Further, we enjoy a public policy framework that articulates not just what the government does, but what the government does not do. Our government is not involved in the formulation of industrial policy or in mandating funding or other support to specific industries and companies. It is the private sector that makes the overwhelming majority of strategic and tactical business decisions and thus makes the best decisions for allocating resources.
So it is no surprise that America's economy is even better suited for today's rapidly changing, knowledge-based world than it was for the mass-production industrial economy. But—and here's the heart of the current concern—the Great Recession has resulted in great damage to this superb record. Having expanded economically at a healthy clip for most of the last 70 years, generating higher incomes and wealth for American households, our country has in the last several years faced a stall and then a decline in prosperity. It is tantamount to a lost decade: chronic high unemployment, zero net job creation, and middle-income households slammed by a drop in their net worth and their incomes, adjusted for inflation. It's the first decline of median incomes and net worth since figures have been compiled starting some 50 years ago.
The unique danger today is the possibility that we may face longer-term stagnation as a consequence of relying too heavily on borrowed money. When the housing and credit bubbles burst in 2007 and 2008, the unemployment rate soared to double digits and caused a cascade of shock throughout the credit markets and the banking system. Washington's ability to initiate a resurgence is now limited by the long-term dangers of our deficits and our debts.
But one unfortunate pattern that has emerged in the last 18 months is to lay all the blame for our difficulties only on the business community and the financial world. This quite ignores the role of Congress in many areas, but most glaringly in forcing Fannie Mae, Freddie Mac, and the Federal Housing Administration to back loans to people who could not afford them. And not to mention the role of the Securities and Exchange Commission, which in 2004 sanctioned higher levels of leverage for financial firms, from 12 times equity to over 30 times equity.
This predilection to blame business is manifest in the unnecessary and provocative anti-business sentiment revealed by President Obama in a recent speech that was supposed to be seeking the support of the business community for a doubling of exports over the next five years. "In the absence of sound oversight," he said, "responsible businesses are forced to compete against unscrupulous and underhanded businesses, who are unencumbered by any restrictions on activities that might harm the environment, or take advantage of middle-class families, or threaten to bring down the entire financial system." This kind of gratuitous and overstated demonization of business is exactly the wrong approach. It ignores the disappointment of a stimulus program that was ill-designed to produce the jobs the president promised—that famous 8 percent unemployment ceiling.
But it's not just the rhetoric that undermines the confidence the business community needs to find if it is to invest. Consider the new generation of regulatory rules, increased bureaucracy, and higher taxes created by the Obama administration. For example, the new financial regulation bill includes nearly 500 "rule-makings," studies, and reports, compared with just 14 in total for the controversial Sarbanes-Oxley bill, passed after the financial scandals of Enron and WorldCom. The disillusionment has spread to the Business Roundtable, the U.S. Chamber of Commerce, and the National Federation of Independent Business (NFIB), which represents small businesses that normally account for roughly 60 percent of job creation.