How to Bring Back American Prosperity

Government interventions and burdensome regulations have hampered the economy and busted our budget.

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Robert Luddy is a member of the North Carolina Leadership Team for the Job Creators Alliance, a nonprofit committed to the defense of the free enterprise system. He is also president and founder of CaptiveAire Systems, Inc.

America is an exceptional country because it was established as the freest country in the history of the world with a Constitution, Bill of Rights, and respect for the rule of law. Our traditions developed from this founding included hard work and a can-do attitude, which allowed America to become the most prosperous country in the world by barely 65 years after its founding.

Personal freedom and, yes, economic freedom allows the individual to reach his or her fullest potential. These freedoms enshrined in the Constitution allowed individuals to compete and prosper in those early days, raising the standard of living for everyone. Community issues were resolved locally, often in the marketplace rather than in the courthouse and by those most affected, rather than by fiat or edict from a distant authority.

The free market allowed early America to excel at education, jurisprudence, farming, manufacturing, and the developments of innovative new technologies. Alexis de Tocqueville wrote, "American is afire with invention. Americans love risk."

[ See a collection of political cartoons on the economy.]

By the early 1800s, many such as Alexander Hamilton, Henry Clay, John Calhoun, and John Quincy Adams promoted a stronger centralized government, which would be empowered to levy high tariffs and new taxes, to create a central bank and to dole out government subsidies, favors, and assistance. Fortunately, a balance was struck between the states and the federal government that lasted for decades.

Renewing American Leadership, in its review of historian and scholar Dr. Michael Novak’s book The Spirit of Democratic Capitalism, noted that what made success in this age possible was

…an interdependent interweaving of free market including economics, democratic political structures, and pluralistic moral-cultural institutions like the press, the universities, the church and voluntary associations. This 'triune' system generated more freedom, opportunity, and wealth for more people than any other system in history.

It was true. Standards of living and life expectancies grew at an amazing rate, while poverty and infant mortality plummeted.

All the while, a movement that called themselves the Progressives was working to change the limited government vision, because they found the restrictions in the Constitution an impediment to their agenda.

[ Read the U.S. News debate: Is Obama Turning the Economy Around?

Progressives from the left and right—Teddy Roosevelt, Woodrow Wilson, and many others through the first half of the 20th century culminating in Franklin Delano Roosevelt—ushered in a more centralized government approach, always a little at a time. Their efforts gave us the income tax, the Federal Reserve and, as a result of their policies, the Great Depression and the New Deal. Notably, the most prosperous period of the first half of the 20th century was the 1920s, when President Calvin Coolidge adopted a hands-off approach to the economy.

After the defeat of Hitler and the Axis, America moved back towards its free market traditions. The results were predicable: an economic boom which lasted the remainder of the century.

The Progressives never understood the vision of the Founders, and didn't trust that the people were capable of governing themselves. They believed they knew what was best for all, and that they needed the power to enforce it.

Gradually and incrementally, they began to expand government reach that sought to solve every problem, always in the name of the "common good." No problem was too big or too small for federal intervention, and precedent was piled atop precedent, to the point where now almost every aspect of our individual lives and our activities in the pursuit of happiness is regulated, prohibited, compulsory, or criminal.

These interventions and burdensome regulations have hampered the economy and busted our budget. The federal debt is now in excess of $16 trillion, and it continues to grow at an astonishing rate.

[ See a collection of political cartoons on the budget and deficit.]

To put it in perspective, if you had won that record-high, $640 million Mega Millions lottery and taken it all in one lump sum, the federal government would have spent the taxes you would have paid (around $300 million) in just under 15 minutes.

The good news is there is a way to correct the course. It is found in the spirit of risk-taking, entrepreneurism, and invention, which are still alive and well in spite of, not because of, government meddling in the marketplace.

Our job creators—small, medium, and national—can solve the problem of unemployment, of want, of lack of opportunity, and unchecked government spending. But it must take the following actions:

  • Reduce federal spending to 20 percent of the GDP, which is the average level of spending for the past 50 years.
  • Reduce the corporate tax rate to 20 percent paid on all income worldwide.
  • Reduce regulation to common sense levels.
  • End the Federal Reserve's mandates to manipulate rates and the marketplace; their only concern should be ensuring a sound dollar.
  • Allow the free market to produce the energy needed for economic expansion, including clean-burning natural gas, shale petroleum, expanded offshore and Arctic exploration, and viable, unsubsidized alternative energies.

[ Read the U.S. News debate on whether the Fed has overstepped its mandate.]

Our job creators will drive down unemployment, increase wages and prosperity, and expand our national wealth when we are freed from the yoke of excess regulation and taxation. The free market is the most effective, most efficient, and fairest allocator of capital, evidenced by our extraordinarily high standard of living.

For American to prosper, we must unleash our entrepreneurs, inventors, and job creators to provide employment, economic opportunities, freedom, and a resurgence of America, as the economic leader of the world.