“The less government we have the better”

Ralph Waldo Emerson

The best news coming from last week’s G-7 jobs summit was it disbanded with no more than some harmless posturing, principally designed as political cover for the inability of their respective governments to solve inexplicable domestic unemployment.

America’s good fortune of not being saddled with new, quick-fix economic remedies was not necessarily an anticipated goal.  Rather, it resulted from the convergence of several factors Administration sponsors either ignored or over which they had no control.

As the orchestrated summit took shape, the White House sent an unspoken but clear signal, stubborn and systemic global unemployment could be best solved by government intervention. 

However, their noble goal to conjure up solutions to reduce joblessness was doomed by at least five critical and unreasoned premises.

  •  In examining the cast of characters sponsoring and attending the G-7 conference, one is immediately struck by the fact almost none of them ever created a jobs.  Rather than leveraging knowledgeable business resources … career politicians, civil servants, academicians, attorneys, White House staffers and government bureaucrats were deemed to be the seers of economic wisdom.
  • It was presumptuous for the G-7 members, each of whose nations face severe economic problems of their own, to surmise they could devise cures for the economies of scores of impoverished third-world countries, many of which face pandemic unemployment and lack any semblance of a market economy infrastructure.  Absent were people with first-hand knowledge of the economic environments being discussed.
  • While the economies of each of the G-7 countries has been impacted by certain common problems such as rapidly evolving technological innovation, public and private sector downsizing and post-cold war defense cutbacks … other issues are unique to America (falling levels of quality jobs and wages), Japan (an aging population and an appreciating currency) and European nations (heavily unionized and rigidly regulated economies struggling with massive, long term unemployment).
  • Too little attention was paid to the disparate political, social, and cultural realities which separate the economies of the G-7 members.  As such, stimulus programs which might be palatable in one nation may have little chance of replication in another.
  • Contrary to its rhetoric, there is an inherent canon of the Clinton Administration, as well as those of other G-7 nations, only government can solve complex economic and social problems.  Their tools ultimately boil down to increased private sector regulation accompanied by expensive programs demanding ever increasing taxes.

Clearly, governments can play a role in helping to smooth our some of the peaks and valleys of economic cycles and in stimulating certain business activities.  However, only the private sector creates wealth … from which demand and ultimately jobs flow.

Rather than feeding the public a steady diet of such verbal pabulum as, “making an important first step”, “challenges which await us”, and “the choice of hope over fear”; the president and his economic disciples would do well to reflect on both economic history and the essence of free-market capitalism. 

Instead of reinventing the American economy, these bureaucratic statists would accomplish more by eliminating the barriers their institutions have placed in the way of economic growth and thus increased wealth, greater consumer demand and more jobs.

Specifically …

  • Slash the capital gains tax rate, incentivizing long-term investment in new business ventures, instead of using it to foster economic class warfare.
  • Rollback personal and employer payroll taxes, not increase them as the Administration now contemplates.  The former will produce more disposable income, proven to stimulate demand … while the latter will provide incentives to employers to add new employees
  • Eliminate many of the burdensome and time consuming regulations which now cost businesses billions annually and whose data does little more than titillate the appetites of government statisticians.
  • Balance the federal budget and commit to retiring the national debt.  This will help keep interest rates low and ultimately free billions of dollars now committed to servicing the federal debt for use by the private sector.

America’s economic greatness, which has helped preserve our democratic institutions, was built on the pillars of individual initiative, risk taking and the profit incentive.  Increased taxation and intrusive over regulation of the private sector, on the other hand, is a prescription for restricted economic growth and lower standards of individual prosperity.