In his 1981 inaugural speech Ronald Reagan famously said, “In the present crisis, government is not the solution to our problem; government is the problem.”
During the debate over how to get the economy going again, we are witnessing a case study in Reagan’s observation.
Consider that government created the problem in the first place through too loose money (Federal Reserve), and purposely distorting the mortgage markets for social engineering purposes (Fannie Mae, Community Reinvestment Act).
Now to fix their mess, our political leaders propose to borrow enormous sums of money that future generations will have to repay. But is it possible that in this crisis, government is again the problem rather than the solution?
Unfortunately, yes. Our tax code discourages the very things the knowledge economy needs right now, such as intense private investment and cash liquidity. The high corporate tax rate encourages companies to invest overseas instead of domestically, and discourages them from bringing home billions in foreign profits where the money would create jobs and add to the liquidity of our economy. And by insisting on depreciation instead of allowing immediate expensing, our tax code discourages the kind of intense, immediate investment that could create jobs right now—requiring so-called “bonus depreciation” in its effort to patch over structural problems with a temporary fix.
Instead of removing these obstacles to economic stimulus in the tax code, our government’s proposed solution is to pile even more counterproductive tax policy on top of the existing mess.
Specifically, instead of encouraging broadband companies to invest more of their own money, our leaders propose more borrowing and government spending to expand broadband into not just unserved areas, but also into something called “underserved” areas, whatever that means.
BUT there are strings attached. Companies that accept these government funds will have to comply with a pile of new regulations, which will direct how companies are permitted to manage traffic on their networks—setting up a two-tier regulatory system with competitors being regulated differently.
In other words, instead of removing obstacles, government is adding more. Instead of having a transparent policy debate about the regulations, government proposes to slip in even more through further tax code complexity.
Just more of the same. Government as the problem, not the solution.