What to do after an economic bubble bursts.
The economic crisis is an economic bubble. It’s a very big bubble. But, it isn’t an economic meltdown or the end-of-capitalism-as-we-know-it, hysterical hyperbole. Even if politicians, the news people, and losing special business interests bleat that it is so. Yet, a 24 month adjustment – tops – can become a disaster if the politicians use the statist and socialist tools which made the Great Depression worse – and longer. Since it appears that President Obama and Democrat majority in Congress will do, precisely, what is wrong economically and right politically – then we need to fix Virginia first. Cut taxes, cut spending, reform entitlements to build individual savings.
This isn’t rocket science. Nor, is it the inscrutable intricacies of high finance. It is Economics 10. Niall Ferguson nails the past, present and makes interesting suggestions about the future in his “The Ascent of Money.” He calls today’s crisis as it was unfolding in 2007. His book is a tour de force about economic history that is readable, understandable, and incredibly prescient. It’s history at its best – the past providing prologue for the present.
The guidance is simple. The best way forward is painful in the short term, but rewarding as soon as possible. Obey the laws of economics like following the laws of physics. Don’t jump off a building in physics = no financial institution is too big NOT to fail in economics. Oops, since it’s too late to let the losers on Wall Street and in Detroit fail, we, The People, are out at least $1 trillion. Or, rather, the debt load on the next generation has increased by more big bricks. So, what’s Virginia to do when the Federal government mangles the market and bungles the economy?
Follow the laws of economics in this market of 7 million persons.
Our Commonwealth exists in our unique economy that has evolved since civilizations started in 4000 BC. Virginia is an evolving place in time with a traceable history. The economy is constantly changing – and will into the future. The basis of this economy is capital. Money.
Capital is to a family what the farm, the fishing boat, or hunting party was to our ancestors. It’s the basis of our survival. It’s the means to whatever materialism we pursue. Available capital is the measure of individual economic opportunity that has become essential and intertwined, like a helical of DNA, with individual freedom.
Yes, America was for the most part poor and free for much of its history. But, the dislocation of labor from the farm with industrialization era and urbanization – and the fragility of employment with the information era and globalization – makes individual capital = the family farm.
Farmers can provide for their family and make some profit based on the certainty of what their labor produces – and subject to the uncertainty of weather. Most Virginians have a job and a savings account instead of 40 acres. The security of the soil must be replaced by more security in savings. Growing capital as a crop is essential to provide for the Good People of Virginia. Every Virginian can, and must, have personal savings.
Government can’t create capital or jobs. Virginia must protect the free functioning of the marketplace just as it is supposed to protect individual freedoms. This is limited government, not laissez-faire, in action. It serves the individual sovereign of the state – while defending the working person from abuse and the environment from damage. It turns government from serving special interests as Virginia does now.
We must fix Virginia, first, for more, better economic opportunity – to enable, expand and enhance personal freedom for the individual to chose where and how he works, lives, plays and raises a family.
Cut taxes. Cut personal and corporate taxes.
Cut spending. Stop un-Constitutional spending.
Cut market interference in the production of energy – without sacrificing the environment.
Reform entitlements, like Virginia’s formula for Medicaid.
Reform mandates, like Virginia’s Standards of Quality for education. The SOQs have been updated, but they need to be reformed.
Encourage individual savings. Provide the tax incentives. Take the ’04 half percent sales tax sham and convert it into Commonwealth Trust Accounts for each Virginian. Focus the accounts as health savings accounts now. Expand their uses later as they grow.
Elect the politicians who can tell Virginia – before the ’09 election – what taxes and spending they will cut, how they will reform entitlements and grow individual savings.
Finally, know that an ‘economic adjustment’ = hard personal hardship for families. Their pain is real. The healing medicine includes incentives for charity and tough love, not government handouts. Government generosity makes matters worse – slows the recovery of the economy – and, sooner or later, punishes every family getting back on their feet.
Let’s fix Virginia first. Now.
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