April 5 2012

A New Way Forward

A Political Crisis
Over the past 20 years, the American political process has become significantly more polarized. Moderates from both parties have become a rarity, allowing extremists to control the political discourse. Both political parties have retreated to increasingly rigid ideologies, based on assumptions that aren’t grounded in reality and don’t reflect the views of the majority of Americans.
Individuals who seek to work across party lines, particularly in the House of Representatives, are punished by their caucuses and often thought of as “traitors.” Key committee assignments are taken away and party-based financial support is eliminated. The result is political tribalism, with elected officials from both sides supporting the espoused positions of their party without thought, consideration or debate. The causes of this polarization can be traced back to our redistricting process, primary system, and system of political finance. Every ten years, as each state seeks to redraw its congressional boundaries, the politicians who manage this process do so with an eye towards creating “safe districts” for incumbents. As a result, the Congressional districts themselves have become either Democratic or Republican districts. With the exception of years of great political change in the mood of the electorate, this leads to most congressional elections being decided in the primaries, by those who tend to be most active – political extremists and special interests who use campaign contributions to influence legislation. As the parties have become more polarized and extreme in their viewpoints, the American electorate has become more disenfranchised. Without a party with which they strongly align, many Americans have become political independents. Unfortunately, as the candidates themselves become more extreme, this leaves a large percentage of the American electorate without good choices. With no one to represent their viewpoints, the political process has left America with a large “silent majority”. United States. As our elected leaders draw childish lines in the sand, refuse to compromise, and seek to corner their political opponents, inaction has replaced leadership in resolving our most pressing issues. At the same time, the American electorate has become gradually conditioned to expect more services and entitlements from their government without cost or sacrifice. Leaders from both parties have built their respective political platforms around doing what is politically expedient – giving today’s voters more and paying for it with borrowed money. As politics has become a career versus an exercise in public service, political calculus has replaced courage as a virtue. Neglect is the result. Without political courage and meaningful action, our problems have grown to almost unmanageable proportions. The combination of lower economic growth, growing entitlement programs, aging demographics and measures to combat the recent deep recession have pushed our national economic situation to an unsustainable point. Our current public debt as a percentage of GDP has grown to 69%, eclipsing any other time in our nation’s history with the exception of World War II. Left unchecked, it is expected to grow to 157% over the next 20 years.1 Our entitlement deficit, the present value of our future obligations with current policy promises and tax levels, has grown to a staggering $63 trillion – $500,000 for every American household.2 The runaway growth in the entitlement deficit, having roughly tripled in the last decade, is the clearest indication of how quickly our government finances have spiraled out of control due to political polarization and neglect. This public sector neglect has also imposed a burden on the private sector. A lack of coordinated leadership

The Consequences
The polarization of the American political process has had disastrous consequences for the policies of the

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around such issues as energy independence, education and healthcare has led to escalating private sector costs and contributed to job flight as more and more American jobs go overseas. An increasingly hostile world is growing weary of financing America’s insatiable appetite for debt. Nations such as China, Russia, and India have all publicly declared a desire to move the world economy away from its dependence on the US dollar. It is only a matter of time before austerity measures are imposed on the United States by our lenders and trading partners. If we don’t act now, our standing in the world will be diminished, our private sector economy will be burdened with structurally high costs, and our population will be saddled with unmanageable public sector obligations—America’s best days will be behind her.

This document sets out nine core principles, illustrates policy positions that flow from the principles, and suggests some political reforms necessary to move us toward a new way forward.

Core Principles
1. Personal Freedom
Grounded in the Bill of Rights, America has always believed in individual liberties. This belief is predicated on the view that the virtues of the individual – self-reliance, responsibility, ingenuity, and entrepreneurialism – comprise the cornerstone of America’s resiliency as a nation. Treading on the rights of the individual, therefore, would only lead to a weakening of America as a nation, as those individual virtues would be diminished. While the rights and freedoms of the individual have always been protected in America, our citizens have a history of cooperation and collaboration in an effort to accomplish shared goals. From barn raisings to volunteer fire departments, Americans have always worked together to create better communities. Allowing individuals the freedom to express themselves and pursue their own goals has not led to a selfish citizenry. On the contrary, Americans tend to be the most compassionate population in the developed world. Americans give to charitable organizations over twice as much of their incomes as the Canadians or British, fours times as much as the Dutch, over seven times the Germans, and nearly twelve times as much as the French.4 Americans are also far more likely to volunteer their time to charitable or civic organizations than citizens of other nations, who look to government for many more services. Protecting the rights of the individual from intrusions by government or overly zealous majorities is a fundamental principle of our democracy.

