It is tempting to simply write off prior efforts that have not done well such as those arising from the Trade Assistance Act (TAA) in its many manifestations, casting them as failures. But a better designed program can and will address this societal malignancy in a truly beneficial and humane manner.
The TAA, conceived in 1974, was designed to face problems that are far different than those that we face today. It was established to quickly and cheaply assist those experiencing job losses only due to trade disruption. It uses age-old methods including very temporary unemployment benefits, antiquated job training programs, and low levels of relocation assistance and subsidized health care. The net benefit of these programs has been shown to be negative $27 thousand per participant. Further, after two years of training, tracked outcomes have shown that by the fourth-year, less than 40 percent of participants were employed in the occupations in which they trained. Beyond such results, these programs have also been substantially underfunded by Congress in recent years, leading to increasing disappointment.
Robert Lawrence, Professor of International Trade and Investment at Harvard and his colleagues developed a program, the “Adjustment Assistance Program,” which would replace the ineffective TAA. Lawrence’s program would consist of several new and some TAA-like measures, but packaged in a manner that would very likely be successful. It would include a robust wage loss insurance program for workers over 45, significant unemployment insurance and health care coverage, establishing tax-advantaged vehicles similar to individual retirement accounts, expanded eligibility for current federal training programs, tax preferences designed to encourage ongoing skills acquisition, and lifelong learning and development rather than the current “you’ve been trained so get on with your life” model.
I would take that a step further and look to the successful outplacement programs that are in place in U.S. companies. Those outplacement programs not only serve to find employment that is similar to that which the employee had performed, but also seek to find new geographic areas and new employment niche opportunities where those participants, and our economy, could flourish. These programs should assist in relocation and promote meaningful orientation into a new life for participants.
Certain elements of the political class will argue that the cost of such a program for the 1.4 million individuals who lost manufacturing jobs between 2007 and 2014 would be prohibitive and a waste of money. However, when Professor Lawrence put his plan forward in 2008 the class of eligible participants was far larger. The program then had an estimated cost of $22 billion. A flat tax of 1.32% levied on all wages would pay for the entire program. Instead, I propose a targeted tax directly on the high-level beneficiaries of the resultant economic growth from the trade agreements. That would certainly pay for the entire cost. The design of such a targeted tax can be shaped by our nonpartisan tax experts that have great experience in creating such structures. In addition, the benefits of repatriating offshore corporate profits would create far more funding than is needed, although a lot of hands are already in that pocket. Can’t we see a way to spend $22 billion dealing with a clearly malignant societal problem?
I would finish just by recommending that, if those who would like to see TPP authorized in the lame-duck session of Congress are serious, then partner it with legislation that would put into motion programs like the one suggested by Professor Lawrence. We should also seek out and incorporate suggestions from bona fide experts, not partisans that have an agenda different from how the United States can continue to strengthen the greatness and international standing that our country already possesses. By following this path, the price tag will be paid for and the future benefits to our nation will be widespread and compelling.
Dr. John N. O’Brien is the CEO of Vista Energy Group Inc.
Image: United States Capitol west front/Public Domain