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An explanation for the Great Stagnation.


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Jim Lacey

It is not a coincidence that, judging by life expectancies, truly great advancements in medical science slowed precipitously soon after the creation of the Department of Health and Human Services. Likewise, in 1979, we created the Department of Education just in time for it to spend billions on our schools’ descent into mediocrity.

NASA required only 10,000 employees and $25 billion to send a man to the moon. Forty years later, it took 18,000 employees and as many as 40,000 contractors to launch our last shuttle flight and close down the manned-space-flight program. Not long ago, our government spent money to help all Americans dream big. Now it spends billions trying to eliminate the risk that is a necessary ingredient of any great achievement. Our vision has become very small.

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Tomorrow, Tyler Cowen’s Kindle sensation, The Great Stagnation, will be published as a book. Cowen draws attention to the fact that most of the achievements that America’s greatness rests on were the result of inventions made in the late 19th and early 20th centuries — planes, cars, phones. These inventions allowed America to build industries that employed tens of millions and made us the world’s preeminent economic power. In those days, our optimism knew few bounds, our vision was soaring, and all things seemed possible. And, almost unbelievably, what we envisioned, we did.

In those days, government was not standing athwart progress yelling “STOP!” Cowen’s book, as intriguing as it is, fails to address a key question: Why did the innovations and inventions that made America great stop coming? Americans have not changed. We still have men and women of great vision, willing to take great risks for the prospect of great rewards. But they are shackled and held back by the chains of government regulations.

If our best days truly are before us, we must release those willing to dare all and let them get to it. Government has a role in society, but it is a limited one. Over the last 50 years, American government has ignored the limits it was founded on and become a pervasive force throughout society. The good it does or is capable of doing is now far outweighed by the damage it is inflicting. By trying to regulate risk out of society, it has instead impeded progress.

If America is going to soar again, government must let capitalists be capitalists. Let them take risks. Let them suffer when they fail. Let them keep the rewards when they succeed. The men and women who made this country great did not ask for much — protection from foreign invaders and domestic criminals, rule of law, and a level playing field. Beyond that, all they wanted was for the government to stand clear. And if government must take a role, one question should be on everyone’s lips: Will what is proposed grow the economy?

As a first step, we should require every department and agency in the federal government to reduce the number of regulations it imposes by 25 percent — to start. To help them focus, 25 percent of their budget should be withheld until they do so. Since you asked, step two is to do away with the Dodd-Frank financial-regulatory agenda before it irredeemably wrecks the foundations of our system.

— Jim Lacey is professor of strategic studies at the Marine Corps War College. He is the author of the recently released The First Clash and Keep from All Thoughtful Men. The opinions in this article are entirely his own and do not represent those of the Department of Defense or any of its members.



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