TCS Daily

A Recipe for Growth

By James D. Miller - May 29, 2003 12:00 AM

President Bush just signed another tax cut, but cutting taxes isn't enough. Here are seven ways President Bush could stimulate the economy in time for the 2004 elections.

1. Temporarily Relax Zoning and Environmental Regulations for New Construction.

Builders continually struggle for permission to erect new structures. Overcoming zoning and environmental obstacles significantly increases the cost to construction firms. Imagine the boom that would manifest if, for one year only, building regulations were relaxed for construction starts.

2. Increase Shareholders' Rights.

Corporate chiefs supposedly work for their firm's shareholders. Unfortunately, entrenched incompetent managers often use legal maneuvers to shield themselves from their shareholders' wrath. We should increase shareholders' ability to fire poorly performing executives. Such enhanced powers would immediately increase stocks' values as investors realize that not only could they rid themselves of bad managers, but also that increased accountability would cause all managers to work harder.

3. Create More Toll Roads.

During rush hour the demand for road space exceeds supply creating a shortage. Rush hour road space is rationed through lines that cheat millions of Americans of time. By enacting more toll roads the government could reduce rush hour traffic and acquire an additional revenue stream that they could use to reduce taxes or deficits.

4. Sell Federal Assets.

The U.S. federal government owns many sellable assets whose value might well exceed a trillion dollars. These include vast tracts of undeveloped land and parts of the electromagnetic spectrum currently given for free to TV and radio stations. By selling such assets we could greatly reduce the deficit and consequently lower long-term interest rates. Furthermore, by taking property away from the government we would reduce its ability to regulate private enterprise.

5. Create Right-To-Work Laws.

Entry into many professions is barred to those who don't have "proper" credentials. For example, you can't become an attorney unless you complete three years of law school and pass a bar exam. Many practicing lawyers narrowly specialize so it's wasteful to force all attorneys to pass a generalized bar exam and spend three years studying every aspect of the law. Entrance barriers to the legal profession consequently serve to increase the difficulty of becoming a lawyer and thus raise the fees lawyers charge. Barriers to other professions from cab driving to hair styling similarly raise prices to consumers. The market, rather than the government, should set the requirement for entering different employment fields.

6. Make It Easy To Fire New Employees.

Laws making it difficult to fire create incentives not to hire. Firms are sometimes reluctant to take a risk on an iffy potential employee because it would be difficult to fire him if he doesn't work out. Minorities who have the most legal protection are the most hurt by this practice since they are the hardest to fire. To reduce unemployment in these times of economic difficulty businesses should be able to easily fire any employee hired within, say, the last year.

7. Offer Free Trade Agreements.

All competent economists agree that free trade increases a nation's wealth. The U.S. should consequently offer a free trade agreement to any country whose actions don't threaten our military security (sorry, France).

James D. Miller writes The Game Theorist column for TCS and is the author of Game Theory at Work.

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