Amid ineffective economic banter in Washington, Bush-Warsh ideas at least make sense
Wake up and good morning. An Aug. 10 opinion piece in the Wall Street Journal on how to fix the U.S. economy, written by former Federal Reserve governor Kevin Warsh (photo, below) and ex-Florida Gov. Jeb Bush (photo, left), is gaining some buzz -- not for any ground-breaking ideas but for sheer common sense. Especially when compared to ongoing Republican-Democrat debate in Washington that makes the old beer ad "Tastes great!" vs "Less filling!" sound like pure intellectual discourse.
The Warsh-Bush piece, which states "We can't go on like this," is headlined A New Strategy for Economic Growth. Noting " We must put our fiscal house in order," the piece argues "cutting spending is essential, but we will never cut our way to prosperity." So, what should be the economic grand strategy? "In a word: growth," they write.
That includes assuring "that big companies are not advantaged at the expense of smaller, entrepreneurial competitors. If banks are 'too big to fail,' they are too big. They must be allowed to succeed or fail on their own merit, without any hint of government support. The failed behemoths at the core of housing finance, Fannie Mae and Freddie Mac, should be wound down. Robust, dynamic competition is a far better way to allocate credit."
The apparent point of this opinion piece is this: Spending cuts alone won't save us. Higher taxes alone won't save us. Lower taxes alone won't save us (but eliminating tax loopholes, deductions and credits are good ideas, they write). Washington's current ideology scene of kindergartners sure isn't cutting it. Do more, Warsh and Bush say, to spur economic growth.
There's been some interesting feedback to this Journal piece which, alas, has already morphed in public opinion into Jeb Bush's (sorry, Mr. Warsh) early position paper on a 2016 presidential run.
In a Sunday Bloomberg opinion piece by MIT economist Simon Johnson argues the U.S. has an economic crisis but it has little to do with our current political obsession with the debt. "First," he says, "we have a growth crisis.... one percentage point extra growth per year for the next 20 years would fix the U.S.’s budget problems.' And second, restoring growth will be hard, Johnson writes, Because of "a paralyzing fight over the distribution of income, in which powerful people can block the government from doing anything sensible if that is against their narrow interest."
Johnson praises the Warsh-Bush piece. "Bush’s rhetoric was suitably vague for someone who is likely to run for president in 2016. Bush and Warsh felt the need to repeat the mantra of the day, 'Cutting spending is essential,' and then quickly made the right point: 'But we will never cut our way to prosperity.'"
That bears repeating: We will never cut our way to prosperity. It will take more than that.
In letters published in the Journal, the response to the Warsh-Bush piece has been mixed. Sen. Bill Nelson of Florida praised it if only for is bi-partisan spirit in these sad political times. Reader Henry Dachowitz from New York said the economic growth ideas advocated by Mr. Warsh and Gov. Bush "are excellent but they have no realistic chance of implementation during an Obama administration." A more critical assessment appears in the letter of New Jersey reader David Halsband:
"The authors' new strategy is neither 'new' nor a 'strategy,' but only a laundry list of clichés: 'We must put our fiscal house in order'; 'cutting spending is essential'; 'big companies are not advantaged at the expense of the smaller'; 'a pro-growth strategy is decidedly long term in orientation'; 'respect for the rule of law'; 'the opportunities presented by a growing economy are matched by the skills of the next generation.' Can anyone disagree with these tautologies? A 'strategy' should be specific. 'A New Strategy' reminds me that our 'leaders' are failing us."
Let's hope not, as tempting as it is to conclude such things. Cliches may permeate the Warsh-Bush piece, but they sound a whole lot better than the strident sounds of 5-year-olds running wild in our federal government these days.
-- Robert Trigaux, Business Columnist, St. Petersburg Times