taxpayer came to the rescue. We spent our hard-earned tax dollars to bail out the very financial institutions whose greed and carelessness put them in jeopardy and created the nation's economic decline.
Now that these institutions are once again profitable and paying out millions in bonuses, we learn that a large number of U.S. corporations pay no income taxes at all. Through lobbyists and special interest initiatives, tax loopholes have been created to shelter corporations from having to pay their fair share. At the same time, many corporations have found overseas harbors for their cash, safe from U.S. taxation.
Given the perceived restraints on government spending created by our high deficits, what steps should be taken to revive our economy and get America back on track?
First, teachers and public workers should not be the scapegoat for problems created by Wall Street, the banking and real estate communities. Those who instruct our children determine the course of America's future. They should be provided with meaningful incentives, advanced education, training and positive recognition.
Second, with the large number of firms avoiding payment of their fair share, Internal Revenue Service experts need to evaluate how the tax system might be tightened to make it more equitable. Keep in mind that the corporate tax rate in the United States has been reduced to 35 percent, a decrease of 50 percent from the 1970s. Also, when tax loopholes and deductions are taken into consideration, the effective corporate rate is just 17 percent.
Third, with the top 1 percent of our population controlling 42 percent of America's financial wealth, 5 percent of national income going to 15,000 families, and 44 million living below the poverty line, it's time to retrieve some of the bounty that lobbyists have captured and transferred to the wealthy. For example, now that banks and hedge funds can once again pay their managers multi-million dollar bonuses, transaction fees should be imposed to help relieve federal and state budgets.
Fourth, if we are to transform America from a fading star to a resurgent superpower, we must begin to tackle the tough problems that unnecessarily drain our spirit and our coffers. For example, we know that U.S. crime rates are three to four times those typical in developed countries. At an annual cost of $70 billion, we maintain 2.3 million behind bars, more than in any other nation, including China.
We know that most crime is committed in inner cities by minority men 25 years old or younger. Instead of continuing down the same futile path, why not invest in super schools that can provide inner-city youth with the education and tools they need to live productive lives? Superior facilities and teachers could cut the number of dropouts, reduce crime, increase employment and help to turn our inner cities from hotbeds of crime, drugs and discontent to areas ripe for redevelopment and growth.
Along with an inner-city initiative, we must spur the growth of qualified scientists and engineers by enhancing university facilities and awarding scholarships and other incentives to channel the most qualified into occupations that can open the gates to future development. At the same time, federal resources must be devoted to rebuilding America's infrastructure and investing in industries of the future, clean energy, rapid rail and GPS-based air traffic control systems.
Skeptics will say that our record deficits prohibit increases in government spending. But without investing in the future, we will be destined to a recession- low-growth existence while forward-looking nations pass us by. We must do better to find innovative ways to raise the necessary dollars. For example, we might consider issuance of Grow America Bonds, similar to the War Bonds that financed World War II. With many U.S. corporations sitting on record profits and wealthy Americans looking for new investments, why not provide them with the opportunity to enhance the nation that has enabled their affluence?
Alan L. Moss, of Egg Harbor Township, is the former chief economist of the U.S. Department of Labor's Wage and Hour Division and the author of two books.