A New Way Forward
We clearly need a new way forward. Our two-party political system has led us into a fiscal crisis of unprecedented proportion. We need to give a voice to the silent majority in America – those individuals who are fiscally responsible and socially tolerant. 3 It will only be through empowering and mobilizing the vast American political center that we will be able to discard the extremist positions that have left us powerless to address our most pressing issues. To energize the political center, we need a new approach to politics that learns from past successes and failures, and is based upon authentic American values and governing principles. We believe this principles-based approach will uncover a broad agreement among the majority of Americans regarding solutions to our fiscal crisis. Energized by a political movement that actually reinforces its views as opposed to challenging common sensibilities, we believe the political center will be motivated to act. We will demand that our leaders demonstrate courage, tell us the truth, and behave like true public servants. We will demand that we resolve our issues instead of passing them on to our children. We will demand that America live up to her potential and continue to be a beacon of hope for all of humanity.

2. Accountability
One of the obligations of living in a free society is that individuals, companies, and governments at all levels should be held accountable for their decisions and actions. While a social safety net is helpful to encourage risk taking and help those who are struggling financially, an overly generous

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or permanent safety net can be negative if it eliminates the incentive to be productive. The social safety net, therefore, needs to be temporary for able-bodied adults and needs to create a strong financial incentive to reengage in productive activities. Companies also need to stand largely alone in facing financial challenges. The growth in corporate welfare has led to economic distortions and is contributing to a ballooning federal deficit. Companies need to be weaned from their dependence on government support and concepts such as “Too Big to Fail” must be eliminated. Organizations so large that they threaten to entirely undermine our economy should be tightly regulated or broken up to end the cycle of these organizations seeking outsized rewards for their shareholders and management while taxpayers bear all the risk. In the event that government does provide temporary support for specific industries or companies, taxpayers should be fairly compensated for any such aid. Finally, government should be held accountable for efficiently managing the resources entrusted to it by its citizens. Government programs should be enacted with clear goals and should have measurable metrics for progress. Programs that aren’t meeting their stated goals or that have large, negative unintended consequences should be eliminated.

In addition, as our country has evolved past a frontier nation and we’ve become more interdependent, our freedom must be limited by rules to ensure that our individual choices don’t negatively impact others.

4. Federalism: Making Decisions at the Right Level
A key element of our Constitution is the notion of federalism – our structure of government that shares power between the federal government, state and local governments in order to make decisions at the right level. Some government policy is best made nationally, for example, where individual rights are at stake, or where consistency is required to ensure an effective outcome (e.g. defense or regulating pollution). Many problems are better solved closer to the people, by states, counties, municipalities, and community organizations. For many of these problems, the solution and the resources to pay for it should be decided locally.

“…government should be held accountable for efficiently managing the resources entrusted to it by its citizens.”

5. Shared Financial Responsibility
A government that robs Peter to pay Paul can always depend on the support of Paul. —George Bernard Shaw As America has evolved as a nation, we have always had a notion of shared financial responsibility. In fact, as the framers developed our Constitution they made it clear that taxes had to apply equally to citizens of every state. While the framers likely never envisioned an American economy as large and diverse as we enjoy today, they nonetheless made clear their intent to create a framework of shared responsibility. A broad, progressive system of taxation that requires those who have benefited the most from the American economic system to pay the most taxes is fair. It is important, however, that tax rates remain low enough to encourage work and productivity— activities that contribute to society as a whole.

“A government that robs Peter to pay Paul can always depend on the support of Paul.”

3. Limited Government
You cannot help men permanently by doing for them, what they could and should do for themselves. —Abraham Lincoln With personal freedom at the very center of American values, the role of government must be, by definition, limited to ensure the rights of the individual. Government’s role should be limited to those areas where there is a clear collective benefit to acting together (such as national defense), where there are clear negative consequences to individual behaviors (such as industrial pollution), or where there are clear longterm, national priorities (such as energy policy).

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In order for that system to incentivize the right behavior, the system also must be broad enough to ensure that every ablebodied American pays some taxes and bears part of the burden, however small, to support our public sector. Without broad participation in our system of taxation we run the risk creating a tyranny of the majority as society’s least productive members seek to extract as high a tax as possible on its productive members. Any system of taxation that isn’t based on shared financial responsibility is unsustainable.

