America at the Crossroads

The U.S. unemployment rate rose to 9.0% in April. Economic growth is anemic. Gas is well over $4 a gallon is most states, and over $5 a gallon in Hawaii.

Over the last couple of years the government has implemented several programs, that cost around $1 trillion each, designed to "stimulate" the economy, including the Bush TARP, Obama Stimulus, and the Federal Reserve's "Quantitative Easing".

The economy has only gotten worse.

Obama and the left keep talking about implementing more of the same type of programs to "stimulate demand".

The problem is that the entire Keynesian notion of stimulating demand is obsolete in a global economy.

Sure, the government can temporarily hand out borrowed dollars to stimulate demand. What demand are they stimulating? Largely demand for products made elsewhere, which doesn't create any jobs in America.

I’m a free trader, but borrowing money to buy products made abroad is the path to ruin. We need to earn money to buy those products. Earning money requires us to make things that people want to buy.

To fix the ills that plague us, America needs to increase investments in innovation and productive capacity.

Today, there are two huge challenges stopping us:

First, our tax system is a complete disaster. According to OCED, American has the most progressive tax system in the world. We also have the highest corporate tax rates in the world. We also have one of (if not the) most complicated tax systems in the world, which costs us a half a trillion dollars a year just to figure out our taxes. To top it all off, there are huge U.S. corporations that don't pay any taxes at all, because they were able to successfully lobby politicians to implement loopholes in the tax system to specifically benefit them. Not only is our tax system unfair, it's also counter-productive and hurts our economy.

Second, the government monopoly schools are an even bigger disaster. America spends more per student than almost every country, yet the government monopoly schools are among worst performing schools in the developed world. America's economic prowess depends on our ability to innovate. Over the last couple of decades, most of our advanced technology talent has come from importing people from China, India, and other foreign countries. Luckily, these people still want to come to America. But importing talent is not a substitute for growing our own talent. The government monopoly schools don't graduate enough people with the basic math and science skills to move the country forward.

We need to do two things to get the country on track:

First, we need to simplify our Byzantine tax and regulatory system.

Second, we need to fix the broken government monopoly schools.

Sounds simple, right? Unfortunately, there are a huge number of special interests (from General Electric to the National Education Association) that benefit from the current system at the expense of the country. Those special interests are not about to give up their tax-funded goodies and go quietly into that good night. So, changing anything becomes increasingly difficult.

That's the problem.

Here's an undeniable fact: The rate of change in the world is changing exponentially. Unfortunately, the U.S. government is stuck in the industrial age, when the pace of change was much slower.

Unless America has some real reform that moves the special interests out of the way, our decline as a nation will accelerate rapidly.

Who will stand up and say: "no more"?

How about you???