By Judd Gregg - 03-09-15 06:00 AM EDT
America has a unique opportunity to break free from the rest of the developed world’s economic malaise. Doing so does not require any extraordinarily difficult political or fiscal action.
Europe has wedged itself into a corner. It has a single currency but neither a single work ethic nor a single productivity ethic. Thus it cannot grow itself out of the trouble it creates. Irresolvable sovereign debt is a fact of the Europeans’ future existence.
The consequence will be — indeed, it already is — a significant reduction in the standard of living for most of the continent. It is stuck in a sort of economic nightmare where it is going upstream against a rushing current of massive and growing debt. The best the European Union can hope for is to stay in a numbingly neutral state. In reality, a slow slide backward is more likely.
Japan simply has an exhausted population. The demographics of the nation are aging, and that trend will not be reversed anytime soon, owing to its inward-looking culture.
The vaunted Japanese savings rate is being neutralized by the lack of actual growth. The absence of growth is due, at least in large part, to the same demographic realities mentioned above: specifically, the decline in the working-age population.
With a debt-to-GDP ratio of 250 percent, it is not clear how Japan’s leaders ever clear the decks and return to an economy that has a growth rate that can get ahead of their debt burden.
In the emerging high growth regions such as India and China there is tremendous opportunity — but there are also massive structural problems.
India, for example, has about 1.2 billion people in total, and while it may have a large middle class, it also has around 800 million people who live in crushing poverty. The challenge of maintaining an effective democracy in the face of this type of social division is immense.
China has had a one-child policy for forty years, so that nation now has one working child supporting two parents and possibly four grandparents. This amounts to a demographic tsunami that could wash away their resources and growth capacity.
In America, our problems are totally different.
We have separated ourselves from dependence on other nations for our energy, which has refocused our entire economy and will dramatically improve our productivity.
We have a deeply-embedded entrepreneurial spirit that continues to create the Facebooks and Apples of the world.
We have massive amounts of capital ready to be invested and risk-takers ready to make something of that capital.
We are poised for growth.
Our problems are really not that big. They are structural and for the most part they involve a government living well beyond its means. These challenges, furthermore, can be resolved without draconian action.
If we adjust Medicare to deliver better healthcare at a more affordable cost, we will fix our most significant entitlement-spending problem.
If we adjust our tax laws, lowering rates and reducing special-interest deductions while still maintaining a progressive system, we will drive economic growth based on effective capital investment.
Our issues are so resolvable that we should be on the cusp of a period of real prosperity and job growth, especially in comparison with our international competitors.
But we are not.
It is almost as if the folks in Washington have all taken up fiddling — not while America burns, but while Americans burn with a desire to move on and to grow the nation’s wealth.
It is not rocket science to rewrite our tax laws to make them growth-oriented while still generating the revenues needed to fund a large government.
It is not complicated to move Medicare from a cost-plus-waste-and-fraud machine to a quality-driven system of good, affordable healthcare.
If these two issues were to be addressed, the nation’s prosperity would sky-rocket.
In fact, the quality of life in this country is going to improve even if those who govern cannot work their way towards progress on these two issues.
The people simply are not going to held back. The American spirit is too strong and the elements that underpin economic growth are too favorable for that to happen.
But think how much faster we would outpace our international competitors if these two issues were addressed.
Doing so is not too much to ask of a government on which we spend almost $4 trillion each year.
President Obama wants to leave a legacy of a stronger America. The Republican Congress wants to show that it gets it and can govern in a way that produces a better nation.
Both sides should focus on the doable. Fix Medicare and fix the tax laws, and a more prosperous America quickly comes into being.
That is a legacy; that is governing.
Judd Gregg (R) is a former governor and three-term senator from New Hampshire who served as chairman and ranking member of the Senate Budget Committee and as ranking member of the Senate Appropriations Foreign Operations subcommittee.
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