Smith Faculty Opinion Article
The 30 Seconds Outlook
December 1, 2011
The Hoover Institution at Stanford presented a program entitled “Restoring
Robust Economic Growth in America” that featured papers by George Schultz, Alan
Greenspan, Scott Baker, Steve Davis, Edward Prescott, John Cochrane, Robert
Hall, John Cogan, John B. Taylor, and Lee Ohanian. While the papers will be
published in a book, John Taylor reported the following findings:
1. Finding a solution to the economic growth
problem is essential for the future of the U.S. and its worldwide leadership
role.
2. The pro-growth policy list includes tax reform,
entitlement reform, monetary reform, and K-12 education reform.
3. Policy uncertainty caused by government activism
is a major problem holding back growth, with the first priority being to start
reducing the deficit immediately---investment is being crowded out.
4. Financial reform must begin anew as it will be
near impossible to implement Dodd-Frank.
5. Empirical measures of policy uncertainty are
negatively correlated with growth.
6. To ignite economic growth it is essential
simultaneously to reform the tax code and entitlement programs, and by slashing
marginal tax rates to restore employment and productivity.
7. U.S. and European bailouts will continue to be a
drag on growth until policy makers “stop kicking the can down the road.”
8. Fiscal policy is not working, and the zero lower
bound on monetary policy must be alleviated—gradual tax reform in the form of a
consumption tax would make today’s consumption relatively cheap and encourage
aggregate demand.
9. Fiscal policy has not been effective in
increasing government purchases and is ineffective regardless of the size of the
multiplier.
10. Unemployment remains high in part because of
restrictions on foreclosure proceedings that increase search unemployment.
11. It was generally agreed that policy uncertainty
is a major problem is restoring growth, short run stimulus packages are not the
solution, and policy reforms should be made in the short run.
John A. Haslem