8. Transparency and Simplicity
Sunlight is the best disinfectant.5 One of the best ways to ensure an accountable government is to make its decision-making process, resulting decisions, and outcomes as transparent as possible to the American electorate. Leaders who are unwilling to have their decisions scrutinized by the public generally have dishonest intent. Back room deals, spending and taxing decisions buried deep into legislation, and political horse-trading, rarely lead to a good result for the public. On the other hand, transparency leads to better decisions. Making straightforward data available to the public (on hospital outcomes, school test scores, and returns on various government investments) leads to more thoughtful decisions, better results, and enhances public trust. Finally, laws and regulations that are overly complex lead to an undue and costly compliance burden. They also lead to unintended consequences. Government should aspire to make its laws and regulations as simple, understandable and accessible to the average citizen as possible. You shouldn’t need a law degree to interpret a law.

“Burdening our children with the debts from our excessive consumption is simply wrong.”

6. Living within our Means
Historically, it has been an American household value to live within our means. Over the last thirty years, we have strayed from that ethic, as both individuals and government have both significantly overspent their resources. Temporary deficit spending by the federal government is appropriate during periods of economic stress or recession, but otherwise, budgets should be balanced over some reasonable time frame, perhaps a rolling five years. An ever-expanding debt as a percentage of GDP is unethical as it represents a significant wealth transfer from future generations to current generations. Burdening our children with the debts from our excessive consumption is simply wrong.

“…transparency leads to better decisions.”

9. Justice and Fairness
Americans have always sought to create a fair and just society. From the time our forefathers courageously declared their independence from a system of government that they believed unfairly burdened our citizens, to the development of the Constitution, to today, fairness and justice have been pillars of our society. A government that indiscriminately favors one group over another or heaps largess on a particular company or industry, does so at the expense of fairness. A government that exempts a select few from its laws or regulations does so at the expense of justice. And a government that reacts to an issue while solely considering the points of view of a selected few special interests is not a just government at all.

7. Social Mobility / Equality of Opportunity
In any economy driven by innovation and entrepreneurs, there will, by definition, be winners and losers. It is not the job of the government to ensure equality of outcomes, but rather to encourage social mobility and equality of opportunity. Success in America should be determined by hard work, innovation, and willingness to risk failure to improve one’s quality of life, not by access to the right politicians or a person’s origin, however humble it might be. Government should not stand in the way of this social mobility, but should encourage it by embracing policies that support equality of access to public resources, job mobility, and risk taking.

“Government should aspire to make its laws and regulations as simple and understandable as possible.”

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Policy Meets Principle
Whatever their party affiliation, we believe that a great many Americans agree with these core principles. They are consistent with long held national values and the intent of our founders as embodied in the Declaration of Independence and the Constitution. While these principles are subject to different interpretations and, therefore, result in differing points of view with respect to individual policies, we believe the areas of agreement are far greater than today’s partisan politicians would lead us to believe.

While our current problems may appear intractable, this is principally because we are viewing them through the lens of bitter partisan politics. In fact, straightforward policy prescriptions are possible when we apply these core principals. Most of these policies are not novel and have been embraced by one of our major political parties. However, without a willingness to compromise, these prescriptions have remained simply that – good ideas lacking for courageous public servants. The policy prescriptions that follow will likely not please everyone. It would be hard to get complete agreement on a broad set of policies even among the most likeminded Americans. Whatever set of policy solutions we develop, however, will require all Americans to compromise in some manner to ensure that we are able to make the changes necessary to move our country away from the fiscal precipice we are currently perched upon. Everyone is likely to have to sacrifice something in exchange for a better collective future.

1. Budget Discipline
Over the last 30 years, our government has balanced its annual budget only twice, in 1999 and 2000. The net result of these years of neglect is a total governmental debt that now exceeds $15.6 trillion, more than a full year’s economic activity in America.6 This number, however, masks a significantly larger financial problem looming in our future. Based on our current commitments to Americans for Medicare, Social Security, and government pensions, we are actually over $63 trillion in the red as a country – half a million dollars for every US household. Both revenues and costs must be examined to tackle a problem of this size; cost cutting alone will likely be insufficient. Because Social Security, Medicare and defense represent approximately 70 percent of the federal budget, any meaningful reform program must address these very significant expenditures. The Simpson-Bowles deficit panel and the RivlinDomenici Plan both provide solid initial roadmaps for a permanent deficit/debt re-alignment. These two similar plans address the revenue side with simplified tax systems that combine lower average rates but include dramatically fewer exemptions and loopholes, adding fairness to the tax system. On the cost side, they not only reduce discretionary spending programs, but also entitlement programs that are not self-funding for the generation enjoying them. Two ways they do this are by raising the Social Security retirement age and by means-testing Social Security benefits, changes that are likely to be part of any re-alignment.

