February 2, 2012

'Marionette Economy' is Not the Answer

Bruce Yandle

Distinguished Adjunct Fellow
Summary

Pulling strings in an effort to manage the economy just doesn't work

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The recession may have officially ended in 2009, but U.S. leaders are just as focused on boosting the economic recovery in 2012 as ever. Mercatus Center economist Bruce Yandle discusses the president’s recommendations to help businesses and the unemployed from his State of the Union address at U.S. News and World Report. He calls the recommendations, “A blueprint for a marionette economy, with the strings pulled by Washington.

“But pulling strings in an effort to manage the economy just doesn't work. The United States' mangled market economy operates on the basis of the uncoordinated actions taken by millions of people in pursuit of happiness. Those decisions can and will be affected by tax changes and regulations, but we cannot build the economy of our dreams by simply sitting in a room and planning it. As the president pointed out, it is true that American manufacturing is surging again, and that employment is growing in industries that were mainly expanding abroad. But that growth in manufacturing employment will not rescue millions of unemployed American workers. There is just too little labor used in manufacturing today, and it's decreasing due to amazing advances in technology.

“The president's focus on higher education may offer a better option for reducing unemployment. If we are going to subsidize the sector, it makes more sense to fund community colleges that can fill the growing need for technically trained workers. But in helping students along the way, it doesn't make sense to micro-manage the student loan process. Doing that will encourage the creation of more debt than those future workers can pay off.

To read the full article, visit U.S. News and World Report’s Economic Intelligence blog.