Our Economy Will Grow Again if Washington Allows It

There is a great deal of low-level panic in the public and private sectors over the American economy. The housing market is bad and the cost of fuel keeps rising. Unemployment has grown. Inflation, a huge problem in the 1970s, is still not a major cause for concern. Syndicated columnist and financial adviser Lawrence Kudlow Kulow_2
expressed my thoughts perfectly when he wrote last week: "I applaud the Fed for backstopping the financial system and preventing a run on the whole banking sector. That’s what it’s there to do. Treasury Secretary Paulson said repeatedly, ‘the government is prepared to do what it takes to maintain the stability of our financial system.’ He is absolutely right. So is President Bush, who said ‘we’ve taken strong and decisive action in challenging times,’ adding that ‘in the long run our economy is going to be fine.’"

The panic that many feel is not rooted in real long-term prospects so long as Washington does not try to over-correct the problems we currently face. As Kudlow suggests the media is constantly trying to make pessimism our new national pastime. "The U.S. has faced numerous credit crunches down through the years and the free-market economy has survived very well," he adds.

The solutions, I repeat again, do not lie in Washington. The genius of our very system is not more government intervention but a stronger private sector. The private sector still drives a strong economy and even the poor most benefit from such growth. Tax hikes, trade protectionism, and massive over-regulation, have always stunted the long-run health of the economy yet this is what the pols who tell you they are concerned about the economy promise to Americans. Book_cover_2
This can especially be seen in the recent NAFTA debates between Senators Clinton and Obama. (By the way, Senator Clinton did privately oppose NAFTA, and thus her own husband’s position, according to Sally Bedell Smith’s magnificent book, For Love of Politics, Bill and Hillary Clinton: The White House Years (New York: Random House, 2007).

At the end of the long day market prices in the housing sector must adjust. This is the only genuinely viable solution. Some families, many who got caught up in the housing boom and the low interest loans and the no down-payment credit, will be forced to become renters. Other families will have a chance to purchase a new home at quite affordable prices. Ultimately capitalism is all about winners and losers and this is not determined by government intervention but by maximizing freedom and encouraging personal thrift, savings and wise spending. Econ(Something millions of Americans will apparently not do unless forced by the economic circumstances.) It is ultimately the market that must drive adjustments, even in lean and hard times, not the government. The government might provide certain "safety nets" for the least among us but this is best done a local levels, where both the giver and recipient can be connected in meaningful relationships. Federal give-aways destroy incentive and creativity and harm people and their future both.

I believe Lawrence Kudlow rightly predicts that "Better days are coming." Thus the economic pessimists will once again be proven wrong. My one caveat to this prediction is that this can and will happen much sooner if the government doesn’t tamper with the economy through the old ways of tax, spend and massive give-aways. (We must cut excessive federal waste and spending.) People must be allowed to succeed, and even fail, then we should be there (in private ways) to help them get back on their feet. Churches should be at the forefront of this but far too few care so long as they can lobby government to take care of the problems.

New jobs are the long term solution for most struggling Americans. And new jobs will be created by a robust economy not by direct government creation. It is the nature of economics that the system goes through growth times and slow times. We are presently in a big slow down. Is it a recession? Maybe, but maybe not. The pessimists insist they know and tell us daily this is "the big one." Fear spreads and politicians are happy to offer solutions. I am not so sure we are in a recession but either way "leave it alone" is generally the right solution when it comes to the economy. The Fed is taking the correct steps so far. Keep the politics out of this and ride it out. In the end Washington can contribute one major thing to the economy, and this is never been proven to be a good thing. It can try and fix our problems by bail-outs and higher taxes.

This entry was posted in Economy/Economics. Bookmark the permalink.