Illustrative Policy Directions Based on these Principles:
While many of our elected leaders have spent a great deal of time politicizing social issues, we believe much of this attention is misspent – diverting the nation from addressing overwhelming economic issues. As a result our policy prescriptions will focus largely on issues that affect America’s financial future, security, and standing in the world.

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In order to live within our means, we should require that the federal budget be balanced over a rolling five-year period of time. This would allow the government the latitude to deficit spend during times of recession or war, but would require that those expenditures be paid for within a reasonable period of time. Structural changes to the legislative process should also be evaluated. In order to minimize self-perpetuating bureaucracies and permanent congressional power bases, laws with large appropriations should be written with sunset provisions. This also ensures that laws are revisited periodically and examined for effectiveness. Government departments and agencies should also consider zero-based budgeting to help eliminate automatic year-overyear budget increases when they are unnecessary. Finally, a bi-annual review of legislation should occur to eliminate programs that are duplicative or otherwise wasteful. In addition, unfunded liabilities and off-balance sheet items should be incorporated into the official budget of the US government. Adding this transparency would require politicians to be honest about the true anticipated cost of any legislation and pay for it out of currently available resources. Transparency would also bring our financial situation into the light for Americans, thereby increasing the likelihood that the electorate will hold politicians accountable for their decisions. Finally, government needs to learn to become more productive – doing more with less – as most American industries have. Without the pressure of competition, government expenditures have risen every year over the past 40 years.7 Compensation for government employees has risen significantly faster than for the average private sector employee. As a result, many government departments have become bloated and inefficient. Measuring outcomes, adding accountability and requiring improvements in productivity should be prioritized.

living within our means, we need to address healthcare costs in America. Americans spend more money per capita on healthcare than any other country in the world. Unfortunately, all this extra spending doesn’t lead to better results. In fact, we rank somewhere between 37th and 43rd in the world in terms of health outcomes.9 Continuing on our current path will either bankrupt America or require severe cuts in medical treatment for seniors and the poor. This isn’t simply a public sector issue. In the global competitive environment, the cost of American healthcare creates a huge disadvantage for our companies and workers – contributing to companies shifting jobs off shore in an effort to lower costs. While the recent healthcare legislation may have been well intentioned, it did very little to drive costs out of the system and aid American competitiveness. There are a number of reasons that our medical care in the United States is so expensive. Chief among these is that the system we have set up to compensate healthcare providers provides incentives to over-treat patients. In addition, by paying on a procedure-by-procedure basis, our system ignores the shift in healthcare related costs towards treating chronic conditions as our population ages. We need to change our healthcare reimbursement system to encourage evidence-based medicine and results-based reimbursements. Coupling this with the sharing of best practices around treating chronic conditions, should eliminate unnecessary procedures and tests while delivering better quality healthcare. In addition, we should require that all Medicare recipients have a living will that expresses their desires regarding end of life care. Of course, medical malpractice reform, stepped up efforts at addressing Medicare fraud, and moving towards electronic medical records are all important first steps towards containing costs. These steps comprise only part of the solution, however, and they ignore the larger problem of how we deliver healthcare. Finally, we can’t ignore the role that we as consumers play in driving costs. Obesity, smoking, and other lifestyle-related choices are the primary

2. Healthcare
Long term, any solution to our fiscal crisis will require significant reforms to our Medicare and Medicaid programs. Collectively, they are responsible for $37 trillion in unfunded promises – representing over half of our long term structural deficit.8 If we are going to adhere to the principle of

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causes of the chronic conditions that cost so much to treat. Holding consumers accountable for more of the cost related to their individual decisions is a requirement of any fair system. Likewise, individuals who have gold-plated insurance plans cannot be entirely shielded from the costs of their medical treatment. Eliminating the tax deductibility of these plans and encouraging higher co-pays would help reduce the overconsumption of our medical resources by those who are fortunate enough to have excellent medical coverage. Becoming more frugal consumers of healthcare resources is a contribution we can all make. The healthcare industry is so large, and the problems so diverse, that we will need to take a multi-pronged approach to healthcare reform. Accountability and transparency, holding both providers and individuals responsible for better health outcomes will be central to that approach. Finally, while we believe the recently passed healthcare legislation contains necessary insurance reforms, we would suspend any expansion of government provided health insurance until we fix the core costcontainment problems.

process. Like the private sector, governments should be required to calculate the increase in their unfunded pension obligations every year and pay for that increase within their annual budget by making direct contributions to the pension plans or their trust funds. In addition, given the current anticipated shortfall in Social Security, we believe that raising the retirement age, means testing Social Security benefits, and adjusting the approach to cost-of-living increases will be required. Without these near term program modifications, we will put ourselves in the position of having to make dramatic cuts in the future – likely plunging millions of seniors into poverty.

