OK, So How Would I Fix It?

Alan Zibel, of Associated Press, sent this request out to the AP panel of economic forecasters: “Now we’re just wondering what you would suggest be DONE about this ‘slow patch’ or ‘growing recession’ we’re in? What’s your solution for an economy where short-term interest rates are already near zero and the economy is barely growing? Do we need to consider a whole new suite of prescriptions for this sort of anemic economy?” Here’s my response.

If a majority of the members of the U.S. Congress wanted to get the economy moving along at a sprightly pace they would do the following ASAP:

1. Enact the ” Fair Tax” ( HR 25 and S. 296) and make it effective January 1, 2011. No more corporate taxes, no more income taxes and (eventually) no more IRS! This would cause businesses and consumers to spend much more freely and investment would rise as well because national savings would increase. The advance payments to households earning less than $50,000 a year would encourage consumption and eliminate the regressive nature of a flat tax without rebates. A poor (but much more likely) second choice would be to extend all the provisions of the 2001 and 2003 tax cuts for two more years while they work up the courage to pass the “Fair Tax”.

2. Set up a National Commission on Regulatory Reform with the authority to recommend changes to laws or regulations that would bring the benefits closer to the costs. At the moment, our best estimates are that the costs exceed the benefits by about $ 1.4 trillion a year or about 10.0 percent of GDP. The recommendations from the Commission should be presented to Congress for an “up or down” vote similar to the BRAC Commission votes they’ve used successfully several times.

3. Immediately approve the pending trade agreements with Colombia, Panama and South Korea. Also, pass a law instructing the president to herd his fellow world leaders into completing the Doha Round of the WTO. Estimates are that would add over $ 2.0 trillion a year to world economic output. They should also encourage efforts to get Russia into the WTO.

4. Set up another Commission to Reduce Government Spending. We have way too much government and not enough private-sector flexibility. The goal should be to reduce discretionary spending to what it was in 2001. We’d begin running budget surpluses and paying off debt within a year and the stock market would soar.

5. Repealing the recently passed Dodd-Frank bill and enacting real regulatory reform as advocated by the members of the Shadow Regulatory Committee would be a really good idea too.

Of course, none of these things will happen with this Congress as they are clueless about what it takes to get government out of the way of the private sector. The current ” Small Business” bill is an excellent example. Small business owners don’t want or need more activity from the SBA; hardly any of them use it and they’d love to see it abolished as a first or at least an early step toward reducing government spending.

That’s why all the nonpartisan political prognosticators are telling us there will be a huge number of new faces in the next Congress. We’re headed for our third ” watershed” election in four years. That’s amazing.