Tuesday, January 13, 2009
A lack of intelligence in Washington
| Has anyone else noticed that there are no new ideas coming out of Washington D.C.? Just not long ago, intelligent men and women were able to disagree about issues, and yet still use history as a guide to do the things necessary to keep the nation on track. Moynihan, Goldwater, Reagan, O'neill and others worked towards a common good. They did this with a keen eye towards the past, and avoided making the mistakes that earlier generations had made. A Democrat in John Kennedy was thus able to lower taxes, and point to the past as a guide to increasing the economy. Reagan took office and deregulated industries and lowered taxes resulting in a great economic boom both on Wall Street and Main Street. Today, our leaders from Obama, Pelosi, Reid, Bush, McCain and every other member of congress our so woefully inept and unaware of our nation's history that it is frankly embarrasing. For a few years think tanks from The Heritage Foundation to Brookings stepped in and offered some leadership from afar, and pundits like George Will and tried to keep politicians at least if not honest, informed. Now pundits try to be as accomodating and politically incorrect as the politicians they are supposed to watch. The think tanks simply strive to hold on to what they have and not a single voice is heard speaking the truth. So here it is. For two hundred years or so, a laissez faire, balanced with moderate but necessary intervention has worked to keep the economies of the world growing. The reason for liassez faire is simply that there is no way to regulate billions of transactions equitably. Taxes have been low or stable throughout most of this span. After World War II they went higher for a time, but this worked only because half of the world was rebuilding the manufacturing base, and the infrastructure to deliver goods. Many other countries simply opted out of economic growth and were ruled by totalitarian regiems under the auspices of communism and socialism, both of course failed miserably. The notion of a leader looking to Queen Elizabeth as the exemplary model is not just gone, our present politicans don't even know what it means! Instead each political party tries to grab as many interest groups as it can to hold of the opposition. All is in the name of the "people" and the individual doesn't exist. The cold hard fact is that of all the polticians in Washington, Obama is one of the most inexperienced, and least able to lead the nation. McCain was even worse. Obama is an exceptional orator (to the masses at least) short on specifics, and even shorter on economic theory and history. McCain is a doddering old man who relishes the role of a maverick, for the simple reason that he doesn't appear to know what else to do. What does the future hold? It doesn't take a crystal ball to predict the future. The stimulus package will lead to a rebound in the second half of 2009, followed by the realization that we are trying to fix a credit problem by increasing credit. At this early stage it appears that the lion's share of the spending will go towards "infrastructure". This is simply stupid. Building roads to areas where no manufactures and services can be delivered is an infrastructure investment. Fixing roads that are a little bumpy doesn't increase the productivity of the nation. When the drunken stooper is over, we'll be left with a hangover of monumental proportions. The eighty million baby boomers will still be around, waiting for their social security checks and medicare payments, the government will be in debt (that means you and I will owe the money) to the tune of 150% if GDP, and the sale of bonds will become next to impossible. This will of course lead to a round of tax increases on the wealthy, and more regulations to keep the interest groups employed and voting for whatever party happens to be in power when the bottom falls out. When the bottom is finally reached, and there are no more buyers for the bonds, and no more income to be taxed we will be at the final fork in the road. There will be only two choices, the tyrant and hopefully, the last honest man. The last honest man (think someone of George Washington's character) will tell us that it is time to go back to the things that have worked; self reliance, hard work and fiscal responsability. The tyrant will find a scapegoat, and promise to punish the wicked traders, imprison the bankers, and point fingers at various religious and racial groups. If history is any guide, the people will choose the tyrant. This sad state of affairs was caused by us. We elected people who promised goodie bags full of lollipops and big screen TVs to be paid for by someone who was luckier in the game of life. The real tragedy is there is still time to fix the country. Draconian cuts in government spending, an avoidance of costly wars, lower taxes, elimination of all business regulations not directly related to public safety, and tort reform, coupled with an aggessive pursuit of our own natural resources, and limits on free trade (which is really mercantilism disguised) would set a path for growth that would not only refill the treasury, it would create surpluses to honor the promises to the baby boomers. A tip of the hat to Faulkner for that last sentence. The solutions are easy to see. Say's Law (see the Ipod) and Pareto's weak optimal are your two guidelines. We can find them in each of the last ten decades proving their validity time and time again. All that is needed is a man with the character to say no. Does our generation have an Adenauer, a Washington or a Queen Elizabeth? I think not. |
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