Yesterday, I revealed that all the tax increases and spending cuts in the world won’t mend America’s precarious financial condition.
Instead, we need to encourage greater economic growth in order to free ourselves from the current debt spiral.
Why? Because it’s the only solution that’s worked over time.
And I’m convinced that this time will be no different.
With that in mind, Congress should spare us the partisan bickering and get to work on these three initiatives immediately…
Economy Booster #1: Get Corporations Spending
S&P 500 companies have churned out solid profits for several quarters now. And the current quarter won’t be an exception.
In fact, Howard Silverblatt, Senior Analyst at Standard & Poor’s, expects S&P 500 companies to report record second-quarter earnings.
But there’s a problem: Companies aren’t doing squat with it.
In 2009, capital spending sank to a five-year low. Plus, corporate cash holdings have stood at record levels for 10 consecutive quarters (and counting).
So why are America’s top companies clutching their wallets so tightly? In a word: uncertainty.
And the blame for this rests with the government.
Think about it: Over the past 18 months, we’ve endured three notable and lengthy debates that have had a direct impact on corporate America.
The first involved the massive overhaul of the healthcare system. Then came the budget impasse. And most recently, it was the debt ceiling.
Against such a backdrop, no executive in his or her right mind is going to loosen the purse strings. On the contrary… they’re going to adopt a bunker mentality and ride it out until the uncertainty passes.
So Washington, get the heck out of the way and stop creating economic uncertainty.
We have a record amount of pent-up capital waiting to be unleashed. And God knows our economy can use it after last quarter’s lackluster growth rate.
Economy Booster #2: Get Corporations Hiring
We shouldn’t rely on the government to solve our unemployment situation. In case our politicians haven’t already proved it, they’re incredibly inefficient at spurring job growth.
Case in point: The 3.6 million jobs “created’ as a result of the infamous stimulus package cost $185,000 per job. And that’s on the low end. The Congressional Budget Office’s original estimate pegs the cost at $278,000 per job.
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The median household income is about $50,000, according to the U.S. Census Bureau. So for every single job that government spending has created or saved, U.S. companies could have hired almost four workers.
So why aren’t companies doing so? Well, as I noted above, it goes back to the uncertainty that Congress has created.
But there’s another key reason: excessive regulation.
Consider: In the 1950s, only one in 20 workers required some type of government license (state or federal) to pursue their chosen occupation, according to Professor Morris Kleiner at the University of Minnesota. But today, that figure stands at nearly one out of every four workers.
Take the service sector, for example. It accounts for roughly 75% of U.S. GDP and the country’s most job growth, according to the McKinsey Global Institute. But it’s also overburdened with the most licensing regulations.
Once again, the federal and local governments need to stop cramping Corporate America’s style. Cut back on the onerous regulations and let businesses hire new workers.
Economy Booster #3: Facilitate Creative Construction
“Capitalism expands wealth primarily through creative destruction – the process by which the cash flow from obsolescent, low-return capital is invested in high-return, cutting-edge technologies.”
So said former Federal Reserve Chairman, Alan Greenspan.
In other words, new intellectual property (IP) is the currency of economic growth. We couldn’t agree more. And we need to put this capital to work.
But it takes almost three years for an idea to get through the bureaucratic mess at the United States Patent and Trademark Office.
And sadly, the provisions made in the America Invents Act of 2011 only create the potential for even longer patent proceedings.
In this globally competitive environment, unless you have a patent-protected product, you don’t have a sustainable business. But instead of encouraging such innovation and reducing the time in which they make it to market, current regulations and bureaucracy are squashing creative construction – and, in turn, economic growth.
Bottom line: If Washington wants to get serious about curing our debt crisis, our politicians should just get out of the way and let the free market work!
Ahead of the tape,