Harvard study blames 'partisan government' and 'polarization' for sluggish economy
Harvard Business School asserts in a study entitled "Problems Unsolved and a Nation Divided" that our weak economy is the result of "political polarization," which has paralyzed Congress and prevented it from taking the steps necessary to improve our competitiveness.
The study asserts that the key to understanding how to fix the nation’s economy is to maintain competitiveness:
U.S. competitiveness has been eroding since well before the Great Recession. America’s economic challenges are structural, not cyclical. The weak recovery reflects the erosion of competitiveness, as well as the inability to take the steps necessary to address growing U.S. weaknesses.
In other words, the U.S. government hasn’t ensured that the American economy is competitive with the rest of the world. The majority of the study’s recommendations focus on maintaining a strong tax policy. The agenda should be simplicity and efficiency, it concludes.
The high corporate tax rate and a tax on international income create burdens on the U.S. economy that shouldn’t be in place, according to the study’s authors. Additionally, personal income taxes should also be reformed to include a mandatory minimum tax amount on any income over $1 million a year.
Harvard Business School also reports that the carbon tax is essential to restoring the nation’s economy.
Not everyone surveyed in the study agreed with the authors, an unusual phenomenon the authors attributed to “partisan dialog” that “confused” the public. “Among the general public, many believe that the political system is obstructing economic progress. However, many Americans are unsure, which we attribute to the divisive and partisan dialog on the economy which has confused the public on many issues.”
How can the government improve the competitiveness of American business? Outside incentivizing certain investments that increase productivity and repealing a bunch of unnecessary regulations as well as lowering the corprorate tax rate, as recommended in the study, there really isn't much Washington can do.
It is more important to remove roadblocks to growth rather than enact new legislation that would interfere in the economy. But the Harvard study appears to favor a top-down approach – an approach that would have a dubious outcome.
The Obama years have seen a ruinous increase in federal regulations on business that has sapped economic growth, dampened the incentive of companies to hire new workers, and stifled creative enterprise. But there are also other drags on the economy. A crumbling infrastructure damages efficiency. Silly rules on hiring and firing get in the way of employing the best people.
The bottom line is that, as much as possible, government should get out of the way and let the free market work its magic. We'll all be better off in the long run.