Summer is coming to an end, and all over America the midterm election races are heating up. Like most recent years, there are clear choices between the incumbent democrat majority and the republican minority candidates, and neither choice is very appealing.
If I haven't already told you, all the Democrat-sponsored handouts, bailouts and deficit-funded largesse are appalling and wrong-headed. Instead of helping people, this misguided spending only contributes to a death-spiral of joblessness, consumerism and crushing debt. For all the hand-wringing and rhetoric over job creation, there's been little concern as to why a trillion dollars in deficit spending hasn't stemmed unemployment.
The Republican party faces what might be the largest internal schism in a generation as old-guard conservatives are challenged by the upstart Tea Party. Personally, I consider this a sign that the GOP is reinvigorating its platform after conservatives lost their roadmap and much of their leadership through the Bush years. However, beyond railing against taxes and big government, Tea Party leaders offer little in the way of practical solutions. And to add insult to injury, conservatives insist on defining America as a white, Christian nation despite millions of good Americans who are neither. Thus, the Republicans continue to be more of an opposition force than a truly viable alternative to the democrats.
Lost in headlines about Obama's religious beliefs and Tea Party campaign gaffs are mountains of public debt, endless corruption and a growing sense that our stature in the world is quickly eroding. While most of us regular folks realize that a new operating system is needed, our elected leaders blythely ignore the problem while fixating on the same old partisan issues.
So with that in mind, I offer a "Me Party" 10-point plan for an American Renewal, beginning with Part 1 below.
1. Stimulate production, not consumption. Check the label on nearly any WalMart product and you will see one of the two primary benefactors of our economic stimulus. China has become the workshop of the world, so it shouldn't surprise anyone that nearly every dollar we spend goes straight into creating jobs -- in China.
So why do our leaders on both sides focus on boosting consumption? Because many adhere to John Maynard Keynes' "prime the pump" economics, where spending drives production and production creates jobs. Unfortunately, Keynes lived in an era when nearly everything we bought was made here in America, so stimulating consumption naturally created American jobs. In fact, the effect of this stimulus was "multiplied" as demand flowed from producers through their suppliers. Henry Ford used the same logic in reverse when he increased hourly wages for his workers; he knew many of those extra dollars would be spent on his Model T.
Times have changed. America is no longer a "closed system" economy; most of our jobs are in service industries and today we import most consumer products. Stimulating consumer spending creates jobs in countries that produce, but few of those jobs are here in the Unites States.
Our leaders need to understand that spending won't create many American jobs, but innovation and domestic production will. Those of us who remember when a single factory supported an entire town won't be surprised by the sheer number of jobs a single production facility can generate. It's not merely the number of bodies employed by the factory, but instead a far wider ecosystem of supplier plants, transporters, professional services to support the businesses and personal services to support the workers. I heard one estimate that every dollar spent on a finished product generates 7 dollars in spending. In a producer econony, those dollars generate jobs.
But America is no longer a low-cost producer, and every industry eventually becomes so well-understood as to be a commodity. Therefore, we must also rely on innovation -- creativity and productivity -- to compete with low-wage nations. Only by continually creating and recreating industries, products and services can we remain at the forefront of production.
Fortunately, in this we have tremendous advantages. In America, expertise and money can easily flow into new opportunities. Nascent businesses can thrive in our economic system without the regulations or restrictions that are pervasive in other parts of the world. Our colleges provide fertile fields for research and incubation of ideas, and we have many rich sources of capital to realize concepts.
More than anything, America needs enough private sector jobs at all levels to support our standard of living, or we risk leaving fewer opportunities for our children. The important thing to note here is that only innovation and production can create jobs in America. We must finally put aside the notion that spending will heal our economy, and focus our attention on building the future rather than buying it.
In the next installment, I will talk about how can we stimulate innovation and production.
Coming next: Part 2: Buy Cradles, Not Graves.
