Principled Economic Policy

September 16, 2010

by Jerry O’Driscoll  

Today’s Wall Street Journal features a major op ed, “Principles for Economic Revival,” co-authored by George P. Schultz, Michael J. Boskin, John F. Cogan, Allan H. Meltzer and John B. Taylor. It begins by noting that the “deep recession and anemic recovery have largely been driven by economic policies that have deviated from proven fact-based principles.”

As the piece’s title suggests, the authors advocate a return to policies for the long-run based on sound economic theory.  However much one may disagree with particulars, the emphasis on the long run must be applauded.  As they put it, “long-lasting economic policies based on a long-term strategy work; temporary policies don’t.”

The piece is very long, easily the size of two normal opinion pieces.  They cover a great deal of ground: bailouts, stimulus, health care, housing monetary policy, etc. It’s well-worth reading and should frame the policy debates going forward.

Let us once and for all be done with endless discussions of temporary policies with transient effects. They don’t work and they distract us from the business at hand.  Low marginal tax rates, transparent and not burdensome law and regulation, and non-inflationary monetary policy promote economic growth. The opposite leads to recession and anemic recovery.

6 Responses to “Principled Economic Policy”

  1. Saber Says:

    Well, I do believe that the recent recession is a glossry rich of lessons to the Long term standing econmoy regulations. The Disccuion is an important part to the way ahead. The experts the Leaders, all of us with one strong voice we must building an strong econmoy that fulifl our needs and more to the coming generation, Far from difference of the views, one methodlogical road must establish. We can’t set looking at it this way, whilte the number of poverty is rasing, not only the saver unemployment is shreniking, it is the time where we should have move our shared reponssibilites toward a strong stable economoy.

  2. Bill Says:

    For those without access to gated WSJ content, the full text of the Schultz, et. al. piece will be posted at aei.org on Monday, Sept. 20.

    http://www.aei.org/article/102532

  3. Boy Plunger Says:

    Bill, it says to wait until Monday for the full piece.

  4. Bill Says:

    I believe that’s what I wrote.

  5. John Hall Says:

    Or just use the google trick.

  6. bill butos Says:

    A useful companion paper on the connection between tax rates and economic activity is Barro & Redlick, NBER 2009 (see http://www.nber.org/tmp/47262-w15369.pdf). Among other interesting empirical results, for post-1950 data they find that higher average marginal tax rates produce “significant negative effects on GDP” (p. 43.

    Jerry’s call for ending the incessant posturing on temporary polict remedies is admirable. Unfortunately, there is (apparently) political hay still to be made here.

    Bill Butos


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