Washington: Don’t tread on economy
By Damon Cline
If the past eight years taught America anything about Washington’s ability to cook up economic growth, it’s that the best recipe is no recipe at all.
More jobs and wealth could have been created after the Great Recession had Washington done nothing. Instead, misguided intervention helped make the recession recovery the longest since the 1960s.
Attempts to spur consumer spending and job creation through gimmicks (“cash for clunkers”), large loan guarantees to dubious enterprises (solar energy firm Solyndra) and massive boondoggles (the American Recovery Act) were absolute failures with little to show for the nearly $1 trillion they cost U.S. taxpayers.
“Economic growth is not the consequence of some master economic plan managed by the government,” writes Discovery Institute Senior Fellow Jay Wesley Richards. “It results from millions of people individually seeking what is in their own interests by providing what is in the interests of others. … This isn’t rocket science. It’s common sense, and it’s been true for thousands of years.”
Free-market advocates, economists and business leaders say government’s heavy hand needs to be smacked away before further damaging America’s free enterprise system, the greatest source of wealth creation in human history.
“Our government’s decades-long, top-down approach to job creation has failed,” Charles Koch, chairman and CEO of Koch Industries wrote in a ‘USA Today’ op-ed in 2014. “Its policies have made our problems worse, leaving tens of millions chronically un- or underemployed, millions of whom have given up ever finding meaningful work.”
Some economic policy groups say the best thing the Trump administration and new Congress can do is to undo the economy-strangling federal bureaucracy.
The Heritage Foundation, in its Blueprint for Reform 2017 policy agenda, notes the past decade’s false narrative: that unbridled capitalism caused the recession and that the “heroic application” of the Obama administration’s bailouts, stimulus schemes and new regulations “saved America from an even darker economic fate.”
The reality is that government meddling helped produce the 2008 crash in the first place, with policies that extended home loans to millions who could not afford them.
And since then, Washington’s “help” has only accelerated joblessness through mushrooming welfare programs, and discouraged employers from expanding and creating new jobs because of a misguided obsession with minimum-wage hikes and costly employer mandates.
Consider the burdensome Affordable Care Act and Dodd-Frank legislation, both passed in 2010. During the four years before their passage, average American wages increased 3.4 percent. Four years after, wage averages had fallen 1.1 percent.
The Competitive Enterprise Institute calculated that federal regulation compliance costs American companies nearly $2 trillion a year. Every dollar a company spends on regulation is one less dollar it has for employee pay, benefits, research and development, and more.
No wonder companies are trying to get by with as few full-time workers as possible: In December 2006, the number of American part-time workers seeking full-time employment was 4.18 million. By December 2016, the number was 33 percent higher, at 5.58 million.
Some employment regulations, such as workplace safety rules, are necessary and justified. But an equal number are not, such as the Great Depression-era Davis-Bacon Act, a law requiring that federal construction contractors pay “prevailing” (i.e., union scale) wages.
It was passed expressly to protect Northern whites from competing with black workers from the South. Yet it remains on the books, despite inflating federal project costs 10 percent, because “labor unions still find it useful to limit competition from non-union workers,” the Heritage Foundation writes.
Americans don’t need more reasons not to work. Too many already have opted out of the workforce based on the latest labor participation rate, a measure of work-eligible people who are employed or are actively seeking employment.
The rate fell to 62.7 percent in December – the lowest rate since the Carter administration. That means nearly four in 10 Americans don’t work and have no plans to.
Aristotle spoke 2,500 years ago on the concept of rewarding what you want to encourage and punishing what you seek to diminish. Based on how the federal government treats the private economy, what would the Greek philosopher and scientist say if he were alive today?
Would he see government as an economic invigorator? Or an impeder?
Damon Cline is the business editor of ‘The Augusta Chronicle’ in Georgia.
America has created more wealth and lifted more people out of poverty than any other nation in history because, for most of its 241-year history, it let free markets operate freely. Just as the Founding Fathers intended.
Thomas Jefferson, in his first inaugural address, said a “wise and frugal government” shall leave citizens free “to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government.”
NUMBER OF AMERICANS WORKING OR ACTIVELY LOOKING FOR WORK
During the past eight years, more than 20,000 new regulations costing more than $108 billion have been put in place, almost 20 percent of which exceed the 1995 Unfunded Mandates Reform Act threshold of $100 million.
America’s highest-in-the-industrialized-world corporate tax rate impedes investment, innovation and hiring, while Obamacare mandates discourage hiring more than 50 employees, and the hiring of full-time workers.
“Last year alone,” the National Federation of Independent Business wrote last fall, “43 new major rules sucked more than $22 billion out of the economy.”
Taxes must be reduced, as well as government regulations.
Repealing Obamacare will free up employers from its mandates, and repealing Dodd-Frank’s strangling restrictions on businesses and investments will help as well. Dodd-Frank has been a small-bank and small-business killer, and has choked lenders with outlandish “compliance” costs.
Every major federal agency regulation should be required to have congressional approval before taking effect.
Balance the federal budget. It will free up money for investment and growth in the private sector.