Just as filling potholes can only temporarily hide the fact that a road is crumbling, so does our refusal to recognize that government’s unprecedented experiment with Keynesian stimulus—known to the uninitiated masses as borrowing and spending on a breathtaking scale—has likely just about run its course. The manipulation of the stock and housing markets over the past six years through new—and unaffordable—government debt is certainly due, in the quaint jargon of economists, for a “correction” now that housing affordability nationally has sunk to a thirty-two year low and the stratospheric prices of stocks that are hype-rich and asset-poor are beginning to raise eyebrows everywhere.
The fact that government has become such a heavy hand in our daily lives should be the almost certain sign that we are all simply shouting for our share of whatever is left to give. Everybody is demanding a bailout in word or deed, whether it be the energy sector, manufacturers, real estate interests, bankers, hospitals, municipalities, or anyone who is now clamoring to obtain a tax credit, gain a loan guarantee, or offload some toxic asset by promising to create jobs, save jobs, or steal jobs from someone else.
None of this is the same as actual economic growth; it is, however, a boon to insiders of all stripes—and their political partners who want to trumpet their records of “job creation” before the next election, which is perhaps the only avenue they now have available to make that claim because we have been losing more private businesses—and their jobs—than we have created since 2008.
What we are living in now is a transfer payment economy: We take—or borrow—money from Point A and anoint some favored—or loud—constituency at Point B with those dollars. What we end up with is an economic “strategy” that sounds just like the directions on a bottle of shampoo: borrow, give, and repeat. It is worth asking whether our economy has now degenerated, at its core, into simply the shuttling tax credits, loan guarantees, and toxic assets from place to place in the hope that the illusion of growth can be sustained through just one more election cycle.
Anyone with a lick of common sense knows this cannot continue. The lesson of Eastern Bloc central planning was plain: State-sponsored businesses are viable only as long as the state has the means to sponsor them. If a hotel requires governmental life support to open, a factory cannot turn a profit without a twenty year tax break, or a shopping center needs a loan guarantee in order to turn on the lights, those businesses are not businesses—they are wards of our transfer payment economy—and the money to keep them afloat comes from us, our children, and our grandchildren.
As startling as it might be for many, perhaps the key to rebuilding our economy is to stop believing that government has the least clue how to do anything other than spray money, cluck comfortingly, and spray money yet again. This is fair to neither the businesses that have to compete outside a cozy shower of cash nor the taxpayers who end up on the hook for someone else’s inability to profitably run a business. The solution is not, as some have suggested, to spray money in an ever wider arc—it is to stop and allow businesses to rise or fall on their merits.
I realize that this all runs against every economic engineering instinct of our intellectual elite; nonetheless, the sooner we stop allowing politicians to cut the ribbons at businesses that taxpayers are unwittingly on the hook to support, the sooner we can start to shrink government, lower taxes, and stop subsidizing CEO paychecks that bear no relationship to actual job performance.
I am not, however, holding my breath waiting for this to happen; the careers of too many well-paid experts are dependent on the notions that government “knows” how to pick winners and losers, economic vitality is dependent on a “partnership” between the private and public sectors, and business “incentives” do something other than create more debt.
There is economic benefit to be had from repairing our roads, keeping our promises to our nation’s veterans, funding public education in a way that ties results to dollars, and eliminating make-work government bureaucracy. Bidding for Fortune 500 office parks with taxpayer dollars should, however, be discarded on the trash heap along with all the other official tomfoolery that has afflicted us for many years.
Also published in The News-Gazette (news-gazette.com) July 6, 2014