Wednesday, July 21, 2010

It's no secret that I consider confidence the magic elixir that makes the economy tick. And in light of the market's drop in the wake of Bernanke's comments today, I think it's safe to say that his comments didn't do much in terms of boosting investor confidence in the future.

And perhaps a good reason for this is that Bernanke, like so many others, just doesn't seem to grasp the simple (to me, at least) reality that the economy isn't stimulated by fiscal or monetary policy, the economy takes off when people are confident in the future and act accordingly. Fiscal and/or monetary policy are important only to the extent that they boost (or, conversely, dampen) business and consumer confidence in the future.

Confident businesses hire new employees, they spend their cash hoards on things that will make them more money. Confident consumers spend money and they borrow to be able to spend even more. Confident banks make loans to businesses and consumers so they can borrow money to spend.

Thus, the goal of government should be to push policies that make Americans more confident about the future... and to refrain from doing things that sap confidence.

Unfortunately, for a number of reasons, our leaders aren't doing this. In fact, while destroying confidence may not be his goal, Obama seems determined to push policies that have that effect. Policies that raise health care costs, add litigation risk to financial transactions and employment decisions, raise taxes and grows the size of government and forces working Americans to subsidize the unemployed and those who are in houses they can't afford invariably make companies and people nervous about the future... and nervous people don't spend and nervous companies don't invest and don't hire.

Add to that foreign and national security policies that make Americans fear for our safety and is it any reason that we're sticking our cash into mattresses?

And the GOP isn't a whole lot better. While they're not pushing policies that have a negative effect on confidence, the policies they're pushing aren't such that would boost our confidence.

Since nobody has it right, I will take it upon myself to advance what I humbly call '10 Steps to Boost Confidence'. Note that not every step will make everybody confident, there are some steps that will make certain people upset, but the goal is to increase the overall level of confidence in the marketplace.

** Put a hard freeze on government spending, especially the size of the government work force. Nothing saps confidence like the fear that government is going to continue to suck up an ever-increasing share of our paychecks. Freezing government expenditures would send a strong signal that people could relax, that things aren't going to get any worse.

** Positively affirm that while the United States may not be perfect, we are the greatest country on the planet, that any shortcomings are dwarfed by the good that we are and do. People need to feel good about where they live and with their friends and neighbors. It is only logical that confidence suffers when a President spends more time apologizing than talking up the good we do.

** Declare that the United States government will not accept other countries threatening or taking advantage of us. The United States government has to be America's most forceful advocate... and it has to be able and willing to defend America with whatever means are necessary. No country should be allowed to get away with badmouthing us or taking actions that are detrimental to our national interests. As the most powerful and most successful country, we have many tools to use against countries that line up against us, and it doesn't help if the American public feels their government is unwilling to stand up to defend us.

** Declare that the government is no longer in the business of bailing out those who screw up. This applies to both businesses and to individuals. While most Americans feel it is proper to give someone a hand to get back on their feet, our generosity doesn't extend to making the person whole. Nor do we feel that helping someone who is down on their luck obligates us to forever take care of them. Similar to the fear many Americans have of an ever-increasing government, we're not comfortable with government obligating us to take care of an ever-increasing group of supposed victims. We don't want our pockets picked to provide unemployment benefits on a never-ending basis. We don't want tax money to go to people who lost money participating in Ponzi schemes, to businesses that took on too much risk, home buyers who bought houses they couldn't afford and consumers who didn't bother to read the fine print on their credit card applications.

** Stop playing favorites. Americans hate the idea that their working hard can by trumped by someone with political connections. We hate it at work when the boss's pet gets the promotion we think we deserved. We hate it when politicians give money to their friends and campaign donors. Getting rid of what is called 'crony capitalism' would do a great bit to restoring the confidence that comes from knowing that one will reap the benefits of working hard and playing fair... and that those who don't work as hard won't get ahead.

** Enlarge the list of what is considered 'off limits' to government control. While there are always going to be groups who want this or that under government control, most people would prefer to live their lives without having to worry about someone else sticking their nose into what they consider to be private... and it is somewhat depressing to think that Big Brother is snooping on everything we do. Note: I know implementing this runs the risk of undermining efforts to keep us safe; the burden is on government to show that they're intruding into our private lives as little as possible.

** Along those lines, lessen government regulation of business. Focus government regulation on getting a few things right, instead of, as is the perception, of trying to do so much that it gets nothing right. Drop the pretense that the SEC can police every aspect of business finance and protect us; they can't, we don't believe they can and pretending otherwise is farcical. Get the FCC out of trying to regulate the Internet. Have the EPA limit themselves to the truly big and the truly risky sites and industries. Have OSHA stop focusing on whether a business has their safety posters on the wall.

** Lessen the fear of being sued. Being worried about getting sued, especially for something one doesn't think was wrong, is a great way to make people cocoon themselves. Businesses need to be able to hire workers without fearing getting sued if things don't work out to the worker's liking, they need to be able to introduce products without fearing lawsuits if people misuse the products. People and businesses need to know that it takes more than a $50 filing fee at the courthouse to throw our lives into turmoil. We need to know that we're not going to have to suffer financially should someone sue us and not be able to back up their allegations. Instituting a 'loser pays' rule and not letting plaintiff attorneys go fishing at our expense would do a lot to remove the fear that hangs over people and businesses.

** Start rolling back taxes and tax rates. Eliminating the inheritance tax would help, both for the employees of family owned businesses (who now worry about the turmoil that results from the owners having to sell) to the families of those who have built up sizable assets. Let people look forward to keeping an ever-increasing share of their paychecks. Note: freezing the size of government would keep the deficit from getting any worse

** Stop with all the multi-cultural hooey. America doesn't need a Black History month, a Jewish History month or whatever. We don't need national celebrations of foreign cultures. America needs to celebrate America, we need to emphasize the traits and characteristics that unite us, not those things that make us different. People can celebrate their culture by themselves and with others who choose, but official celebrations and proclamations and the like need to serve to remind us why it is so good to be an American. Not a hyphenated American but an American, period. We need government to stop being so focused on our race and sex and national origin. People need something to feel proud of in order to be confident, and focusing on our differences doesn't help.

That's the top ten. Moving to implement them will certainly piss off some people, but all in all, there will be more people who applaud these steps than those who go off and sulk because, for example, they're going to lose their pet status with Congress.