INSIGHTS: THE UNITED STATES IS THE WORLD RICHEST COUNTRYBY FAR, AND THAT’S THE PROBLEM
By Guest Columnist John Tamny:
Political Economy Editor at Forbes, Editor ofRealClearMarkets and author of the new book Popular Economics: What the Rolling Stones, Downtown Abbey and Lebron James Can Teach You About Economics
It’s a shame that the United States is the richest country in the world. It is simply because the U.S. should be exponentially wealthier. We’ve come nowhere close to reaching our vast economic potential.
The barriers to the very economic growth that would substantially increase our wealth, health and happiness are governmental. Simply put, the political class is hostage to fallacies about taxes, regulation, trade and monetary policy that have been embraced by an economics profession wowed by charts, graphs and misleading statistical aggregates over common sense. Precisely because common sense is often nowhere to be found in Washington’s discussion of economic policy, we suffer levels of economic growth and wealth that are a fraction of what they could be.
Popular Economics aims to correct all the mis-information. Its explicit and very cheerful theme is that everyone knows growth economics very well simply because they’re aware of the world around them. In a book that is free of charts, graphs and silly government-designed measures of our economic wellbeing, I explain economics in ways that anyone can understand.
The migrations of the Rolling Stones are featured to show how those not rich always suffer nosebleed taxes levied on the wealthy the most, Paris Hilton’s wild ways and ESPN’s creation are used to make a case for total repeal of the estate tax, Michigan’s 2007 upset loss to Appalachian State in football is one of many prominent examples showing why regulation is a conceit that nearly always fails, LeBron James’ basketball genius is elevated to reveal the wonders of free trade, and then the simplicity of the Buffalo chicken wing is described to obviate the need for a dollar that is stable in value.
Economics is fun, and as the previously mentioned examples hopefully make plain, economics is something we all intuitively understand. The problem in modern times isn’t that Americans have run out of ideas, energy or initiative; rather they’ve suffered an increase in governmental barriers that have been erected to suffocate their natural desire to produce.
Taxes, regulation, trade tariffs, and rules-bereft monetary policy bereft are the four basic prosperity killers that are robbing Americans of much greater economic growth. That’s the sad part, but the good news is how easy it will be to reverse the stagnation. As soon as the four prosperity killers are neutered, we’ll enjoy wondrous economic times that will make the present seem very tame by comparison. Economic growth is simple, and the answers once again all around us.
Considering all the talented people who live in the United States, the existing economic outlook that has so many on the depressed side of happy is wholly inexcusable. Worse, the fact that we’re on the slow side of economic growth means that scientific discoveries meant to cure cancer, technological innovations that would make the internet seem quaint, and transportation advances that would render the traditional automobile dated are a more distant object. Our unmet economic potential in the United States is depriving us and the rest of the world of much greater happiness.
Politicians, economists and pundits are fibbing when they tell us the answers to abundant economic growth aren’t simple. The prosperity wrought by growth is well within our grasp, and it will be quickly achieved as soon as the governmental barriers to our ambition our removed.
It’s time to start growing again. The answers stare at us every day in the uncomplicated world around us.
ON THE ECONOMY: VIRUS ALERT
Look out, it’s gonna melt your face right off your skull. Look out, and make your iPod only play Jethro Tull. Look out, and tell you knock-knock jokes while you’re trying to sleep. Look out, and make you physically attracted to sheep Look out, steal your identity and your credit card. Look out, buy you a warehouse full of pink leotards. Look out, then cause a major rift in time and space, and leave a bunch of Twinkie wrappers all over the place. That’s right it’s a virus alert! Ok, using a Weird Al Yankovic song to start a column is probably reaching for the bottom of the barrel. Virus alert was on the 2006 album Straight Outta Lynwood and as a parody reflects on how federal agencies generally approach their analysis of the economic and social impact of proposed regulations.
The federal government requires that all new rules and regulations proposed by agencies undergo a thorough benefit-cost analysis if they are likely to have a substantial impact (generally considered a cost over $100 million). But the agencies themselves are responsible for the analysis, almost guaranteeing that they will always support the rule being proposed. Note that these are not rules that are specifically called for by Congress, but rather rules that come out of the regulatory bureaucracy itself.
Earlier this month, Congress took a small step to create a better oversight system for this rulemaking process. The House Judiciary Committee voted to send the All Economic Regulations are Transparent (or ALERT) act to the House floor. While the act would not address the problem of biased analysis, it would bring more transparency to the regulatory process by requiring agencies to make more detailed and consistent disclosures, including a submission to the Office of Information and Regulatory Affairs that includes: A summary of the rule, a listing of the objectives of and legal basis for the issuance of the rule, a discussion of whether the agency plans to conduct an analysis of the costs or benefits of the rule during the rule making, and a general estimate of the cost of the rule.
Even these minimal restrictions are being opposed by regulatory agencies and their allies who claim that the provisions of the Act would delay important rules, essential to protecting the health, safety, and welfare of the American public, due to posting requirements. As a result of this requirement, the benefits of critically needed regulations – whether measured in lives saved, environmental damage averted, or money saved – would be put on hold unnecessarily for six months or longer.
But delay is the whole reason for the Act. Currently myriad regulatory agencies push through expensive rules, based solely on their own internal analysis, without time for Congress to examine them. The ALERT Act would provide a six-month regulatory moratorium and notification to Congress. But while the ALERT Act gives more time for Congress to act, it does not fix a rulemaking process that does not provide for real cost-benefit or alternatives analysis.
Cost-benefit analysis is not only important to quantify the effects of proposed rules, but also to ensure that those rules and regulations enacted achieve their goals in the most cost-effective manner. In fact, the most important part of cost-benefit analysis is an examination of potential alternatives (including a do nothing alternative), and this alternatives analysis is generally missing from agency regulatory studies. No matter how well an agency identifies and quantifies the potential costs and benefits of a proposed rule, if it does not compare these against those from other alternatives, they are not really relevant. It is the alternatives analysis that puts the whole thing into perspective and determines if an agency is taking a proper approach to the problem being addressed.
In other words, a cost-benefit analysis without an alternatives analysis is a parody of the process. The ALERT act is a start, but it’s not enough to take care of the virus that is the current regulatory system.
The Monthly Manifesto is published by John Dunham and Associates, 32 Court Street, Brooklyn, NY 11201 as a service to our clients and friends. For more information relating to the content or for a free consultation on how we can assist your company or organization with your issues please contact us at 212-239-2105, or click the button below…