Fed's Kashkari sees cure for slow growth in immigration, tax reform

As of today, the Federal Reserve is powerless and cannot do much. A top Fed official argued in a 5100 word essay how US can achieve faster economic growth through non-monetary policy approaches such as immigration and tax reform. Minneapolis Federal Reserve Bank President Neel Kashkari noted that the U.S. labor market is "closer to normal" but that inflation is still below the Fed's 2-percent target and economic growth is well below precrisis norms. "Kashkari sketched out a wide range of possible reasons for slow U.S. economic growth, concluding that the most likely causes are an aging population, psychological scarring from the financial crisis that makes households and businesses unwilling to take risks, and "lackluster technological innovation." And to address those problems, Kashkari says that, the government could boost spending on basic research, rebuild worn-out infrastructure, streamline regulations and the tax code, and otherwise take small steps with little downside risk and plenty of potential. "Another promising policy is immigration reform, especially for high-skilled workers," Kashkari wrote. But government, and the Fed, should be careful of policy change that poses too much potential for harm, he also argued. Raising the Fed's inflation target is one such approach, he suggested; massive government spending is another. "I am skeptical that a large-scale expansion of government spending by itself is the best way forward, since larger fiscal deficits will lead to higher expected future taxes, which could further undermine private sector confidence," he wrote.

http://www.cnbc.com/2016/09/12/feds-kashkari-sees-cure-for-slow-growth-in-immigration-tax-reform.html