Politics & Policy

Unleash American Business

An explanation for the Great Stagnation.

Over the next 50 years, I will double everyone’s life expectancy. And not only will most of you live to be 160, but 120 will be the new 30, and 150 will be the new 55. The last ten years of your life will resemble old age today, and I will have to double health-care costs — but still, this is quite a deal, no?

The great deals do not end there. For a mere doubling of the cost of education, I will ensure that every child receives an education that will prepare him or her to work in the future economy, so that virtually all of them will attain a standard of living only billionaires can aspire to today.

Want more? How about I keep government revenues — that is, taxes — under 20 percent of GDP? In return, I will guarantee a century of unprecedented economic growth, leading to America’s quintupling the size of its economy within a lifetime.

Although no one told them at the time, all of the above is basically the deal anyone living at the turn of the 20th century received: Average life expectancies doubled, everyone who desired to could receive an education that the great scholars of the past would envy, and even the poor often lived better than King Louis XIV. Meanwhile, the government went about its affairs at a fraction of the percentage of GDP it confiscates today.

All of which goes a long way toward explaining the dissatisfaction that many Americans are currently feeling. Today, we get skyrocketing health-care and education costs, without any of the massive gains our grandparents received. Does anyone believe that the next trillion dollars of health-care spending will do more than budge current life expectancies? A 70-year-old in reasonably good health today cannot expect to live any significant amount longer than a 70-year-old in the same condition a generation ago would have. At most, medical science can extend her life for a few months at phenomenal cost. When my grandfather was born, his life expectancy was between 45 and 50. Thanks to advances in medical science and nutrition, he didn’t depart this world until he passed 90. I feel a bit cheated that the best medical science can offer now is that when a substantial number of us get to 90, we may be able to linger a few months longer.

The same for education. When my grandfather was born, only a small fraction of students finished secondary school; he never passed fifth grade. Moreover, college graduates barely qualified as a statistical ripple in our growing population. A major investment in education made secondary-school graduation the norm, and well over half of all Americans have at least some college education. Who would resent spending more money when you get results like the above?

The problem today is that Americans continue spending ever-greater sums on education although the numbers started stagnating over two generations ago. No matter how much money we throw at education, we cannot seem to get high-school graduation rates to 90 percent or college-graduation rates much above 30 percent. Moreover, many who do graduate are getting an education inferior to what their parents received. We are spending more and more for ever-diminishing returns.

Meanwhile, the government continues to collect an increasing portion of the American economy for its own uses. In the past, one could argue that Americans gained from government spending. Huge dams were built, an Interstate Highway System was constructed, and going to the moon was good for national morale. Today, the federal government collects over 25 percent of the nation’s GDP, but we get little of economic consequence in return.

No major new dams are planned. In fact, the cost-efficient energy produced by dams is frowned upon. Rather, government wastes tens of billions on inefficient alternative sources, such as wind and solar. It seems not to matter that every job created by these sources of energy destroys between two and four jobs elsewhere in the economy. Moreover, far from building something as useful as the Interstate Highway System, the government is maintaining our existing infrastructure so badly that the History Channel is turning a profit on a show about it.

Rather than using our money in ways that might propel America forward, the government has been holding the country back. Besides subsidizing job-killing alternative-energy schemes, it has busily created dozens of agencies that act as roadblocks to progress. For if there is one thing agencies are good at — besides extending their own existence — it is creating regulations for everyone else to live by.

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.

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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