Wednesday, January 16, 2013

Getting it right: it’s economic growth, stupid!

The problem:

“The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.”

--Thomas Sowell, Hoover Institution, Stanford

The solution:

“The role of economic growth in advanced societies is increasingly to satisfy the many claims from different groups. People can pursue their self-interest without harming the common good. . . we should . . . strive for faster economic growth.” [emphasis added]

--Robert Samuelson, Washington Post 

Economic growth is the key to America’s future. And it’s not only conservatives who think so. New York Times columnist Tom Friedman has just written:
In his book The Moral Consequences of Economic Growth, the Harvard economist Benjamin Friedman argues that periods of economic growth have been essential to American political progress; periods of economic prosperity were periods of greater social, political and religious harmony and tolerance. [More recently, Ben] Friedman . . . wondered aloud whether we’re not now entering a reverse cycle, “in which our absence of growth is delivering political paralysis, and the political paralysis preserves the absence of growth.” [emphasis added]
Tom Friedman wants big government and economic growth. He’s part of a dying breed. Most “growth firsters” are anti-big government, convinced a too-big, debt fueled leviathan is killing economic progress. The Paul Krugman-massive-government types believe the more government spends, the more likely we are to have economic growth. But they look out of touch with the facts: government is bigger than ever in the U.S. and Europe, yet the economy is stalled in the U.S. and sinking into recession in Europe.

Big government or growth? Michael Barone, in the Washington Examiner, argues we have to move away from big government:
welfare state arrangements that once seemed solid are on the path to unsustainability. Entitlement programs -- Social Security, Medicare, Medicaid -- are threatening to gobble up the whole government and much of the private sector, as well. Lifetime employment by one big company represented by one big union is a thing of the past. People who counted on corporate or public sector pensions are seeing them default. . . Walter Russell Mead calls this [failing structure] the blue state model.
David Boaz, in the libertarian Reason, believes “countries relying more fully on property rights and market exchange vastly outperform state-directed economies.” But in the U.S., he writes, we are moving in the opposite direction:
big government has been chugging right along. Federal spending has doubled in the past decade, and the national debt has tripled. The Supreme Court just upheld a vast expansion of federal control over health care. Washington is working overtime to sign up more food stamp recipients, and it has actually taken ownership of such once-proud companies as General Motors and AIG.
Jim Geraghty, in the New York Daily News, tells us we don’t have a real handle on how bad unemployment is today:
[PBS’s] Paul Solman believes that the long-term unemployed — those who have stopped looking for a year or more, but say they want a job, a figure reaching about 7 million — should be included in the public definition of unemployed, as should the “discouraged workers,” those looking for work sometime in the past year but has stopped looking for work. Throw in those working part-time who want full-time work and cannot find it, and our calculation of America’s “unemployed” booms from 12.1 million to an ungodly 27 million.
Yuval Levin, in the conservative National Review, describes Republicans as anxious to dump to status quo in favor of market-driven incentives that help the vulnerable along with others:
the Democrats want more money so that the entitlement system doesn’t have to be reformed, while the Republicans want to reform the entitlement system so that the government doesn’t have to take more of the country’s money or take up even more of the economy.
For the Democrats, the policy imperative now is the consolidation and defense of the liberal welfare state, and especially its defense from the consequences of its own fiscal collapse. With Obamacare enacted, they are basically done building.
For the Republicans, the policy imperative is to reform our governing institutions through ideas that use the market economy (rather than fighting it) and therefore allow for major savings and for enabling free and responsible choices while protecting the vulnerable. . . They seek to offer a vision of effective but limited government beyond the welfare state.
That’s not the direction Obama’s moving, according to Andrew Klavan in the conservative City Journal. Klavan writes that “Obama has been more or less plain to see[--a] product of the anti-American academic left, committed to transforming U.S. capitalism into a social-democratic system like Sweden’s.”

Peter Suderman, in Reason, gives Obama credit for identifying the problem, but not the solution. According to Suderman,
Obama had Americans pegged. They were tired of politics as usual, tired of the endless cynical squabbling of the two parties. But the president’s solution was the opposite of what they actually wanted: not a single, unified story to replace the two competing narratives, but a flowering of individual narratives—an independence from politics rather than a greater connection with it.
Certainly independence from big government. Joel Kotkin, an ex-Democrat who views with increasing alarm California government’s growth at the expense of the private sector, writes in the Orange County Register:
California needs policies that can boost economic growth in . . . construction, agriculture, manufacturing and energy – [areas] with the best prospects for creating good, high-paying jobs for both blue- and white-collar Californians.
“boost economic growth.” Amen.

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