Economists and politicians have offered two potential solutions to the economic woes in both the United States and Europe:
- Austerity budgets that will kill the economy.
- Continued deficit spending that will kill the economy.
Of the two options, killing the economy later is better than sooner. But either way, we're still dead. And this fascinates me about the debate: All informed adults assume we're dead either way. I haven't seen an economist map a way that we could keep overspending and later inflate our way out of the massive debt without causing a new set of problems just as dire. And economists generally agree that cutting government spending is the equivalent of pulling the plug on a comatose economy.
If you can't keep spending wildly, and you can't spend any less, what option remains? Allow me to trot out a third option that might work for the United States. Some of it will look familiar but I'm adding a new layer.
Let's start by agreeing that the amount of risk that either a person or a country should take is driven by circumstances. A prosperous country can afford to have many workplace laws and regulations to keep everyone safe. But if the world is on the verge of economic meltdown, you might accept some elevated risks in order to benefit the greater good. In general, bad times increase your options. Even a gridlocked and constipated government can make decisions when death is knocking at the door. (At the moment, death is merely walking toward the porch.) So while your first reaction to my plan is that our government could never act so decisively and creatively, I would suggest we are nearing a point where the only choices will be drastic and out-of-the-box. We're almost there.
My economic plan is for the government to pass laws ordering banks to turn all foreclosed properties into a specific type of rental. These homes would be reserved for foreigners that have highly valuable economic skills and a desire to live and work in the United States. At the same time, the government would ease restrictions on immigration, but only for the most skilled workers.
For the most part, the new immigrants wouldn't be taking jobs from Americans because there are always job openings for the top talent. The biggest tech companies are always begging for engineers. No employees of McDonalds will be replaced by the influx of foreign talent.
The new laws would also require that the foreign renters give all of their banking business to their landlord banks. The law might even have a clause that says the renter must someday get his first mortgage from the same bank, at a competitive rate, should he eventually buy a home. Buying a home would be the only path for a foreign renter to get out of the bank-owned rental market after say three years.
Banks don't want to be in the business of property management, so let's assume this idea creates a bunch of new jobs to support the rental properties. You'd need someone to qualify renters and help them move in. You'd presumably need lots of repairs to get properties into rental shape. And you'd need ongoing service and repair work because renters don't do their own home maintenance.
The government could also require the foreign renters to hire local housecleaners, to use local carpet cleaning companies once a quarter, and that sort of thing. That creates more jobs. Imagine also that the government loosens restrictions on cooking at home and selling food. And let's say the new renters are required to use these personal chefs at least twice a week. That's more jobs. Obviously I don't have the details worked out, but the basic idea is to compel the highly-paid foreign engineers to pour money back into the economy in ways that create jobs.
Next, the government could require banks that own foreclosed properties to install photovoltaic systems on each property that has the right kind of sun exposure. The estimated monthly energy savings would be tacked onto the rent, effectively financing the solar systems. Rental agreements would spell all of this out, including a warning that there might be people doing work on the roof for a week. That will create more jobs in the solar industry.
On day one, this new set of laws would stabilize the real estate market by sucking up the foreclosed properties. The big tech companies might find themselves hiring foreign engineers that rent homes in one state and work in another, just to take advantage of the loophole to hire talent. That's okay too.
In the long run, the influx of engineering talent should give the economy a nice boost. America's largest untapped resource is the fact that people want to live here. In normal economic times we can indulge our irrational fears and biases about outsiders. But as doom walks up our porch our appetite for risk increases. The unthinkable will turn thinkable.
I'll stipulate that my plan has flaws. I'm using it to illustrate a bigger point, that the "third way" out of our economic gloom will reveal itself as our appetite for risk increases. Desperate times require risky solutions. We might impress ourselves with our own creativity in the next year. I hope so.