Earlier this month, the Brookings Institution asked 10 of their scholars, “What was the big story in economics over the past decade?”
Brookings leans left; in economics, that means they tend to favor greater government intervention than a free-market advocate like yours truly does. I’ll respond to most of their 10 scholars for the purpose of offering a different (and hopefully illuminating) perspective.
1. “Low interest rates have left the Fed backed into a corner.” True, but be clear that the Federal Reserve has painted itself into the corner. I wrote about this five years ago. The Fed will have a hard time ever letting interest rates rise to “normal” levels—not because of a decline in “the natural rate of interest” as the Brookings scholar states, but because the federal debt is too large to finance at historical interest rates. And the notion that the Fed will need to “cut rates to fight the next recession” is pure Keynesian dogma. The Fed let rates rise during the Depression of 1921, and the economy quickly adjusted and rebounded.
2. “Robbing the poor to give to the rich.” This is sheer class-warfare claptrap. The whole income inequality issue is a gross misrepresentation of economic reality. Yes, the super-rich minority owns a higher percentage of the country’s wealth. However, they didn’t take this wealth from the poor, but rather created this wealth by creating more value for more people in a massive flood of positive-sum trades.
As Joseph Schumpeter once wrote, “The capitalist achievement does not typically consist in providing more silk stockings for queens, but in bringing them within the reach of factory girls.”
Today’s billionaire entrepreneurs are bringing all sorts of goods within reach of the masses. The fact that there’s more wealth at the very top than usual is a sign that there are more wealth creators providing more goods to more people; in short, we’re all getting richer.
3. “The cost of the free market was high for some”—i.e., the wealth inequality argument again (See #2): According to this scholar, the collective “we” (meaning government, of course) failed to “make needed public investments” and “reduce the national debt.” Excuse me, but if you want to reduce the national debt, then you need to trim, not expand government expenditures (aka “public investments”). I have long argued that we should reduce government debt, but there are two groups in Washington—Republicans and Democrats—who have perennially failed to do so.
4. (5th on Brookings’ list): “Growth in health care spending was unusually low.” It grew “only … from 17.3 percent [of the economy] to 17.7 percent.” Hmm, what’s the goal—25 percent; 50 percent? Although two Brookings scholars write, “the reasons for [the slower growth of health care spending] are unclear,” they also write, “the prices Americans pay for health care services are higher than they need to be.” Bingo! It’s not exactly cutting-edge economics to say that higher prices tend to decrease consumption.
5. “Taxing the rich has taken center stage.” May I add, “unfortunately”? Again, see #2 above. It’s hard to think of policy proposals more repugnant to the individual rights that Americans hold dear than wealth taxes. As the writer says, such proposals “would have been too radical to seriously discuss 10 years ago.” That is 100 percent true and shows how extremist the left wing has become in a relatively short period of time.
6. “Dismal news on life expectancy.” This was one of two very important, worrisome, and right-on entries on the Brookings list. Life expectancy has been falling for approximately five years due to “increases in drug overdoses, alcoholism, and suicides among working-age Americans.” This is a national tragedy and a national emergency.
If “lack of opportunity” is contributing to this grim trend, the answer surely isn’t to plunge the economy into stagnation, which is exactly what the various socialist agendas proposed on the left would do. We need an economy less burdened, not more burdened, by the heavy hand of government control.
We need to do a better job of raising children to have the resilience, character, and adaptability to cope with the accelerating pace of change. This will come, not via economic reforms, but through a spiritual revival. (Let me recommend Charles Murray’s illuminating 2012 book “Coming Apart.”)
7. “All school and no work becoming the norm for American teens.” Here, the scholar expresses optimism that more kids staying in school longer will increase human capital and pay off significantly in coming decades. Maybe. But some are staying in school due to imprudent student loans that cripple lives; others emerge from school as indoctrinated foot soldiers for leftist causes; and American schools, in general, are achieving dubious results.
8. (10th on the list) “Demographics became a headwind for U.S. economic activity.” This is the other entry on the list that hits the bulls-eye. Demographic trends—in our case, a swelling population of senior citizens concurrent with falling birth rates—will have profound economic consequences. We boomers heard environmentalist zealots predict that overpopulation would devastate our planet, but those predictions fizzled; now we’re beginning to awaken to the very real challenges that will be posed by a cessation of population growth or—more ominously—an outright decline.
Thank you to the Brookings Institution for calling these issues to our attention. Numbers 6 and 8 in our list require top priority. Most of the others either aren’t real problems or are misunderstood, due to the skewed ideology so common among today’s scholars.
Mark Hendrickson, an economist, recently retired from the faculty of Grove City College, where he remains a fellow for economic and social policy at the Institute for Faith and Freedom.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.