BLOG: Can government fix the economy?

Tom Jackson
Nov 28, 2011

My last blog post discussed two books, The Great Stagnation and Race Against the Machine, which seek to explain why America's economy doesn't seem to be working well for most people.

Both of these books offer suggestions on what can be done.

Race Against the Machine's authors, Eric Brinjolfsson and Andrew McFee, offer 19 proposals. They are good ideas. But they read as if they were beamed in from an alternate universe, one where the United States Congress actually bases its decisions on good public policy.

For example, get a load of suggestion No. 16:

Eliminate or reduce the massive home mortgage subsidy. This costs over $130 billion per year, which would do much more for growth if allocated to research or education. While home ownership has many laudable benefits, it likely reduces labor mobility and economic flexibility, which conflicts with the economy's increased need for flexibility.

I agree with this, but would Congress? Congress can't even act when its blindingly obvious what should be done.

A case in the point is the so-called Supercommittee. Everyone knew that the members needed to reach a compromise between Democrats and Republicans that would reduce the deficit. But the 12, including Ohio's Sen. Rob Portman, couldn't bring themselves to do anything except issue press releases. How likely is it that Congress will end mortgage subsidies, just because economists across the political spectrum think it's a good idea?

This is where I think Tyler Cowen, author of The Great Stagnation, has a clear edge. Cowen's top prescription can be carried out by everyone, without waiting for John Boehner or Barack Obama to sign on.

Cowen's signature idea is that America needs more technological innovation to create new industries. And his most interesting remedy is this: Raise the social status of scientists.

Cowen explains,

When it comes to motivating human beings, status often matters at least as much as money. I would like to see both incentives pointing in the right direction. Right now, scientists do not earn enough status and appreciation. While scientists are not, in American society, a low-status group, neither are they thought of as especially high status either. Science doesn't have the cache of law, medicine or high finance. Few women or men dream of dating or marrying a scientist.

Raising the social status of scientists doesn't require an act of Congress, Cowen points out.

We simply need to will it, and change our collective attitudes, for it to happen. It's a potential free lunch sitting right in front of us. Challenge the scientists you know, ask them to educate you and your kids, and reward them with your sincere admiration.

 

Comments

KURTje

Tom you must want feedback......sure you'll get it.

Kimo

 

When it's all said and done, lots will be said but nothing will be done until after 2012.

The republicans are in control and it's all eyes on 2012.

It is.... what it is......

 

 

 

6079 Smith W

@ Mr. Jackson:

The "take a scientist to lunch" suggestion reads like pure sophistry.

If govt. were the "answer," the ol' Soviet Union (the Rooskies ain't stupid) and current authoritarian regimes like Cuba, Venezuela, et al, would be pinnacles of technological innovation and economic excellence.

As P.J. O'Rouke pointed out in his book, "Holidays in H*ll": About the only thing that oppressive authoritarian regimes have a lot of is govt.

On the contrary, govt. needs to allow for the unshackling of the creative juices of each and every entrepreneur and business whatever their specialty or inclination.  

Individualism, not collectivism is the key to the U.S.' future prosperity and economic success.

IMO, bureaucratic micromanaging of an economy as vast and dynamic as the U.S., has only led it and will continue to lead it into macro stagnation.

 

6079 Smith W

"Eliminate or reduce the massive home mortgage subsidy. This costs over $130 billion per year, which would do much more for growth if allocated to research or education." 

 Well first off, the govt. would have to change its implied policy that home ownership for the majority of Americans is desirable.  

On another point: How about eliminating the tax deduction for employee heath care insurance premiums?   Shouldn't it be a taxable benefit?   Why should those who pay premiums out of pocket be required to subsidize others? Level the playing field somewhat eh?

 

mikel

because the dems did such a great job right?

how about no tax returns for any able bodied person that has been on gov't assistance for more than two years?  that should save some serious money.

eriemom

 Mr. Jackson:

You lost them by the end of the second paragraph. In my opinion, we will never get agreement about elevating science. Even though it was the basis of the Enlightenment, we are no longer enlightened. There is to much money being made by the status quo, and science threatens that. The monied interests are working over time to discredit science and education.

 

The New World Czar

"Raise the social status of scientists"...Who funds and employs those in research and development? Well, of course those evil private-sector corporations. Who constrains those in research and development? Well, the all-knowing government!

 

6079 Smith W

@ Mr. Jackson: 

Govt. "fix" the economy?

Some have theorized that  Fannie Mae and Freddie Mac that are currently in govt. "conservatorship" (i.e. nationalized) are getting ready to seriously implode which is one of the reasons Rep. Frank who championed the GSEs is leaving Congress.

"The government-chartered firms’ mandate, which continues today, is to buy mortgages from banks and repackage them into securities either for their own portfolios or to sell to others. The banks can then use the proceeds from those transactions to write new mortgages."

http://www.bloomberg.com/news/2011-11-29/how-henry-paulson-gave-hedge-funds-advance-word-of-2008-fannie-mae-rescue.html

Strangely, the word is out that the Fed. Reserve is getting ready to buy $545B in mortgage backed securities from the GSEs.

http://www.bloomberg.com/news/2011-11-27/bond-dealers-see-fed-buying-545-billion-of-home-loan-debt-in-third-easing.html

For the most part, all the govt. has done is taken "too big to fail" and repackaged it as a new and improved -  "too bigger to fail." 

Our govt. continues to "kick the can down the road" and we're running out of road.

---------------

@eriemom:

Find a "scientist" and take 'em to lunch.

 

Phil Packer

This is a waste of energy since the super rich will always decide how much money the rest of us will have. Also, a black hole is going to swallow up our universe next year anyway, so...

EddieOs

More on Gingrich:

Newt on why he wanted a divorce from Jackie: "She's not young enough or pretty enough to be the wife of a President. And besides, she has cancer."

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The plain simple truth is it can’t. All a government can do is get in the way, add regulations on top of industry and cost it more money.  That is not to say that regulations are not needed, rules and laws are necessary because people abuse and profit from abuse. A system of laws is a needed thing. regulation is a needed thing. But don’t confuse regulation with OVER-regulation where the law becomes a hindrance to building business.

Please if I am wrong and Government does something that produces value please let me know. I do not believe the Government can fix the economy. That is up to us. But the government can keep us from doing so, and that is a bigger fear then anything else.

I was seaching for this answer and got the above passage from the following link.

.http://theplainsimpletruth.com/2010/07/09/question-government-fix-economy

I am also waiting for your replies if there is any other way. Thanks Hope you will like it.