Growth Is Good

I’m seeing quite a flurry of articles promoting economic growth today. Imagine my disaapointment when I read this column by Eugene Robinson, captioned “Growth, not cuts” on the opinion page of the WP but titled “Let’s move on to our bigger economic problems” on the column itself:

We’ve just spent months of bitter struggle to accomplish remarkably little. Meanwhile, most of the world’s advanced economies, including ours, are mired in an economic “recovery” that is proceeding so slowly it feels as if we’re moving backward.

Earth to Washington: Unemployment is stuck around 9 percent. Businesses aren’t hiring because consumer demand, normally the great engine of the U.S. economy, is feeble. Americans are saving rather than spending because their most valuable assets — their homes — have not begun to regain the value they lost when the housing bubble went splat. Housing prices can’t begin to recover until the glut of foreclosures is digested by what’s left of the real estate market. Those foreclosed homes can’t be bought by the unemployed.

Earth to Robinson: tulips never recovered. Housing growth may have been an important economic driver during the post-war period but I think we need to pronounce that period over. Consumer demand was only about 50% of the economy 35 years ago, not the “great engine&148; it has become. Looking for growth in those directions is merely a futile desire to reinflate the bubble.

I found precious little about promoting growth in the column. I guess the buzz word of the day for the WP editors is growth.

I was equally disappointed by this column by Frank Beckmann in the Detroit News. It’s essentially a collection of Republican nostrums:

Tax cuts work, no matter which party enacts them, and yet Democrats stubbornly call for confiscation of more private sector wealth so they can distribute taxpayer income to politically favored groups and projects.

Obama has made a nonspecific promise of a future announcement to create jobs, but its hard to imagine he will soon abandon his failed Keynesian concept of using government spending — stimulus plans that did not reduce unemployment when they were tried — to create jobs.

It’s time for the president and his allies to start listening to the real job providers — people like Home Depot founder Bernie Markus and Las Vegas kingpin Steve Wynn, who recently spoke up — and follow their simple plan for the way the federal government can truly spur the economy.

Reduce regulations — like the new fuel economy mandate of 54.5 miles per gallon — lower and simplify taxes, and cut spending severely, to allow our free market economy to thrive and for the real job providers to begin hiring again.

I’ve cited some of those myself from time to time but I think it’s a wholly inadequate prescription. For one thing I don’t believe we’re at the point in the “Laffer curve” at which reducing marginal tax rates will spur growth. For another it doesn’t address the serious problems that we confront.

The other day, in comments, I listed some of those problems, the things I thought were retarding growth:

1. Bank malfeasance, misfeasance, and nonfeasance.
2. Tolerance of Chinese mercantilism.
3. Demographics–the retirement of the Baby Boomers.
4. Crony capitalism.
5. Overgrown healthcare, financial, education, and defense sectors.
6. A generally enormous amount of deadweight loss.
7. The collapse of the housing bubble and the serial policy errors that followed the collapse.

Here are some of my suggestions for addression those problems.

Compel the banks to write off all or some of the underwater home loan mortgages, impaired student loan and consumer debt, and bad commercial real estate loans. That will be a death knell for the “too big to fail banks” but propping them up in the hopes that the housing market will return to normal is holding us back severely in dozens of ways. Mark to market, for goodness sake.

We need to streamline the maze of federal, state, and local regulations that inhibit business formation and expansion. Bringing government procedures into the 21st century would help (heck, bringing them into the late 20th century would help—they’re still mired in the 1950s). I propose an expansion of the UCC to cover more territory but there are other approaches that would help.

We need to spend less on defense, healthcare, and education. We are simply spending more on defense than is necessary for our security. A large standing army is mostly good for taking and occupying territory. Do we really want to take and occupy territory? Our bomber and missile fleet is still largely useful for facing down a large, high tech enemy. Is that where our resources are best deployed?

Healthcare is simply too expensive. It’s the prices, stupid. I see no way that the present system can be tweaked to bring down costs. The system is the problem. Costs will continue to rise unacceptably simply with increasing specialization and following accepted standards of care.

Education is mired in the 18th century.

Stop subsidizing big companies at the expense of smaller ones. Big companies employ a lot of people but they aren’t creating a lot of new jobs. Rationalizing our intellectual property laws would help, particularly an abolition or extreme narrowing of software or business process patents.

In the 1950s highway construction was investing in the technology and infrastructure of the future. Today, not so much. Let state and local governments spend more of their own money maintaining existing roads and bridges and concentrate federal infrastructure spending on the technology and infrastructure of the future.

We need more, cheaper energy not less, more expensive energy. I have my own pet approaches, for example, small scale thorium reactors that avoid the capital intensiveness, implementation delays, and health, safety, and security issues of the present technology.

That’s a start.