Rebooting America
Prosperity: Federal Reserve Chairman Ben Bernanke can talk all day about doing everything possible to sweeten a sour economy. Monetary policy is pretty much exhausted. It's Congress that could act - but won't.
'We remain prepared to take further policy actions as needed to foster a return to full utilization of our nation's productive potential in a context of price stability." Those were the words the Fed chief hoped would have a healing effect on an economy battered by years of housing and lending policies hijacked for ideological purposes.
But what more can Ben Bernanke do?
The interest rate elevator doesn't have a button for going lower than the subbasement. Other proposed steps - cutting bank reserve rates, buying mortgage securities, simply printing billions more of money and so on - are about as useful as an aspirin after running the gantlet.
And in spite of the godlike aura that surrounds whoever sits as chairman of the Fed, Bernanke can't control Congress' fiscal policy.
The private economy isn't fooled; it knows that the executive and legislative branches of government are controlled by forces hostile to economic freedom. The Federal Reserve has reported that 500 firms are sitting on $1.8 trillion in cash, a situation that hasn't happened in decades.
These companies are doing what rational individuals do when they see that the long-term forecast makes no mention of sunshine - saving for all those rainy days.
They just saw a financial overhaul enacted that maintains the too-big-to-fail policies that helped get us into this mess, discourages orderly bankruptcy, and prevents the creative destruction that capitalism needs to thrive.
They've seen a massive, socialistic health overhaul passed whose disruptive surprises from an army of new bureaucrats it will empower can only be guessed at.
They've seen trillions spent in a disastrous Keynesian scheme to get America back to work - as the Medicare and Social Security programs the baby boom generation is counting on sink into insolvency. And they see the Bush tax cuts riding off into the sunset.
If we want these companies to inject a genuine, job-generating stimulus into the private economy, all we have to do is what has worked so well before.
As Nobel Prize-winning economist Vernon Smith of Chapman University writes on the Daily Beast Web site, "Our best shot at increasing employment and output is to reduce business taxes and the cost of creating new startup companies."
Smith implores Washington, "Please, no more government spending!" He cautions regarding promising firms: "Don't subsidize them; just reduce their taxes even as they become larger; also reduce any unnecessary impediments to their formation."
This is all sage advice. Unfortunately, new political leadership is the only way that massive wealth will ever be injected into the economy, because it's the only way the owners of that wealth will be confident that their resources can be put to productive, successful use, hiring workers and earning a fair return.
No enjoyment comes in pointing it out, but if more American voters had been educated on economic history, they never would have placed politicians into power who would waste trillions in taxpayer funds trying to spend us out of our economic ills.
Is Reagan really so long ago that we've forgotten that government is the problem, not the solution? If so, it's time to relearn the lesson.
