Laffer curve - the real laugh

[Undertoad]

But why was productivity growth slowed in the 70s - and why did it take until the 90s to recover?

I believe that government stifles innovation in quite a few ways.

It makes it easier to compete by creating an atmosphere where fewer companies can compete, by creating a business-prohibitive atmosphere. ("What's good for GM is good for the country." Nope. See the movie "Tucker".)

It creates artificial barriers to entry through regulation, heavy and bizarre taxation and tax rules, etc. (Insurance)

It removes productive human activity from the marketplace by pushing it towards unproductive choices. (Instead of being an environmental engineer, my friend Dave is chatting with Indians about EPA regs)

It semi-nationalizes certain industries, setting up strict rules by which supposedly private industries must operate. (Public utils, transportation, PGW, etc.)

It acts as a buyer itself, but a very political buyer, not a smart buyer. It buys a tremendous amount of things, but doesn't know how to price-compare, sets up its own rules, etc. (Defense, Medicare)

It competes directly against for-profit businesses with the might of its special nature as government. (Education, waste management, development)

Lastly, nowadays, it is joining WITH big companies (and not small ones, who are more likely to be innovative) in corporate welfare deals that are entirely political and entirely non-market based. (Stadium deals, shipyard deals, bogus "job creation grants", etc.)

That's just off the top of my head. How to prevent that kind of crap? Well it certainly won't happen overnight. The only recourse is to set into place courses of events.

We've known for a couple decades that government could be reduced by one-half to two-thirds. Reagan set up the Grace Commission to determine how the Federal government could achieve its goals. They recommended $400B of cuts of things that are irrelevant, etc.

But how to get there from here? Once a government proigram is started, it cannot be stopped. Government agencies are established under the idea that problems should be solved, but a government agency has no interest in solving a problem and thus putting itself out of business. Once the bureaucracy is in place, its central interest is in preserving itself, which it will do first and foremost, before anything else.

We know from history that the federal government will spend $1.25 fo every $1 that it thinks it has. So one way to start is to reduce what they have. The harder job is to actually cut spending, which you can only do (if you are a pol) by calling in political favors, etc. There is just no motivation to do that.

The only power the president has over actual spending is by submitting the budget.

So if I were Pres, I would submit a tax cut on day one regardless of what the actual conditions were. Can a president stop a recession. No, recessions are inevitable, and probably good for the economy anyway. What you say? Yup, I figure, the destructive nature of the recession generates new economic activity by shaking things up. The cruddy business plans fail; the expanding industries catch their breath; everyone takes a step back.

But knowing that, if I were Pres, I'd submit a tax cut ANYWAY, tell the country that it was an emergency measure because of the recession, and take 100% of the credit for the growth that -- again, inevitably -- follows the recession.

And during the recession, when confidence is at its lowest -- I would take that time to sell government cuts on the basis of the fact that it is necessary to tighten all belts, even the government belts.