Recent economic data show that
U.S. job growth in May was negligible, while the official unemployment
figure-- at least the figure the Labor Department admits to-- rose to 9.1%.
The real unemployment figure, however, as compiled by economist John
Williams, may well be higher than 20%. It is clear the U.S. economy is in
terrible shape, and that no amount of government spending or Federal Reserve
quantitative easing can reduce unemployment, increase real productivity, or
address our debt fiasco.U.S. jobs and productivity are dependent on the
accumulation of private capital to finance existing businesses or fund new
entrepreneurial activity. Private capital-- whether accumulated by profitable
U.S. businesses, invested by private equity and venture capital firms, or
attracted from abroad-- is the key to economic growth and new jobs. But we
cannot create jobs if we demonize profits, punish risk-taking capitalists,
and stay hostile to foreign investment.
The steps to encouraging
capital investment and creating new jobs in America are simple, though not
easy:
• First and foremost, we must
create a sound U.S. currency backed by gold or some other commodity respected
by the market. No nation in history with a rapidly depreciating currency has
attracted private capital. Unless and until we prohibit the Treasury and
Federal Reserve from essentially creating money and credit from thin air, we
cannot restore the U.S. economy.
• Second, we must create a
favorable regulatory environment for U.S. business. This cannot be stressed
enough. When businesses don't know what's coming next from the EPA, when
Obamacare spikes their healthcare costs, or when the Dodd-Frank bill adds almost
unknowable regulatory compliance burdens, businesses simply will not expand
and hire. It is time to start shrinking the federal register.
• Third, we must stop spending
trillions of dollars overseas on foreign wars. There is no point in debating
a foreign policy we cannot afford. It no longer matters what neoconservatives
want. Our interventionist foreign policy is financed on credit, and our
credit limit has been reached. Our economy would be infinitely better off if
those trillions of dollars had never been removed from the private economy or
added to our debt.
• Finally, we must completely
revamp the U.S. tax system and move to a territorial model that does not tax
foreign source income. U.S. corporations are sitting on more than a trillion
dollars in foreign earnings that cannot be repatriated to the U.S. because of
taxes. We need to stop taxing unpatriated funds to bring those earnings home.
Better yet, we need to abolish the income tax altogether.
The U.S. economy is in deep
trouble. Congress needs to act immediately to restore the rule of law and
create an environment that rewards, rather than punishes, the critical
components of any healthy economy: capital accumulation and investment.
In this struggling economy it
is essential for politicians to take a step back and think about what
government has been doing to business in this country. In less than 200
years, the free market, property rights, and respect for the rule of law took
this nation from a rough frontier to a global economic superpower. Today,
however, our nation and our economy clearly are headed in the wrong
direction.
Of course, America has never
enjoyed absolute free-market capitalism: creeping government intrusion and
special interest political patronage have existed and increased since our
founding. But America historically has permitted free markets to operate with
less government interference than other nations, while showing greater
respect for property rights and the rule of law. Less government, respect for
private property, and a relatively stable legal environment allowed America
to become the wealthiest nation on earth.
By contrast, the poorest
nations almost always demonstrate hostility for free markets, private
property, and the rule of law. Capital formation, entrepreneurship, credit,
and wealth accumulation are uniformly discouraged in poor countries. Private
contracts are not reliably enforced, and private property is not secure in
the hands of owners. The predictable result is widespread poverty and misery.