“The current tax code represents a complex, 70,000 page document intended to change behavior, reward favored industries, and dole out economic welfare.”

4. Tax Policy
The proper purpose of taxation is simple: to raise the revenues necessary to fund government. Our tax code is anything but that. The current tax code represents a complex, 70,000 page document intended to change behavior, reward favored industries, and dole out economic welfare. While estimates vary, compliance with the tax code costs American’s between $140 $265 billion annually. 10 In order to reduce compliance costs and fairly treat all Americans, the tax code should be simplified and broad based. Nothing should be deductible from the individual income tax, including mortgage interest, charitable contributions, and state and local taxes. In addition, tax credits should be eliminated entirely, and politicians who want to invest in favored industries or projects should have to do so through actual budget expenditures versus tax expenditures – adding to transparency and accountability. Finally, all forms of income, including capital gains, dividends, and interest should be taxed at a person’s individual income tax rate. Estate taxes should be set at the same rate with a modest estate tax exemption established to allow individuals to pass on a small business or family farm without taxation.

3. Retirement Security
Underfunding of pension obligations runs rampant throughout our retirement system. From federal retirement programs to state, county, and municipal pension programs to private defined benefit plans, the collective underfunding throughout the system likely exceeds fifteen trillion dollars. While we believe under the principle of federalism that state and municipal governments need to manage their own retirement security system, we would suggest that applying common rules to reporting and budgeting for all government retirement liabilities would add to transparency and accountability, thereby enabling us to know if we are living within our means. Specifically, we believe that government pension obligations (including Social Security) need to be in the annual budgeting

“By the same token, government should be aggressive about knocking down walls that ensure a permanent upper class in America.”

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Federal income tax rates should be lower for most Americans to compensate for the elimination of deductions and the normalization of tax rates. Taxes should be progressive and simple enough so that all Americans can do their own taxes. Unlike the current tax system, every able-bodied American should pay some form of income tax, however small, to ensure a shared sense of financial responsibility. The corporate tax code should be treated in the same manner. Inappropriate deductions and credits should be eliminated, rates lowered, and the corporate tax code simplified dramatically. Any significant changes to tax policy should be phased in over an appropriate period of time to give citizens and companies who made decisions under the old policy time to adjust.

By the same token, government should be aggressive about knocking down walls that ensure a permanent upper class in America. Interlocking directorates, compensation consultants, and a lack of real democracy in corporate America has allowed CEOs of public companies to get excessively rewarded – in many cases for failure. While government involvement in making compensation decisions violates the notion of limited government, we do believe the government should pursue a package of corporate reforms that ensure shareholders have a far greater voice in making those decisions. Finally, for companies that rely on government insurance programs and backing, we should require restructured compensation plans to ensure that excessive risks and rewards are avoided.

“Reducing the negative effects of energy consumption has to be balanced with ensuring we have the resources we need to grow our economy.”

6. Energy Policy / Climate Change
Energy policy and climate change are closely linked. From a national security perspective, our high levels of oil consumption contribute to the economies of a number of countries that remain hostile to America. Fossil fuel consumption is also the largest controllable contributor to climate change. Reducing the negative effects of fossil fuel based energy consumption has to be balanced, however, with ensuring we have the resources we need to grow our economy. To accomplish this, we need to prudently develop our domestic oil and gas resources, thereby reducing our dependence on foreign energy while encouraging the development of lower carbon alternatives over the medium to long term. America should encourage the production of alternative fuels that can be created with domestic resources (including costeffectively supporting infrastructure investments for natural gas and electricityfueled vehicles) and provide a framework for increased fuel economy standards for automaker vehicle fleets. In addition, we believe we should evaluate raising the tax on oil-derived gasoline, while simultaneously reducing the payroll tax in a

5. Income Inequality
It is not the responsibility of government to redistribute wealth to create equality. Through a progressive tax policy, however, we can ensure that those who have gained the most from our economic system bear a fair share of the tax burden. Government also has a role to play in ensuring a level playing field and encouraging social mobility. By promoting policies that encourage excellence in education, childhood nutrition, and housing assistance, we can ensure that all American children have an opportunity to succeed. For example, in low income areas, busing routes should be expanded to increase school attendance, and summer learning programs provided for K-8 students to help eliminate the summer learning gap among the poor. For children and the permanently disabled, our society should provide a meaningful safety net. For the able-bodied, temporarily displaced by free trade and other economic forces, temporary income and health care assistance as well as substantial retraining should be provided by the government. However, long-term welfare for the ablebodied corrodes initiative and promotes a permanent under class.

