On Wednesday, while defending the indefensible — more stimulus spending for public sector unions — Harry Reid took to the floor of the United States Senate to let us know that private sector job growth is “just fine.” Mr. Reid, here’s a free tip. Since the current administration took office, the private sector has lost 1.6 million jobs. No, Mr. Reid, we’re not “just fine.”
Senator Reid’s and President Obama’s economic thinking comes straight out of 1930s Keynesian theory, which holds that all economic growth is stimulated by increased government spending and deficits. The doctrine supposes that such deficit spending will increase demand, which will lead to increased production and thus restore economic growth.
Keynesian economics failed to save the American economy during the Great Depression, and it has failed miserably ever since. President Obama’s “American Recovery and Reinvestment Act of 2009” (ARR) is a classic example of Keynesian policy run amok. After ARR’s $787 billion of deficit spending, the unemployment rate climbed and the economy grew worse. Likewise, the $447 billion “son of stimulus” jobs plan that President Obama has been relentlessly promoting (“pass this bill”) since September will not spur job growth. According to a CNN Money poll, almost 70% of small business owners say that the plan — if implemented — would not spur them to hire more workers.
While Mr. Reid is trying to raise Keynes from the dead, over-regulation and high taxes are threatening our prosperity and putting the American dream at risk. Despite what some people say outside the Beltway, what happens in Washington does matter. Policies passed by Congress and signed by the president matter in the lives of every American. And we’re now suffering the consequences of very bad policies — real per-capita income is down, unemployment is high and job creation is stalled.
Senate Majority Leader Harry Reid may have let his myopic, Keynesian ideology affect his good reason and judgment, but the problems in Washington are a bipartisan affair. An economic fact of life is that small start-ups have been responsible for all of the net job growth in the United States since the mid-1970s. Despite this economic truth, Democrats gave us Obamacare, Dodd-Frank and failed stimulus, and Republicans gave us Sarbanes-Oxley. All of these bad policy ideas gave small businesses unnecessary, costly regulations and higher taxes that have killed job growth.
With political leadership like this, it is no wonder the American people are fearful that Washington doesn’t have a clue about how to restore our nation’s economic health.
Here’s what Harry Reid should do: stop giving political speeches on failed stimulus policies and work to pass meaningful market-based reforms that will liberate entrepreneurs from taxes and costly, job-killing regulations. The health of America’s economy depends on small, new businesses being able to obtain capital, expand research and grow into public companies that can hire people while bringing new products to market.
The good news is that Americans know how to create jobs and advance economic liberty. We did it in the 1980s, when we overcame stagflation, and we can do it again.
If only our political leaders understood the fundamental link between new, start-up businesses and job creation, they would reduce tax rates to maximize incentives and they would deregulate the economy to stimulate growth.
As Peter Ferrara has eloquently detailed in his brilliant new book, America’s Ticking Bankruptcy Bomb, we know cutting tax rates and deregulating the economy will work because they’ve worked spectacularly in the past. The Reagan recovery started in late 1982 and lasted 92 months without a recession — the longest peacetime economic expansion in our history. Our elected officials have a successful road map to help them restore American prosperity. Let’s hope they keep Keynes in the grave.
Jerry Rogers is president of Capitol Allies and founder of the Six Degrees Project, an independent, nonpartisan effort that promotes entrepreneurship, economic growth, and free-market ideas.