Or maybe not. But I told someone...
Below is a newspaper column I wrote in 2002, early in the previous Administration. I thought about it after hearing the hoopla around the current president's speech to schoolchildren coming up next week. The furor is most furious in my former home state of Texas. Which is what my column was about then, and seems even more accurate almost seven years later.
Boom and Bust
So I read in the newspaper (in 2002) about the fall of Atlanta from economic grace. During the 1990s it was growing faster than New York or Silicon Valley, but now it is shrinking just as fast. And as I read it I remembered our short stay in Austin Texas.
We arrived at the end of a down turn, which meant good real estate prices for us. We sold our small three-bedroom home in exurban Boston at a small loss for $130,000 (this was 1990 by the way) and bought large four-bedroom with garage for $101,000. I liked that part. And when we left but four years later, we sold it again for $135,000. I liked that part too.
That’s Texas all over. They call it boom and bust. When things are good they are very very good, as the poem says; and when they bad they are horrid. In Texas, it was the result of a raw materials economy; one based on oil and cotton and thus affected by forces outside the state.
It was also the result of a very hands-off state government, exemplified by the fact that the oil industry is regulated by the State Railroad Commission. This is like putting the New York securities industry under the watchful eye of the State Optometry Board.
This odd state of affairs exists because in Texas everyone has a right to strike oil, make gigabucks, and keep it. Of course, everyone doesn’t strike oil, and even them that do, do not make gigabucks. But the dream that it could happen is sovereign in the state of Texas (a phrase which could be construed as similar to a state of grace or a state of delusion).
Keeping the dream alive is why Texas booms and busts. The price of allowing occasional immense wealth (no state income tax for example) is a state that relies upon property taxes and consumption taxes, which then vanish in slow times. The price of keeping the dream of grandiose wealth alive is a state that punishes poverty as a crime, namely the failure to get rich. Whenever money flows, it flows mostly into a few pockets. And when it doesn’t it mostly doesn’t flow out of those pockets.
The result is a whipsaw economy. It is quite active, but never really grows very much, because every expansion is followed by a nearly equal contraction.
I tell you all this because this is where the nation is heading. America is becoming Texas, which I do not mean in the flattering sense. Since the president was governor of that state, this is not purely accidental. But I am not disposed to conspiracy thinking, so let’s leave that one alone.
What I am saying is that a wild west economic policy, one where rules are few and far between, is not healthy. For every creative advance there is at least one charlatan and rogue. For every great new idea there is at least one catastrophic failure. It may produce booms but it also produces busts and in the long run that weakens rather than strengthens a society.
They key to healthy economic growth for the country is what we have been told to do as individuals. - Invest in solid companies. – Look for slow steady growth. – Change course rarely and reluctantly. – Do not speculate or churn your holdings. - Keep investing at the same rate, through good times and bad.
How does that turn into national policy? Well, healthy economic policy would spend money on education and healthcare so workers could be better workers. Boring but effective.
It would favor businesses that are part of their communities, serving them as well as themselves, for these tend to make real money a lot longer than bubble firms like Enron.
It would realize that the economy is many sectors, each affecting the other, and thus to change one will affect the others, so do it slowly. Business needs stability to thrive.
Likewise, it would not put all its eggs in the stock market basket, or some other industry, or hand out favors or incentives to some because that would affect all those around them
And it would not lower taxes in good times but see this as the price we pay for success, and use that good fortune to ease the inevitable recession, thus making the next recovery sooner and better.
These are the rules I use. I am not rich, but I have moved ahead overall. My bills are paid, and my debts are few. Most of you do the same. So why is this so hard for us as a nation? I am not sure, but I suspect it has something to do with a tortoise and a hare.