l****z
发帖数: 29846 | 1 By LIZ PEEK, The Fiscal Times
November 23, 2012
Some people miss the 1950s because of the era’s simple pleasures like
Twinkies and Howdy Doody. Paul Krugman misses the decade’s high tax rates
on the rich. In a recent column, he harks back to the days of drive-in
movies and Pat Boone for lessons he says “remain relevant” – namely that
an economy can prosper even with extraordinarily high taxes. More broadly,
Mr. Krugman argues that the postwar years show that you can “have
prosperity without demeaning workers and coddling the rich.”
Mr. Krugman should get out more. He would find that women no longer wear
poodle skirts and the United States is no longer the globe’s free-range
economic powerhouse that it was after World War II. In the 1950s, the U.S.
was leagues ahead of its economic rivals, most of which had blown up their
budgets, and their industries, during the long years of destruction.
Though the U.S., too, had ramped up spending to fund the war effort, and
subsequently raised taxes to pay down debt, its necessary industrialization
leap-frogged the country ahead of its rivals. Productivity soared; in 1950
it hit 6.7 percent and for the decade it averaged 2.75 percent per year –
the best ten-year record to date – allowing, among other benefits, generous
worker pay. The country also benefited from pent-up demand: in the early
50s we had three successive quarters of GDP growth above 10 percent.
The U.S. was the world’s largest market for nearly every kind of good, and
to a large extent we supplied our needs. In 1950, we were actually a net
exporter. In those halcyon economic days, the nations that would come to
take our jobs had not yet entered the ring.
These days, we are thrust into a do-or-die contest – something those on the
left like Mr. Krugman refuse to acknowledge. Ironically, leaders in Spain,
Italy and even Socialist France – architects of the kind of overburdened
state that Republicans in the U.S. oppose -- understand the need, above all,
to boost their competitiveness.
When Moody’s just this week cut France’s debt rating one notch below
triple-A – the same mark-down accorded the U.S. by Standard & Poor’s last
year -- the ratings agency noted that the downgrade would have been tougher
but for a “strong commitment to structural reforms and fiscal consolidation
.” Faced with its own fiscal cliff – or possibly a valley of long-term
decline – France’s Socialist leaders have adopted measures to boost their
industries’ competitiveness. For the U.S., the message from S&P was just
the opposite – we were downgraded because we continue to ignore our
problems.
France is not the only EU country facing up to reality. Italy’s Finance
Minister Vittorio Grilli said last week, “We need to keep cutting spending
in order to reduce taxes…this will improve growth prospects.” Reporting
the fifth consecutive quarter of GDP shrinkage apparently concentrates the
mind.
Mr. Grilli suggested that in the next decade, the moribund Eurozone, now “
slow and behind the curve” would be “ahead of the pack.” He looked to
privatizations and better control of government spending as essential to
that achievement. Italy and France are not the only countries engaged in
overhauling their economic underpinnings; impressed by Germany’s relative
success, numerous EU countries are borrowing from that country’s playbook
in cutting taxes and regulations to energize businesses. How ironic it will
be if the Eurozone is driven to make the tough choices that our leaders
abhor, and jumps ahead of us.
It would be ironic, and quite a turn-about. Ronald Reagan became President
in 1980 and set about undoing the economic mischief that had brought about
sky-high interest rates and slow growth under his predecessor. Reagan
lowered marginal tax rates from 70 percent at the upper end to 28 percent
and deregulated railroads, banking and airlines. He reined in government
spending and unleashed the energies of the private sector, creating above-
average growth. The U.S. prospered.
Europe was left in the dust, guided by policies aimed at wealth
redistribution and raising worker protections. In recent decades, the EU
countries have lagged, with their share of global GDP dropping from nearly
36 percent in 1969 to 26 percent in 2011 (while the U.S. managed to hold its
place with about 26 percent over that period.)
With the financial crisis knocking out the region’s fragile economic
scaffolding, Eurozone leaders are reappraising the durability of their
social safety net, the wisdom of the region’s commitment to high-cost green
energy and the affordability of its high-cost labor. They now view Europe’
s growth as tied to reenergizing its private sector; they recognize that the
welfare of their people cannot be guaranteed by governments with declining
revenues. Our leaders – and especially the Obama White House – has yet to
get the message. Neither has Paul Krugman.
A recent survey by the Financial Times showed executives rating China, India
and Russia as less friendly to business than in years past. Economists at
ISI recently noted that foreign direct investment in China fell 0.2 percent
in October to $8.31 billion from a year earlier, the 11th decline in 12
months.
While there may be myriad reasons for the drop, chief among them could be
the perceived frostier welcome from Beijing authorities. European nations
should leap on this opening. We in the U.S. should as well; attracting
investment is pivotal to growth. The U. S. has cheap energy, the rule of law
, minimal corruption, reasonable infrastructure and an educated workforce;
we can compete.
U.S. politicians seem to be looking for common ground. Furthering our
competitiveness is not only common ground, but fertile as well. Streamlining
and strengthening our worker training programs, overhauling our
dysfunctional H1B visa program, creating private-public partnerships to
build advanced port facilities or other needed infrastructure, tackling the
roll-back of overlapping regulations – efforts like these could attract
bipartisan backing.
Like children learning how to ride a bike, our leaders could practice
working together on such relatively non-controversial issues. The training
wheels (and the harmony) could come off when we get to really tough choices
– like entitlements reform. But who knows, maybe with some success under
their belts, the two parties could begin to find their balance after all. |
|
