How to get the "Big Fix" Started

The Ennobler has discussed the stimulus package before, and a recent article by David Leonhardt (a relative of a good friend of the Ennobler) gave some good insight on the current state of our economy and what lies ahead in the near future. While The Ennobler does not share the same views as Mr. Leonhardt on many issues, there is much in the article that supplies, at the very least, suggestions and objectives that politicians on both sides of the aisle should support.

While many disagree on the ways in which these objectives are to be achieved, noone in their right mind would be opposed to higher levels of growth, discussed in the article's first section. Exactly how these high levels of growth are achieved largely depends on much of what Mr. Leonhardt discusses throughout the article. This all harkens back to technology (not gadgets, but the broad sense of the word). The best way for states to increase steady state levels of growth is through improvements in technology. The best way to improve technology is by investing, educating and curing inefficiencies, all of which Leonhardt mentions. In regards to investment, he puts:

Governments have a unique role to play in making investments for two main reasons. Some activities, like mass transportation and pollution reduction, have societal benefits but not necessarily financial ones, and the private sector simply won’t undertake them. And while many other kinds of investments do bring big financial returns, only a fraction of those returns go to the original investor. This makes the private sector reluctant to jump in. As a result, economists say that the private sector tends to spend less on research and investment than is economically ideal.

One goal of governments should be to encourage markets to promote socially optimal levels of consumption of various goods. As Leonhardt discusses, these goods include investment, education and energy. The stimulus package provides a good chance to set consumption levels of these three goods at socially optimal levels. Increasing investment in research and technology, investing in education, and introducing a carbon tax while lowering marginal tax rates would all provide opportunities to cure inefficiencies and enhance growth.