It is about time that we prepared a wish list of changes that should occur to put our economy back on a sound footing.
Probably not all measures proposed can be enacted, but they will serve as benchmarks, guides. It is generally accepted that our economy is in serious trouble, a situation that has been going on for years.
Reforms clearly are essential.
Economic output has declined to slightly over one percent annually, and the “recovery” from the recent recession is the slowest in history.
Real business investment, the harbinger of future growth, is virtually unchanged from last year’s sluggish pace. Median income growth has been in a many-years slump. The number of full-time, middle class jobs has not been advancing very much. Furthermore, the net worth of most families has been in a downward slope for years. Yet, so far the remedies coming from Ottawa have focused on minimizing inflation, not on expediting economic expansion.
We have been propping up old industries such as the automobile sector and helping the financial industry. As a recipe interest rates have been cut to almost zero. It is not surprising then that there has been an explosion of borrowing by individuals and governments.
Consumer price inflation has been moderate, but the indices have been “adjusted” to minimize rising costs. The huge flows of inexpensive imports, mainly from Asia, help to subdue prices. As a consequence, our foreign trade balance has fallen into a deficit. Unemployment remains at shameful levels, particularly among young people.
In the last decade the debts of the federal and provincial governments have been soaring with balance budgets promised for “tomorrow”. Provincial deficits on a per capita basis rival the worst in the United States.
The financial industry has turned into a giant casino, with Wall Street and Bat Street capitalizing on a sea of liquidity, engaging in derivative trading. Central banks here and south the border have abetted this process by money printing on a colossal scale.
We simply must return to sound money, balancing government budget deficits, stop printing money and debasing our currency with central banks returning to their original purpose, providing liquidity in times of crisis.
We should stop subsidizing the housing industry, cut back on entitlements to affordable levels, and get free markets back to wealth creation.
These may be pipe dreams for now, but their days surely will come.
David Stockman, who was President Reagan’s chief economic adviser, warned that the United States is fiscally, and intellectually broke.
“When the latest bubble pops, there will be nothing to stop the collapse.”