Burrow down beneath all the shouting and finger-pointing and you find that there’s a broad consensus in American society about two things:<\/p>\n
1.\u00a0 We need to shrink the size of the Federal government, which is currently unsustainable.\u00a0 Roughly a third of our government is paid for with borrowed money.\u00a0 Even massive tax increases won’t keep the bloated bureaucracy afloat.<\/p>\n
2.\u00a0 We have to grow the private sector economy.\u00a0 Jobs are the #1 preoccupation in every political debate and in every campaign across the country.<\/p>\n
Unfortunately, neither political party has offered a credible plan for accomplishing these things, or even for moving us substantially in the right direction.<\/p>\n
President Barack Obama’s budget proposals show red ink out into the future as far as we can see.\u00a0 Republicans, meanwhile, are offering a voodoo economics plan that failed dismally in the 80s and 90s.<\/p>\n
And the tea party movement?\u00a0 They don’t even pretend to have a plan.\u00a0 All that anger may be cathartic, but it won’t accomplish the two goals outlined above.<\/p>\n
So here’s my back-of-a-napkin plan for sustainable private-sector growth with a smaller Federal government.<\/p>\n
First, guarantee that Federal interest rates will remain low over the next decade.\u00a0 It needs to rise a little — say to 1% — but businesses need to know that capital will be widely available over the long haul.<\/p>\n
This will introduce a level of confidence and security that will inspire banks to begin lending again, while companies will begin borrowing more aggressively.<\/p>\n
The danger of low interest rates, of course, is that the economy will overheat, sparking inflation and squeezing the labor pool.<\/p>\n
Instead of cooling off the nation’s economic engine with interest rate hikes, however, the government should apply the breaks with systematic and targeted Federal layoffs.<\/p>\n
Beginning when private-sector unemployment rates hit 7% — likely sometime in 2012 — Federal agencies should begin shedding employees, trickling those workers back into the job market.<\/p>\n
These “non-essential” workers should be identified and notified well in advance.\u00a0 They should understand that they don’t have permanent futures in the government sector.<\/p>\n
They should be encouraged to pursue training, early retirement, and other professional opportunities, so that the transition back to the private sector can be as non-traumatic as possible.<\/p>\n
The goal should be to cut roughly 10% of the Federal workforce over the next decade.\u00a0 But if unemployment begins to rise again — say, topping 8% — public sector layoffs should be suspended temporarily.<\/p>\n
The idea is to shrink government slowly and steadily, without triggering another deep recession.<\/p>\n
Similar targeted cuts should be made to Federal subsidies paid to farms and corporations. With low-cost capital more widely available, those direct cash payments should be slashed by at least the same 10% amount.<\/p>\n
If we use this kind of government downsizing — rather than interest rates — to stabilize the economy, we will go a long way toward solving the two great problems confronting American society.<\/p>\n","protected":false},"excerpt":{"rendered":"
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