In a rather confessional tone, Jeffrey Sachs declared in his recent op-ed:
The global fiscal stimulus championed last year by the Obama administration is coming undone, repudiated by the same Group of 20 that endorsed it last year. Now, against a backdrop of a widening sovereign debt crisis, we need to abandon short-term thinking in favour of the long-term investments needed for sustained recovery.
Indeed, the current period of uncertain and fragile economic rebound poses a critical opportunity to ponder the principles that can revitalize economic growth. More than ever, the urgency to adhere to sensible principles is high as a wave of interventionism has seen government take more control of our private economic activity, wearing away economic freedom hard won through years of determined work. Government’s rush to fix the perceived causes of the economic crisis has demonstrated the dangers of interventionist policies by big government. Rather than fixing economic problems, they can actually exacerbate them.
Unfortunately, our government seems to be exhibiting a “fire, ready, aim” mindset with regards to government action in the economy. Fixing something without fully understanding why it’s broken can be very dangerous and further erode our economic freedom.
As Sachs points out, “[President Obama] and his advisers ignored one of the key insights of modern macroeconomics: that the result of fiscal policy depends not only on current taxes and spending but also on their expected trajectories in the future.” Policy choices made at this critical juncture of the economic uncertainty will indisputably shape the growth trajectory for our economy in coming years.
If our policy makers, Democrats and Republicans alike, are serious about restoring and securing our economic future, they should begin with a renewed commitment to economic freedom, which is key to a vibrant, innovative and growing economy. The challenge is to revamp the reform agenda to focus on creating more economic freedom, not less. Our leaders should trust Americans to find the best opportunities to create jobs and economic growth. That is the best and most principled approach to move beyond the current economic woes as quickly as possible…