22.9.15

MONETARY THROTTLE, REGULATORY BRAKES.

The old Welfare Economics Paradigm called for corrective taxes and well-specified subsidies, along with counter-cyclical and complementary monetary and fiscal policies.  Hope and Change bring none of those.
To grow the economy, cheap interest rates are not going to work as well as reforms that make business formation and job creation more attractive. Yet Democrats these days have ever-lengthening lists of job-killing policies they want to enact, from tighter environmental regulations to dramatic minimum wage increases (especially in cities where unemployment is high) to tax increases. Paradoxically, that leaves liberals cheerleading for Fed policies that increase inequality and concentrate wealth because only ultra low rates (or truly massive deficits, which can’t be rammed through a GOP Congress) can mask the effect of left-wing microeconomic policies on the economy as a whole.

There is no shortage of capital today, but there is a dearth of attractive opportunities to invest that capital in ways that will stimulate employment. People who actually care about the living standard of the American people need to be thinking long and hard about the kinds of policy changes and innovations at the local, state, and federal levels that would rejuvenate the American labor market by making it easier and more rewarding to create new jobs.
Perhaps the simplest thing for the government to do is to back off. No public spending without rent-seeking: result, no productive effect.  The commentator is also arguing that the regulatory burden is depressing the internal rate of return on private investment, which might otherwise be substantially higher than the opportunity cost of capital.

No comments: