As I think I have made clear over the last several months, I don’t think we’re just going through a bad patch as I am being relentlessly told. I think that demographics and poor policy choices have come together to reduce growth below what it otherwise might be. That is the unfortunate nature of time-shifting future growth. Eventually the future shows up and if growth is not as robust as you thought it might be when you took the steps that resulted in the time-shifting the results can be pretty bleak.
The financial sector is far too large; the healthcare sector is far too large; the education sector is far too large; the military-aerospace sector is far too large; the construction sector is far too large. An enormous amount of capital is tied up in these sectors.
The sources of future growth are frighteningly opaque.
If the federal government is bound and determined not to decrease the cost of healthcare, the only other practical strategy is to cut everything else to pay the rising healthcare costs. I think that’s a sucker’s game but there you have it. It is fantastical to expect a weakening private sector to support ever-higher federal spending.
There will be an irresistible groundswell of pressure for economic engineering to turn things around. The impulse to do something will be overwhelming, especially as election year approaches. That’s next year if you haven’t been paying attention.
Government is inherently status quo-ist. The future’s industries have no lobby. That’s why we’re still desperately trying to reinflate the bubble, an effort that I believe is not only futile but counterproductive.
There are things that could be done which I doubt we will do. For example, the federal government could engage with state and local governments to produce a uniform code of environmental, banking, insurance, etc. regulations analogous to the UCC to make it easier to start and operate businesses. There are trade liberalization agreements languishing for lack of attention. We could also stop trying to prop up failing companies, industries, and business models.
When things aren’t going well it’s hard to have confidence in the future and the uncontrollable and unplanned developments of the market but IMO those are where our best hopes reside. The very fact that they are uncontrollabel and unplanned is why they are hated by would-be economic engineers and central planners.