The Keys to Economic Growth and New Jobs

Economics / Economic Theory Jun 13, 2011 - 02:53 PM GMT

Recent economic data show that U.S. job growth in May was negligible, while the official unemployment figure-- at least the figure the Labor Department admits to-- rose to 9.1%. The real unemployment figure, however, as compiled by economist John Williams, may well be higher than 20%. It is clear the U.S. economy is in terrible shape, and that no amount of government spending or Federal Reserve quantitative easing can reduce unemployment, increase real productivity, or address our debt fiasco.U.S. jobs and productivity are dependent on the accumulation of private capital to finance existing businesses or fund new entrepreneurial activity. Private capital-- whether accumulated by profitable U.S. businesses, invested by private equity and venture capital firms, or attracted from abroad-- is the key to economic growth and new jobs. But we cannot create jobs if we demonize profits, punish risk-taking capitalists, and stay hostile to foreign investment.

The steps to encouraging capital investment and creating new jobs in America are simple, though not easy:

• First and foremost, we must create a sound U.S. currency backed by gold or some other commodity respected by the market. No nation in history with a rapidly depreciating currency has attracted private capital. Unless and until we prohibit the Treasury and Federal Reserve from essentially creating money and credit from thin air, we cannot restore the U.S. economy.

• Second, we must create a favorable regulatory environment for U.S. business. This cannot be stressed enough. When businesses don't know what's coming next from the EPA, when Obamacare spikes their healthcare costs, or when the Dodd-Frank bill adds almost unknowable regulatory compliance burdens, businesses simply will not expand and hire. It is time to start shrinking the federal register.

• Third, we must stop spending trillions of dollars overseas on foreign wars. There is no point in debating a foreign policy we cannot afford. It no longer matters what neoconservatives want. Our interventionist foreign policy is financed on credit, and our credit limit has been reached. Our economy would be infinitely better off if those trillions of dollars had never been removed from the private economy or added to our debt.

• Finally, we must completely revamp the U.S. tax system and move to a territorial model that does not tax foreign source income. U.S. corporations are sitting on more than a trillion dollars in foreign earnings that cannot be repatriated to the U.S. because of taxes. We need to stop taxing unpatriated funds to bring those earnings home. Better yet, we need to abolish the income tax altogether.

The U.S. economy is in deep trouble. Congress needs to act immediately to restore the rule of law and create an environment that rewards, rather than punishes, the critical components of any healthy economy: capital accumulation and investment.

In this struggling economy it is essential for politicians to take a step back and think about what government has been doing to business in this country. In less than 200 years, the free market, property rights, and respect for the rule of law took this nation from a rough frontier to a global economic superpower. Today, however, our nation and our economy clearly are headed in the wrong direction.

Of course, America has never enjoyed absolute free-market capitalism: creeping government intrusion and special interest political patronage have existed and increased since our founding. But America historically has permitted free markets to operate with less government interference than other nations, while showing greater respect for property rights and the rule of law. Less government, respect for private property, and a relatively stable legal environment allowed America to become the wealthiest nation on earth.

By contrast, the poorest nations almost always demonstrate hostility for free markets, private property, and the rule of law. Capital formation, entrepreneurship, credit, and wealth accumulation are uniformly discouraged in poor countries. Private contracts are not reliably enforced, and private property is not secure in the hands of owners. The predictable result is widespread poverty and misery.

Dr. Ron Paul
Project Freedom

Congressman Ron Paul of Texas enjoys a national reputation as the premier advocate for liberty in politics today. Dr. Paul is the leading spokesman in Washington for limited constitutional government, low taxes, free markets, and a return to sound monetary policies based on commodity-backed currency. He is known among both his colleagues in Congress and his constituents for his consistent voting record in the House of Representatives: Dr. Paul never votes for legislation unless the proposed measure is expressly authorized by the Constitution. In the words of former Treasury Secretary William Simon, Dr. Paul is the "one exception to the Gang of 535" on Capitol Hill.

Dr. Ron Paul Archive

Comments

gAnton
14 Jun 11, 21:07

Let Them Eat Cake

1. First, allow me to present two of the many symptoms of the prime economic and social "disease" which, if not primarily responsible cause of most of our severe social and economic problems, is certainly a major causal factor of most of them:

A. The average wage of the American worker is at it's lowest real rate in thirty years.

B. The top 1% of American income earners receive 70% of all income and control 90% of the national private wealth. (I have seen various values for these numbers, but the above are "ballpark".)

There are number of other funny-factors. For example, about 30% of income tax payers are receiving more money from the federal government than they pay in income taxes, and about 40% of the US population is on food stamps. I think that this is done to placate and control the disadvantaged. (Right before the French revolution, the queen of France, when told that the masses were on the verge of rebellion because they had no food and were hungry, reportedly said "Let them eat cake". It is probably better that the US disadvantaged are fed "cake" rather than being housed in the concentration camps that President George Bush constructed to incarcerate his fellow Americans.)

2. So what do I is going on here? I thing that, although the US government is formally a democracy, it is actually and in fact an informal oligarchy of the nations richest corporations and individuals. These control the bought-and-paid-for government to enrich themselves at the expense of others. (13th century theologian Thomas Aquinas said "one man cannot over-abound in external riches without another man lacking them"). Perhaps government financing of federal campaigns would have prevented our current predicament, but it's far too late for that now.

3. I am very pessimistic that anything can be done to impede the decline and fall of the American empire. Everything that the government has done in the last three years or so has only made the situation much, much worse. It may be a long way to the bottom, and the timing is a grand mystery, but we'll get there.

4. I am very worried about the American military. I think that many of the high officers share my apprehensions about America's future, and they see a war as their only long term salvation.

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