TCS Daily

Economic Girlie-Men of the Right

By James K. Glassman - September 1, 2004 12:00 AM

When California Gov. Arnold Schwarzenegger warned pessimists not to be "economic girlie-men," he was, implicitly, criticizing the Democrats, who can't win this election unless they convince voters that -- contrary to the facts -- the economy is weak and getting weaker.

But some of the worst of the economic girlie-men are in President Bush's own party. They are the regulators and legislators who believe that the right response to a limited number of corporate scandals is to load all businesses down with expensive, time-consuming new rules and to discourage risk-taking.

The truth is that all is not right with the U.S. economy, and we ought to face it. While productivity is high, jobs are increasing and consumption, earnings and investment are rising, we could be doing better. The reason, in my view, is a debilitating lack of what John Maynard Keynes, the most influential economist of the 20th century, called "animal spirits" -- raw optimism and the drive to take risks.

The remedy is not higher taxes, as John Kerry proposes. The remedy is lower taxes, especially on capital and profits, plus more sensible regulation. But policy is not the only problem; worse is the post-Enron fear that has gripped policymakers. Arnold's term "girlie-men" fits many of them well.

Girlie-men are afraid to allow businesses to offer stock options to their employees -- and instead, yielding to green-eyeshade accounting, rush to enact absurd rules that will discourage one of the major incentives to our high-tech success.

Girlie-men fear what the economist Joseph Schumpeter called "creative destruction" and instead, like CNN's Lou Dobbs, advocate constraints on trade and immigration. The last thing girlie-men want is competition.

Girlie-men think that the way to make mutual funds behave is to force them to chaired by people without a direct stake in the funds' success -- a policy which, inevitably, will lead to higher expenses and fewer choices for investors.

Girlie-men lack precisely the verve and gusto that drove Schwarzenegger's wonderful rhetoric. It's time to laugh these sissies off the economic stage.


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