Saturday, November 6, 2010
Restoring Confidence is the First Step
I just read a good article by David Smick on the role of confidence in restoring and maintaining a robust economy.
To add my own thoughts, confidence comes from predictability and trust. Job #1 for the government is to stop creating uncertainty and to implement systems that ensure fair playing fields for all, whether they be entrepreneurs or ordinary taxpayers.
Job #2 is to eliminate government waste and other spending that isn't absolutely vital to restoring the economy, thereby allowing government funds to be aimed at viable investments and a reduced tax burden (which also helps with Job #1).
Job #3 is for government to make the targeted, huge investments -- that only it can make due to its size and reach -- in education and infrastructure that will enhance industrial productivity and enable new business formation.
Job #4 is to provide incentives for people and companies to invest their new excess capital (from #2's tax savings) here in the U.S. Creating abundant capital and making it easier to achieve returns on that capital will reduce the cost of that capital to those he want to use it. Many investments that have been off the table for a generation now -- like building a blue collar factory -- would become viable again. Despite all the press about everyone needing to be a knowledge worker, we can definitely make use of well-trained people who can work with their hands, as they do in Germany.
It is well within our means to put people back to work and to set the stage for sustained prosperity. Some sacred cows will need to be slayed, "business as usual" (e.g., earmarks) in Washington will need to change, and we'll need to endure some upheaval as government workers are displaced and redeployed in industry, but the effort would be worth it. We just need to get on with it.