A plan for economic growth

  1. A plan for economic growth

    On July 18, the Hoover Institute released a paper by four prominent economists, John Coogan, Glenn Hubbard, John Taylor and Kevin Warsh entitled “On the Prospects for Higher Economic Growth.” As you would expect, given the source, the paper outlines “conservative-minded” strategies advocated to produce economic growth: lower taxes, less regulation, rationalized entitlements and welfare, greater investment. The target indicated is 3 per cent annually versus current Congressional Budget Office projections of 1.8 per cent. With extensive statistics, the economists make the point that this combination of policy changes will promote economic growth by increasing employment, wages and productivity. You can find it here. The caveat to all this is contained in this quotation from the paper: “It is important to keep in mind that attaining 3 per cent annual GDP growth rate is based upon enactment and implementation of a package containing significant tax reform, regulatory reform, budget reform and monetary reform,” all of which requires leadership from Congress and the Federal Reserve. Given the current state of political division — pigheadedness? — the probability of all these things coming to pass is remote. Still, strong voices at the Fed advocating for them, as well as lightening banking regulation, should have an effect. There will be voluminous testimony before Congress and jawboning of its members. There will be pressure from business and financial groups, and, most of all, it will become clearer that these moves are necessary to boost the economy. While Republicans in the past have produced policy papers like the one above,…

  2. Taxes…how to pluck the goose.

    Well, Congress is fiddling with the tax laws again. Between the time this is written and the time you read it, all manner of mischief may occur. One thing is certain: whatever the Solons of Capitol Hill do, it will be done in the name of “fairness.” Actually, another thing is certain, too: it won’t be fair. Part of the problem, of course, is that what seems fair to me may not seem fair to you. I don’t much care about the depreciation schedule on a FedEx truck, but I sure want to get rid of that alternative minimum tax. And so on. But the bigger part of the problem rests with Congress. The tax code not only raises money for the government, it buys votes for our representatives. All those tax credits and deductions the legislators toss around make some constituency happy, and that presumably translates into votes for whomever can claim credit. Some of those deductions have become so sacred that people forget they are the work of legislators, and not carved in stone next to the Ten Commandments. The home interest deduction, for example, is designed to promote home ownership in America. A worthwhile idea, no doubt; but was it really conceived with 12,000 square foot palaces in mind? Is it socially beneficial to have homes like these dotting the countryside? Or the good old charitable deduction–certainly it is good to share with those in need, but do we need a tax break to tweak our consciences? Besides, doesn’t the government already…