America’s economic problems are not new. And yet, like an entity suffering from amnesia, the government can’t seem to remember why it continues to fail.
Fifty years ago this fall Ronald Reagan said, “For three decades, we’ve sought to solve the problems of unemployment through government planning, and the more the plans fail, the more the planners plan.”
Taken together that’s 80 years in which Washington has tried, and failed, to centrally govern its way out of trouble. Now, with the U.S. still entrenched in the slowest economic recovery since the Great Depression it’s time for Washington to give up the ghost of governance and learn something from our laboratories of democracy: the states.
“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design,” Friedrich Hayek wrote in the Fatal Conceit.
Hayek’s point was that economies are so wildly complex that there is simply too much information for any one group of people to process. In those terms, the sense of order that men are trying to achieve can’t be done through deliberate arrangement, but may only be accomplished through decentralization – a process that allows more information to be considered, even if it is not purely understood.
If Washington has failed in its attempt to micromanage the economy why not look to some who are doing it better? Namely, conservative states.
Fortunately, Republican governors are trying to make that case at Conservative Political Action Conference, better known as CPAC.
“Governors are about getting things done,” said Chris Christie. “They are about making government work and keeping government out of people’s lives as much as they can.”
“Republican governors across this country have stood up and done things, not just talk about them,” he continued. “And what you see in Washington is that people only want to talk. They can’t stop talking.”
Christie went on to praise governors like Wisconsin’s Scott Walker, Ohio’s John Kasich, Florida’s Rick Scott, and Michigan’s Rick Snyder. And for good reason. As of late 2012, personal income in 23 red states has risen 4.6 percent since the recession began, compared to a miniscule 0.5 percent in 15 blue states. Similar trends can be seen in job and population growth. It’s a trend Texas governor Rick Perry noted in his CPAC speech.
“Among the states we see two visions of America,” Perry said. “There is the vision common in blue states, where the state plays an increasing role in the lives of its citizens. In these states taxes are on the rise, pension programs are out of control and jobs are leading by the truckload. And then there’s the red state America vision, where the freedom of the individual comes first, the reach of government is limited. In these states taxes are low, spending is under control, jobs are on the rise and opportunity is being sought far and wide.”
Those trends aren’t just luck, they are the result of those states relentless effort to encourage growth—namely, by getting government out of the way. That has meant reducing taxes, loosening the stranglehold that unions have held on workers, streamlining burdensome regulations, and making smart investment in their future.
Take Michigan governor Rick Snyder as the perfect example. While blue state leaders are doing their best to up the ante on tax incentives to lure big businesses to their state—a costly choice with a low return on investment—Snyder has moved the state toward acting like a venture capitalist. Governing Magazine reports:
First, he’s focused on growing firms in Michigan rather than recruiting firms from the outside, what he calls “economic gardening” as opposed to “hunting.” Second, he’s focused on providing companies with short-term as opposed to long-term assistance, an approach that he thinks will help both the companies and the state. . .
So economic gardening, as Snyder defines it, is very much in the venture capital tradition. You don’t steal or strip big companies. You take small ones and figure out how to grow them into big ones.
Will Snyder’s experiment work for every state? No, and that’s the point. One-size-fits-all simply doesn’t work in a nation so big and so different as ours. That’s a lesson that Washington needs to learn, and fast.