“We need to aggressively pursue cost-containment within the day-today military budget and ensure the military and its contractors are accountable.”

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revenue neutral manner. The intent of this tax policy change is not to increase revenues to the US Government, but rather to encourage consumers to make decisions that support our strategic goals. The combination of these policies should not only aid the environment, but significantly improve the United States’ strategic position in the world.

There are obviously conflicting viewpoints about why we spend so much and get so little. A recent consensus, however, seems to be emerging around the impact that school leadership and teacher accountability can have on student outcomes. While most of the investment in K-12 education takes place at the state and local level, given the positive externalities associated with having a well educated population, the Federal Government has a role to play. By establishing standards and promoting innovation, the Federal Government provides incentives to state and local governments to reform their education systems. A particular emphasis on building school systems that are built around the children we are teaching versus the adults who are delivering the services should be promoted. Performance based pay for the best teachers, investments in charter schools, and other forms of experimentation should be encouraged. The Federal Government also has an incentive to support higher education attainment. Unfortunately, the indirect beneficiaries of much of our financial support, the universities themselves, have been using these policies to justify raising tuition and fees for students. Through various programs, the Federal Government provides over $100 billion in support for higher education.13 Title IV universities who benefit from this financial aid should be required to support the goal of higher education attainment through limiting cost increases to the rate of inflation or risk losing their Title IV status.

7. National Defense
A fundamental role of the Federal government is to protect our citizens from hostile enemies. Moreover, our country has important national interests outside its borders, and it is often appropriate to pursue those interests vigorously. We can no longer afford, however, to be the police force for the planet. For example, the Iraq war is estimated to have direct and indirect costs of $3-6 trillion 11 (i.e. equivalent to $10,000-$20,000 per citizen). We are not passing judgment on this conflict, but it alone has contributed substantially to our ballooning national debt over the last 10 years, without apparent benefit. We need to choose our battles carefully and ensure that we truly understand all the costs – financial, diplomatic, and national security – before undertaking future military engagements. In addition, we acknowledge that the American military holds a special place in the hearts of most Americans. There is nothing more important than for government to honor its commitments to our troops and their families and to pursue military action with an understanding of the real costs and sacrifices that our military community makes. With that understanding, the Department of Defense also has an obligation to prudently invest the tax dollars that we entrust it with. As the largest corporation in the world, the DoD is not immune to the inefficiencies that accompany such bureaucracies. We need to aggressively pursue cost-containment within the day-to-day military budget and ensure the military and its contractors are accountable.

9. Immigration
Immigrants at both ends of the skill and education spectrum have played and will continue to play a critical role in our economic growth and ingenuity. This fact does not outweigh the obligation for immigrants to enter legally, with priority determined under policy objectives to fill our country’s unmet demands for talent. The need for talent, high skilled or low, should be met with targeted programs for legal immigration, or for guest worker entry, not by turning a blind eye to illegal entry. Legal immigration for family reunification, which currently accounts for nearly 75% of US immigration, needs to be balanced against the country’s needs for skilled migrants. The number of H1B visas should be significantly increased to allow, in part, for highly skilled immigrants, who are educated in the United States, to remain here.

8. Education
The United States spends more on primary education (K-12) per student than any other developed country in the world with the exception of Luxembourg. Much like healthcare, despite our deep financial commitment, we are not obtaining corresponding results.12 In short, many students are decidedly mediocre when compared to the rest of the world.

