Americans believe the nation has been on the wrong track for decades. The economy grew at a slower pace the last forty years than any forty year period since 1939. America remains one of the most prosperous countries in the world, but our share of the world economy continues declining. The share of the US economic pie going to workers and rewarding productive effort is near the smallest in history. This leaves many hard working people with no economic security and others without adequate incentive to work.
During strong economic expansions there were a couple of years under both Reagan and Clinton where a majority had confidence in our future. We rallied around the flag after 9/11, but confidence we were headed in the right direction was short lived. Who fears the most for our country switches with Presidents, but regardless of political party the majority continues to answer, “No!” When asked, “Is the country on the right track?”
I’m launching this blog to get to YES! I have no ability to get us there on my own, but “We the People” do. Our country has so much going for it. If enough people shift their perspective just a bit closer to reality we can restore the faster growth of yore with a rising tide that lifts everyone.
I’ve watched the growth unfold over the last 40 years and studied and pondered what worked and didn’t over the last hundred. When you look at what happens over ten, twenty or forty year periods, you get a clearer vision of what policy enables widespread sustainable prosperity. Over that kind of time frame political spin reveals itself as spin.
Much of the spin is about taxes. Fiscal policy is how the government taxes and spends. Almost everyone hates paying taxes, especially the wealthy. If it takes building a strong inclusive economy to avoid paying taxes the wealthy will do the heavy lifting to avoid paying. If they can influence policy to avoid taxes with less work they tend to do that instead.
Money is good. Having money is good, but the love of money, the willingness to pursue money at the expense of others, leads to all kinds of mischief and if left unchecked a weak forty year growth rate. Greed left to its own devices hoards wealth and chokes prosperity. Good policy can channel self interest to serve the public good. We used to have a tax policy that did that it better.
The long term economic growth rate is highly sensitive to the ratio of business revenue used to run and grow businesses. Tax policy has a huge influence on the share of revenue that goes into the deductible expenditures like wages, equipment and research that grow businesses and the economy and also the share of revenue pulled out of businesses as personal income of capitalists.
Spin attempts to hide this relationship between tax policy and growth on two fronts. On the first front It tries to claim low tax rates on the wealthy spur faster growth. While there are elements of truth here it is easy to debunk the spin which is supported with hypothetical mathematical models and cherry picked data. The second front helps refute the first, by pointing out that there is not a strong statistical relationship between tax rates on the rich and single year periods of economic growth. Both fronts mask the policy that best promotes prosperity. Using long term periods mentioned above refute the second front. When you follow me you will soon understand the power of fiscal policy.
When I studied economics, the Vanderbilt Econ Department made a strong case that free competitive markets help an economy fulfill its purpose of satisfying the needs and wants of people. The dominant political rhetoric at the time was free markets.
Much of what is good for profit maximizing businesses also satisfies the needs and wants of people. Problems come where the interests don’t overlap. Business is the main tool of the economy. Free unfettered markets can enable putting the tool before the purpose of the economy. Putting the tool first misallocates resources to businesses that aren’t doing the best job of taking care of people. Weaker growth and other problems follow.
The bigger and the broader the perspective we have the closer it comes to reality. We have to be willing for what is true to be true regardless of what we currently believe. Life should stretch our perspective. It certainly has mine.
I was born into a wealthy family. My parents were members of different churches and different political parties. One was raised with corporal punishment and one was not. My father used to say, “My wife and I agree on everything except politics, religion and how to raise children.”
In third grade family fortune turned. Privileges I thought were normal disappeared. Another shift came in high school and financial status was again beyond the average of my peers. As an adult I’ve interacted with people in the top 0.01% of society and with the homeless. Through it all I was me and it’s clear who I am, is not defined by economic status. I’ve been a member of both political parties and also voted for independent candidates.
As an investment advisor I was once on the verge of a twenty year record of outperforming the market after fees for my clients. But, I also know the great pain of being emotionally attached to a belief that turns out to not continue working and leads to a subsequent decade of under performance. Pride does indeed lead to destruction. As a child my favorite poem was “If”. It’s kind of like I was learning to play out Kipling’s words, “If you can meet with triumph and disaster and treat those two imposters just the same.”
The perspective I’m going to bring you in this blog spans the attitudes of want and abundance. It rises above political ideologies. While the posts will have political implications they will recognize that both parties have good intentions, just as both of my parents did. The analysis will be empirical not ideological. As Jesus said, “You recognize the tree by its fruit.”
Perhaps most important the blog will take a long perspective that looks past the next year or the next election. It will look to big ideas that can help make the twenty-first century another American century.
If you want to be a part of the solution, if you have enough humility to think gosh I might learn something I didn’t already know, If you want to understand fiscal power, if you want to help yourself, me and others move perception enough closer to reality that we can create an economy that uplifts everyone. Follow me and let’s solve this.