Monday, July 29, 2013

For The Sake Of The Economy, Obama Should Keep His Eye Off Of The Ball

Forbes ^ | 07/28/2013 | John Tamny

Last Wednesday in Illinois, President Obama unwittingly explained how economies grow. Our 44th president asserted without a hint of irony that “Washington has taken its eye off the ball.” Exactly!
Economies aren’t living, breathing blobs, rather they’re a collection of individuals. Because we individuals have infinite wants, economic growth is as simple as the government getting out of the way of our production. What we produce constitutes our demand, so if we’re not restrained by government policy, we tend to be productive.
Considering government policy, from an economic perspective it’s best to break it down to four policy areas. Specifically, if governments get taxes, trade, regulation, and monetary policy mostly right, the economy booms. It’s as simple as that.
Taxes are a price, or a penalty placed on work and investment, so if the price isn’t too high, individuals have an incentive to get up and work each day. Trade is of course why we work, we’re all free traders at heart, so when politicians aren’t erecting barriers to trade, they’re not taxing the purpose of our labor. Regulations by definition don’t work, but they do inhibit the profit motive, so when they’re not increasing, companies can focus on producing for others rather than pleasing bureaucrats.
If we then analyze the U.S. economy in light of Obama’s largely correct statement that “Washington has taken its eye off the ball,” we can easily understand why the latter has coincided with a somewhat promising stock market rally alongside rising optimism among Americans about the health of the economy. To put it very plainly, too much government had been strangling the economy thanks to Washington keeping its eye on the ball. But with Washington and Obama happily distracted, growth has picked up.
(Excerpt) Read more at forbes.com ...

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