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A failure to enforce our immigration laws has left us with over 12 million illegal immigrants in America. In order to stem the flow of illegal immigrants into America, we need to protect the integrity of our borders. We cannot, however, find and deport millions of people who are here illegally. We should, therefore, consider a path to Permanent Residency for existing illegal immigrants based on paying taxes, obeying the law, and going through the guest worker entry or citizenship process like every other immigrant. Once guest worker programs are in place, we should require all employees to use the e-verify system, an Internet-based system run by the Federal Government that verifies a job applicant’s eligibility to work in the United States. The legal burden and liability for employment of illegal entrants should then be borne more by employers and the penalties for employing illegal workers should be so significant that they form a major deterrent to hiring illegal immigrants.

described in this document, we can lower the cost of hiring American workers. Lowering the corporate tax rate, while eliminating the myriad of deductions and tax credits, will simplify tax compliance and lower the overall tax related burden for US companies. The impact of these two changes alone should have a dramatic affect on job creation in America. In order to increase the flow of capital to America’s real job creators, start-ups and small businesses, we should aggressively move to flush bad debts out of America’s community banks. By allowing small banks to sell their bad loans and amortize the losses over a 10 year period of time, we can get them back in the business of originating new loans instead of tending to failed ones. We should also allows small public companies with less than $1 billion in market capitalization to opt out of the most onerous aspects of Sarbanes-Oxley, thereby encouraging more growth companies to access public capital markets.

★ Building and Retaining Talent

10. Job Creation—Innovation
As the world economy has become more interconnected, American workers have increasingly had to compete on a global scale. While manufacturing workers have had to deal with this reality for some time, advances in information technology have made foreign competition for jobs a reality for knowledge workers as well. In competing for jobs globally, the US needs to create an environment that is conducive to job growth, with a particular emphasis on innovation. By focusing on four core elements, we believe the policies described herein do precisely that:

Our current educational system generally takes a one-size fits all approach to public K-12 education. By encouraging innovation in our public schools, particularly around earlier access to vocational education options, our public schools can be segmented in such a way to deliver a more customized, high quality educational experience. Building on that earlier vocational training through a public/private partnership to develop apprenticeship programs will accelerate the productivity of these highly skilled workers. In addition, America educates some of the brightest minds in the world in its university system. Under our current immigration laws, many of those students are forced to return to their home countries, thereby denying America access to their job creation abilities. Modifying our system for H1B1 visas to allow high achievers to stay in America will only increase innovation and job creation potential. America needs to be the place that people from around the world flock to create new businesses.

★ Restoring Confidence
By addressing our fiscal deficits, we are creating more confidence in our economic future, thereby encouraging investment in the US. Companies that are sitting on record stockpiles of cash are reluctant to invest those in America. Consumers are reluctant to make purchases given the relatively unstable economic climate. Through a sensible, staged, fair plan to get our fiscal house in order, we can demonstrate to both consumers and companies that they can approach the future with confidence.

★ Positioning America to Invest in the Future
Our current fiscal picture leaves very little room for America to invest in the future. By getting our fiscal house in order, particularly as it relates to our expanding entitlement programs, we should eventually position America to invest again in the catalysts for economic growth: core research, education, and infrastructure.
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★ Eliminating Barriers to Job Creation
America is competing with countries that don’t impose the same structural costs upon their employers. By addressing the costs of our healthcare system through the changes

Political Reform
A strong democracy encourages broad participation among the electorate. With over 40% of the population self-identified as politically independent, the current electoral process actually discourages participation. With congressional districts largely divided between safe Republican and safe Democratic districts, the most important electoral decisions are often made in the primaries, which are closed to political independents in most states.
This system of politically derived legislative districts and closed primaries protects incumbents. Our system of campaign finance, which is largely transactional in nature for incumbents, reinforces this advantage. Special interests with business before Congress funnel money into the campaign war chests of incumbents in an effort to gain more favorable treatment. What results is a system that protects special interests, often to the detriment of the country as a whole. The following three prescriptions are designed to broaden participation in the political process and ensure fairness. The Constitution largely left states with the power to determine how their representatives are chosen, so most of the changes espoused below would require a Constitutional amendment or a state-by-state approach.

Campaign Funding
The courts have recently ruled on various campaign finance reforms – generally protecting the free speech rights of citizens and extending those same rights to corporations. While we believe that personal freedoms need to be protected, dramatically better transparency is also required. Any meaningful financial participant in a political campaign should be required to disclose their involvement prior to the election.

Conclusion
A small group of thoughtful people could change the world. Indeed, it's the only thing that ever has. —Margaret Mead We have reached a critical point in our country's history. Without a sustained commitment to fiscal discipline we are certain to devolve into a nation with a lower standard of living, more fear and uncertainty, and fewer opportunities for our children. By taking a principled and courageous approach to solving our problems, we can chart a different course for the future.   Changing the path we are on as a nation won't be easy. It will require a majority of Americans to stand together in a spirit of shared sacrifice to create a better life for future generations. It will require us to move past the political tribalism that has marked the last 30 years of our history and to embrace our shared desire to create a better nation. It will require us to change our political landscape by empowering the vast political center. Only by rejecting the politics of the past will we truly be able to create a new way forward.

