Wednesday, March 14, 2012

On government’s role in getting the economy moving

The government's role in restoring a healthy economy is primarily to get out of the way and to reduce the economic dead-load of taxes and excessive regulation.

Rocket blasting-off

In the very same way that the energy required for a rocket or an aircraft to gain altitude increases as the affect of gravity increases, so too do taxes and regulation increase the “energy” necessary to make the economy rise.

Therefore, half-measures must be avoided entirely. Half-measures will produce tepid or, worse, no improvement, while allowing political critics to say, "We've tried your ideas, and they didn't work."

The reforms introduced must be bold, courageous, determined and, yes, some will be painful, as well.

  • Some economic activity presently based on government interventions (e.g., subsidies, artificial demand) will cease to exist.
  • Initial price-jumps following the removal of interventions that were, in fact, or worked effectively as price controls will be unavoidable. Thankfully, the removal of some interventions will bring price decreases, as well.
  • Changes in the value of the U.S. Dollar are likely to occur. Protecting the U.S. economy against currency values being artificially manipulated by other nations (such as the Chinese Yuan) is not wrong as long as the protection imposed is directly correlated to the amount of manipulation in the estimated true value of the currency.
  • Recognition that disparities in income and wealth are normal, natural and actually function as a healthy stimulus to production and the growth of the economy is essential and should be articulated to the voters in a clear way.

When legislation is proposed, the changes and the impacts of the changes must be announced and explained in advance. The long-term vision must be reiterated. The reason for the change must be clearly defended against every onslaught from the opposition, and then the effects of the changes must be "survived" as reality sets in.

The costs the people must bear during the readjustment of the economy should be shared as widely as possible by implementing measures that are clearly articulated as "temporary" to ease the transition. Otherwise, the fragile political support of those suffering the temporary pain of the readjustment will be lost.

Telling the truth and not promising things that cannot be delivered is the only safeguard to the credibility of the reforms and of the officeholders who see that the reforms are imperative to our nation's full recovery and restoration.

We are here to help!

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