The Only Thing That Can Save Us Is Economic Growth

Time and again, those of us who want to see the federal government shrink get disappointed. 

That doesn’t mean the fight isn’t worth having–without constant badgering by us, the federal government would grow ever faster, and we even get a minor victory every once in a while. Sometimes it is hard to tell exactly what is happening because Washington math would be best described by Douglas Adams rather than an accountant, but I THINK we make a difference. 

But if we learn anything from the past few months, other than don’t count Donald Trump out, no matter how bad things seem to be for him, it’s that we aren’t going to solve our federal budget problems by cutting spending. Not because it is fiscally impossible, but because it is politically impossible. 

Yet, as they say, what can’t go on forever…won’t. And piling up trillions in debt and sending the debt/GDP ratio into the stratosphere can’t go on forever. 

There is only one solution, and that is boosting economic growth. If you can’t reduce the debt, you must increase the GDP. 

That requires reducing the fiscal and regulatory drag that the federal and state governments impose on the economy. While economic growth rates are not infinitely malleable — government can’t mandate increased investment and productivity — it’s indisputable that tax and spending policies impose a lot of friction on the economy. It’s likely, however, that reducing taxes and regulations is much more politically palatable, and even popular. 

You can’t cut taxes to zero without blowing up the federal government, but you can structure the tax code to encourage rather than discourage economic activity, and rationalizing regulations may be difficult, but it is both necessary and doable. 

Most people barely notice–unless they are trying to do something that the government openly regulates, like constructing or modifying a new home–how burdensome regulations can be and how much drag they impose on the economy. But we have an instructive example in the Los Angeles fires. 

Despite promises to ease regulations–an implicit admission that regulations are a massive barrier to building things–almost no reconstruction has actually begun. It’s not that people don’t want to rebuild. It’s that the government makes it so darn hard. 

Bill Maher has gotten partially red-pilled on this issue. NSFW:

This sort of thing isn’t just infuriating, it’s devastating to economies. Regulations can kill economic activity, and even government projects can’t get built because government bureaucrats make everybody jump through hoops, costing time, money, energy, and discouraging growth. 

A few months ago I was reading about a government solar project–the federal government was pushing it–that took 17 years from start to finish. 

17 years. And that was for a project that the government wanted! In many cases, bureaucrats can just kill something they don’t like. 

We aren’t going to eliminate regulations, and in a modern economy we don’t want to. There have to be rules of the road. But the whole point of regulations is to ensure that nobody makes things worse, not to ensure that nobody can do anything at all. 

In an ideal world we would slash taxes, spending, and regulations. Pork would be stripped out, and politicians would be driven by common sense and spend most of their life in the private sector. 

This is not that world. 

So, if spending control is too heavy a lift, we should focus even more effort on slashing bureaucracies and regulation. Compared to tweaking Social Security or Medicare, which both need reform but likely won’t get much, this would be an even bigger boost to the economy and, yes, federal revenue.