In addition to polishing off The Tipping Point and Faith at War this weekend, I also read The Competition Solution. The book is excellent, and at just under 200 pages is a fairly easy read. Essentially, the book's argument is that more than any other factor, the economic boom of the 1990s is the result of improvements in U.S. regulatory structure that has vastly improved competition since the early 1970s. Examples of sectors that have been opened up for increased competition include the airline industry, the trucking industry and telecom.
The benefits have been staggering, producing both lowered prices and a superior product. Examples of this are all around us. Twenty years ago long-distance phone calls could run over a dollar per minute -- now I get free long-distance with my cell phone. Airline prices have likewise fallen dramatically -- my trip to Denver this week will run me $133 round-trip (around $70 before tax and fees). The effect has been a huge boost to productivity (productivity, we should remember, determines how rich we are. After all, you can't consume more than you produce), a giant tax cut for people and businesses and lowered inflation.
The author argues that in order to boost the economy the focus should not be on taxes and interest rates, but rather regulation and increased competition. I think that he is absolutely correct. Republicans have become too obsessed with tax rates. The difference between paying 35% and 40% tax rates isn't going to make or break an economy. Regulation can. That’s not to say that low taxes aren’t smart public policy. They are. 70% rates surely discourage investment and productivity. But after a certain point the marginal benefits to further rate reductions becoming increasingly minimal.
The implications of this argument are profound. First, it means that President Bush and Congress would be far better advised to concentrate their efforts on expanding competition. Specific sectors cited by the author include education and health care. He gets no qualms from me. I would also add repeal of the Jones Act and privatization of Amtrak to the list. Further airline deregulation is also needed.
Second, it means that partial credit for the great economy in the 1990s should go to -- brace yourself -- Jimmy Carter. It’s true. Carter gave the a-ok to efforts to deregulate the airline sector along with -- oh boy -- Ted Kennedy. And the Kennedy staffer who pushed for the deregulation? A former Harvard law professor by the name of Stephen Breyer. Yeah, wild.
That’s not to say that Reagan and others don’t deserve credit. They do. In fact, every president since Ford has taken steps to increase competition and improve the country’s regulatory structure. Let’s hope that this trend continues.
Oh, and while I don’t think that Republicans would be well advised to pursue further tax cuts, they absolutely should move to implement tax reform.
The benefits have been staggering, producing both lowered prices and a superior product. Examples of this are all around us. Twenty years ago long-distance phone calls could run over a dollar per minute -- now I get free long-distance with my cell phone. Airline prices have likewise fallen dramatically -- my trip to Denver this week will run me $133 round-trip (around $70 before tax and fees). The effect has been a huge boost to productivity (productivity, we should remember, determines how rich we are. After all, you can't consume more than you produce), a giant tax cut for people and businesses and lowered inflation.
The author argues that in order to boost the economy the focus should not be on taxes and interest rates, but rather regulation and increased competition. I think that he is absolutely correct. Republicans have become too obsessed with tax rates. The difference between paying 35% and 40% tax rates isn't going to make or break an economy. Regulation can. That’s not to say that low taxes aren’t smart public policy. They are. 70% rates surely discourage investment and productivity. But after a certain point the marginal benefits to further rate reductions becoming increasingly minimal.
The implications of this argument are profound. First, it means that President Bush and Congress would be far better advised to concentrate their efforts on expanding competition. Specific sectors cited by the author include education and health care. He gets no qualms from me. I would also add repeal of the Jones Act and privatization of Amtrak to the list. Further airline deregulation is also needed.
Second, it means that partial credit for the great economy in the 1990s should go to -- brace yourself -- Jimmy Carter. It’s true. Carter gave the a-ok to efforts to deregulate the airline sector along with -- oh boy -- Ted Kennedy. And the Kennedy staffer who pushed for the deregulation? A former Harvard law professor by the name of Stephen Breyer. Yeah, wild.
That’s not to say that Reagan and others don’t deserve credit. They do. In fact, every president since Ford has taken steps to increase competition and improve the country’s regulatory structure. Let’s hope that this trend continues.
Oh, and while I don’t think that Republicans would be well advised to pursue further tax cuts, they absolutely should move to implement tax reform.
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