Friday, October 17, 2014

'The Good News Is: Everything We Have Tried So Far Has Failed'

(Not) Said by Winston Churchill
An oft-quoted but mis-attributed quote always seems to have merit when it comes to the basic general wisdom of the American people:
'Americans can always be counted on to do the right thing…after they have exhausted all other possibilities'
This generally has been attributed to British Prime Minister and statesman Winston Churchill, mainly because it sounds like something he would have said way back when.

But the general sentiment was actually first uttered by Israeli diplomat and politician Abba Eban, not by Sir Winston. Mr. Eban was more general in his comment which was: “Men and nations behave wisely when they have exhausted all other resources.”

Daniel Henninger of the WSJ has written a very good piece, 'A Year of Living On The Brink' about the recently concluded IMF meetings in Washington where world finance leaders met to discuss the pressing issues of the world today....and came away after having concluded to do absolutely nothing of any consequence.

He concludes by saying in essence: 'We have tried everything that traditional Keynesians and monetarists have said would work in the past...and still, the American economy is acting like a big tank stuck in molasses'.

'It is essentially the prescriptive promise of this 2009 to 2014 policy mix that was repudiated by officials at the IMF meetings in Washington the past week' Mr. Henninger wrote somewhat calmly but with the ominous presence of a threatening thundercloud.

What is 'so good' about finding out that everything President Obama and other world leaders have done over the past 6 years has not gotten the American and world economy out of the economic doldrums?

Everything.

No matter what politicians try to do to sell themselves to the American people to get their votes, there is only one thing that really matters: 'Does it work to help people find jobs and enjoy economic prosperity for themselves and their families'?

If a politician running for office 'promised' the American people that eating 1 government-paid for peanut butter-and-jelly sandwich everyday would return us to full employment, higher wages and a happier life, and he/she got into office and made it happen through legislation, and it worked somehow, that person would be elected for life by that state or district.

Maybe even President.

That is the 'probable cause and effect' of politics. It has almost nothing to do with actual economics in the minds of the voting electorate. They don't want to be bothered with the inner workings of quantitative easing or Keynesian economics or what Milton Friedman thinks about monetarism.

They just want to know one thing and one thing only: 'Did it work for ME!?'

If it didn't, vote for someone else who will promise something different.

What is the 'good news' about the failure of the IMF meeting to take any further steps down the road to perdition we have embarked on with massive government stimulus programs and 'expanding the balance sheet' of the Federal Reserve (read: 'Make up more currency out of thin air') under the entire 6 years of President Obama?

It means US policy-makers have no choice but to 'try something else'.

That 'something else' is what has worked over the entire history of America and in free societies the world over: Let people make their own decisions with their own money with a minimum of taxation and interference from government sources.

Throw in a few years of less government interference and more mature adult federal budgeting such as:

  1. Gutting the entire Dodd-Frank legislation that is the banking equivalent of Obamacare in the medical world;
  2. Repealing the most onerous sections of Obamacare and allowing people to actually 'keep their doctors if they like them' and drive out the cost factors in health care that are making it simply unaffordable in the first place;
  3. Freeze overall federal government spending for just the next 4 years at FY 2014 levels which will 'magically' balance the budget without any tax hikes or complete elimination of any government service (although some agencies should be eliminated completely);
  4. Come up with a truly 'Grand Bargain' on reforming and reducing the cost and the taxation of entitlements coupled with a pure simplification of our tax code (we favor moving to a consumption tax..see other posts)
And we will all quite possibly see the greatest economic explosion America has ever seen.

The markets and the world will know that the adults have returned to run the US government after years of childish and almost infantile leadership on many levels. The mere mention of adult leadership will send such shock waves of confidence through the world markets that we may not really know what hit us until years later.

We are on the verge of becoming self-sufficient in oil and gas production which will reduce our reliance on oil coming from the Middle East where the truly crazy people such as ISIS and Al Qaeda roam.

There may be technological breakthroughs on new energy sources such as cold fusion (Lockheed Martin and Tom Darden of Raleigh both recently announced investments in that space) which could completely and radically transform our energy industry in America.

Young people we meet everyday in the sciences and technology fields tell us about the exciting new technologies they are learning about in the classroom and in the laboratories. The only thing government needs to do in most instances is to 'get out of the way' and let these young inventors and entrepreneurs take the risks to grow these new industries much as Henry Ford established Detroit as the world's mecca for the automobile industry...until labor unions, excessive onerous government regulations, local government corruption and corporate mismanagement destroyed the Detroit automobile industry, that is.

Everything in life has an action and a reaction. It is a basic law of physics.

So it is in economics. If we allow it to happen, that is.

Politics is the only way to unleash the economic power in America that can soak up almost all of the un- and under-employed people who want to work but can't find a job. Government can never do that nor can it provide a living wage for everyone who can't find meaningful work today. We just can't afford it given that we have maxed out our credit card of national debt and created more money at the Fed which runs the risk of igniting the inflation demons down the road.

As Mr. Eban or Mr. Churchill or whoever said: 'Americans will do the right thing when they have run out of all other options'.

Now is that time in our history. Let's get it right for a change we can all really believe in.


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