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We can reduce the intensity of this skills mismatch in the future by committing ourselves to education reform that breaks from traditional modes of throwing money at the problem and instead seeks better measures of effectiveness and a willingness by local leaders and teachers unions to embrace the approaches which are best for the child—even if those are not the best for administrator pay and security.
There will always be some measure of skills mismatch as capital is readjusted to its best possible use in the economy. But we can work to ensure that U.S. public policy avoids distorting where that capital goes so that no sector of the economy is propped-up for longer than it should survive. An example of this in past is how, in the spirit of pursuing the American Dream, housing subsidies and other programs contributed to the skills mismatch problem by causing an oversupply of capital to flood the construction industry during the bubble period of the last decade.
So we should not hope for a return to 2007, when there were 2.2 million more construction workers then there are today. Nor should we expect that the consolidation of the financial industry, which has shed nearly 750,000 workers since 2007, will reverse course. Instead, we should be looking for the jobs of the future and what it will take to retrain today’s unemployed workforce.
These structural problems cannot be fixed with more direct spending programs, an infrastructure bank built on the failed government-sponsored enterprise model, or an extension of unemployment insurance benefits.
The solution to today's unemployment malaise must be polies that will help the economy in general by freeing up companies and entrepreneurs to pursue expanding or starting business ventures that adapt to the changes in the marketplace.
To this end we should be aware of how regulations and taxes inhibit job creation. Therefore, instead of just talking about how to create jobs, my administration intends to focus on addressing any restriction to economic freedom in the U.S. with the goal of creating an environment for entrepreneurs to thrive.
To do this we must focus on both long-term and short-term objectives. Here are seven areas we can address for change over the long-term:
First, our education system is highly inefficient. Test scores remain at the same level today as in the 1970s, which means given the advancement in teaching methods and technology since then the actual education level is even lower. We need to embrace comprehensive reform, as I mentioned earlier.
Second, the American immigration system is an impediment to economic growth and employment expansion. I recommend that we eliminate all quotas for immigrants that plan to open a business and begin to issue “entrepreneurs’ visas” to highly skilled immigrants. Attracting and retaining top talent is essential for future job creation.
Third, we must overhaul the tax code. Whether it is by eliminating all deductions or simply replacing the income, corporate, and capital gains taxes with a consumption tax, Congress should make tax code reform a top priority.
Fourth, changes to the tax code should be coupled with reducing the long-term debt and deficit through responsible entitlement reform. We must commit ourselves to the necessary changes in Medicare and Social Security that will reduce future liabilities, eliminate waste, and ensure that the social safety net can be maintained for those to which it was promised.
Fifth, recovery in the housing industry, and the return of some related jobs in that sector, will involve getting the foreclosure process back up to speed so that we accelerate the deleveraging process of household debt. To this end I have directed federal regulators to quickly come to a settlement with banks over the mortgage servicing fraud dispute.
I have also decided to end programs that aim to stop the decline of housing prices. As long as housing prices remain higher than buyers are willing to pay, then families that want to move to another part of the country for work will not be able to sell their home. This problem, called labor immobility, has added to the unemployment rate.
Furthermore, to ensure the proper allocation of capital to the housing industry, I will direct Secretaries Geithner and Donovan to initiate the necessary steps to dissolve Fannie Mae and Freddie Mac responsibly over the next five years so that the private sector can once again compete in mortgage finance.
Sixth, not only do we need to approve the pending free trade deals with Colombia, Panama, and South Korea, which will have many short-term benefits, we also need to initiate new free trade talks with Japan, India, Turkey, Indonesia, and Kenya, among others. New free trade agreements open up entrepreneurial potential and produce lower consumer prices. My administration also plans to make completion of the Trans-Pacific Strategic Partnership a priority, which would open free trade with nations from Malaysia to Vietnam to New Zealand.