Open Primaries
States should move to open primary systems where unaffiliated voters can participate and all voters can choose what they view as the best candidate regardless of their party registration. California’s Top Two Primaries Act is a good blueprint for increasing both participation and the influence of moderates.

Legislative Redistricting
States should take redistricting out of the hands of elected officials and put it in the hands of citizens in the form of non-partisan commissions. Iowa’s efforts are a good blueprint for this reform.

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The Co-Authors

Charles Conn
Charles is Senior Advisor to the Gordon & Betty Moore Foundation. He sits on several company and non-profit boards, including Patagonia and Trout Unlimited. He also owns a working ranch in Owyhee County, Idaho. Previously, he co-founded Citysearch and as CEO led the company through its merger with Ticketmaster and acquisition of Match.com. Prior to starting Citysearch, Charles was a partner with McKinsey & Company. Charles is a Henry Crown Fellow of the Aspen Institute, and is a graduate of Harvard Business School, Oxford University, where he was a Rhodes scholar, and Boston University.

Greg Orman
Greg is the founder and Managing Director of Denali Partners and the Managing Partner of Exemplar Holdings, both private investment funds focused on providing capital to small businesses. Previously, he was in the energy services business, first as Chairman, CEO, and founder of Environmental Lighting Concepts, and then as CEO and President of KLT, a subsidiary of Great Plains Energy. Greg has served on the boards of numerous private companies, The Kansas City Zoo, The Gala at the Glen for Cystic Fibrosis and The Center for Ethics in Financial Services at the American College. He was an associate at McKinsey & Company and graduated with high honors from Princeton University.

Thomas Layton
Thomas Layton is Executive Chairman of oDesk Inc. He was CEO of Metaweb Technologies from 2007 until its acquisition by Google in 2010, CEO of OpenTable from 2001 to 2007, and co-founder and President of Citysearch from 1995 to 1999. Thomas serves on the boards of OpenTable, www.Ancestry.com, oDesk, Doxo, and Hearsay Corp. Thomas co-founded www.MapLight.org, a nonprofit, nonpartisan research organization that provides citizens the transparency tools to shine a light on the relationship between money and politics. He is a Henry Crown Fellow of the Aspen Institute, and a graduate of the Stanford University Graduate School of Business and UNC – Chapel Hill.

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1.Congressional Budget Office, Long term budget outlook, June 2011 2.Peterson and Walker. “State of the Union’s Finances: A Citizen’s Guide.” Peter G. Peterson Foundation. April 2010. 3.Over 70% of the electorate who expressed an opinion suggested that the budget should be balanced by both cutting spending and raising taxes, while over 61% of those who expressed an opinion suggested that government is too involved in the issue of morality. Pew Research Center. “Beyond Red vs. Blue,” Political Topology. May 4, 2011, pages 71 & 79. 4.International comparisons of charitable giving November 2006. Charities Aid Foundation Briefing Paper. 2006; Arthur C. Brooks, “A Nation of Givers,” The American, March/April 2008 5.Supreme Court Justice Louis Brandeis, “What Publicity Can Do,” Harper’s Weekly, 1913. 6.According the Congressional Budget Office, total public debt has increased from $5.6 trillion in 2000 to $15.6 trillion before Easter of 2012, rising from 58% to 109.5% of GDP over this period. 7.Congressional Budget Office, Long term budget outlook, June 2011 8.Congressional Budget Office, Long term budget outlook, June 2011 9. OECD Health Statistics 2010 10. The President’s Economic Recovery Advisory Board, “The Report of Tax Reform Options: Simplification, Compliance, and Corporate Taxation” August 2010, pg 3; Hodge, Moody, and Warcholik. “The Rising Cost of Complying with the Federal Income Tax.” The Tax Foundation. 1/10/2006 11. J. Stiglitz & L.Bilme. The Three Trillion Dollar War: The True Cost of the Iraq Conflict. 2008. 12. Kane & Orzag. “State Fiscal Constraints and Higher Education Spending: The Role of Medicaid and the Business Cycle.” Educause. 2002 13.Glater, Jonathan. “Big U.S. Role in Lending to Students.” The New York Times. 2/25/2009

notes

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