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4 pro-growth reforms that liberals and conservatives could agree on

Strict housing regulations are holding back growth in San Francisco.
Strict housing regulations are holding back growth in San Francisco.
Justin Sullivan/Getty Images

The American economy has been recovering for several years now. But in this recovery, as in the last one from 2003 to 2007, there's been no sign that we're returning to the rapid growth rates — and robustly growing wages — America saw for much of the 20th Century.

The left and right disagree about what to do about this. Conservatives think the key to jump-starting the American economy is to cut taxes and regulation. Liberals prefer investments in education and infrastructure; they also argue that in an era of growing inequality and economic uncertainty, the state's redistributive function is more important than ever.

Still, Brink Lindsey of the the Cato Institute (where I worked from 2003 to 2005) believes there's some room for common ground. In a new white paper, he points to four reform ideas that could boost economic growth while reducing inequality. And each of these ideas has the potential to attract support from both liberals and conservatives.

1) Let developers in coastal cities build more

Big cities like New York and San Francisco suffer from soaring housing costs. This is obviously bad for the living standards of ordinary Americans in these cities, but it's also bad for economic growth as well.

That's because these cities are responsible for much of the American economy's growth. These cities enjoy higher average wages than the rest of the country, reflecting the greater productivity of workers there. If housing were more plentiful, a lot more people could move to these cities, boosting their incomes and helping some of America's most innovative companies grow more quickly. That could boost the American economy by hundreds of billions of dollars per year.

To get there, big American cities need to relax laws that limit development. And while deregulation is normally thought of as a conservative idea, there's reason to think it could have traction on the left as well.

Strict construction limits exacerbate the gap between rich and poor by reserving opportunities in America's most dynamic industries for people who are rich enough to buy expensive housing. New York mayor Bill De Blasio, a Democrat, proposed some modest reforms to New York's housing regulations earlier this year. And San Francisco supervisor Scott Wiener, also a Democrat, has argued that pro-development policies are key to addressing the Bay Area's housing affordability crisis.

2) Boost high-skilled immigration

The immigration debate has taken on a partisan tone in recent years, but the dispute between left and right is mostly about low-skilled immigration. Conservative immigration skeptics worry that low-skilled immigrants will commit crimes or go on welfare, costing taxpayers more than they contribute to American society. And they're offended by the millions of people who have come to the United States without permission.

But none of these concerns apply to high-skilled immigration. There's little reason to worry that a foreign-born doctor or computer programmer will wind up on welfare or in prison, and highly educated immigrants aren't going to try to sneak into the country without papers. And immigrants co-founded great American companies such as Google and Intel.

America's treatment of foreign-born college students is particularly counterproductive. When these students graduate, we force many of them to return home, taking their valuable skills with them. Making it easier for these students to stay in the United States after graduation would be an easy way to boost the US economy.

3) Reform copyright and patent laws

These laws are supposed to promote innovation, but in recent years they've often done the opposite. Anti-piracy laws have limited innovation in the digital media sector (as I argued in a 2006 paper for Cato). A dramatic expansion of patent protection has led to "patent trolls" who file a lot of nuisance lawsuits against innovators.

Lindsey proposes an ambitious set of reforms to deal with these concerns. He proposes reducing the term of copyright (which currently stands at the life of the author plus 70 years) and eliminating criminal penalties for copyright infringement (making the legal system less hazardous for startups like YouTube that push the boundaries of copyright law). He also calls for the abolition of patents on software and business methods, which tend to be of particularly low quality and, therefore, prone to patent trolling.

These are ideas with potential support across the political spectrum. The patent reform bill currently being considered in Congress, for example, enjoys support from both conservatives like Sen. John Cornyn (R-TX) and Sen. Chuck Grassley, (R-IA) and liberals like Sen. Patrick Leahy (D-VT) and Sen. Chuck Schumer (D-NY).

4) Liberalize occupational licensing rules

Most people are happy that the government requires extensive training before someone can perform surgery or design a bridge. But in recent decades states have imposed licensing requirements on professions — taxidermists, animal trainers, bartenders, funeral attendants, and many others — where the potential danger from unqualified workers seems much smaller. In many cases, these licensing regimes impose onerous training and credentialing requirements that appear to go way beyond what's necessary to prevent harms to the public.

Strict licensing is bad for innovation in these professions, because it can shut out people who want to pioneer new ways of doing things. And it also exacerbates inequality, because many of the professions subject to licensing would otherwise be routes to upward mobility for people with modest skills and incomes.

Deregulation is generally seen as a conservative idea, but once again there are signs that left-leaning economists are also interested in the issue. Alan Krueger, a Princeton economist who chaired President Obama's Council of Economic Advisors from 2011 to 2013, studied the harmful effects of occupational licensing laws in 2009. President Obama's 2016 budget sought $15 million to study occupational licensing requirements in the 50 states and encourage states to streamline laws that impose unnecessary barriers to entry.