BINDER WITH BLINDERS

Alan Binder wrote a rather interesting piece in the Journal stating that "The Fed in Running Low on Ammo. As you may well remember Mr. Binder, now at Princeton is a former vice chairman of the Fed and a very smart guy. Therefore, I'm really not sure Mr. Binder chose to elucidate the obvious rather than deal with more substantial issues.

At this stage, to be frank, it doesn't matter a hill of beans how many arrows are remaining in the Fed quiver. At this stage the Fed is incapable of having a real impact on this economy and Mr. Binder should know that. Perhaps he is attempting to prevent his old shop from becoming irrelevant in the discussions, but again he is too bright for that. So why, then? I confess I am at a loss but I am sure that as long as Mr. Binder and other respected commentators continue to waltz around the real issues the downward spiral in which this country finds itself at this moment in time will continue.

I emphasize "this moment in time." I am not one who believes that the best days of the United States are behind us. Nor do I believe the the position of leadership we enjoy must inevitably pass to the Chinese (or anyone else for that matter) over the next 20 years. I've lived long enough to have heard that mantra before...a couple of times as a matter of fact. But we have allowed ourselves over the past decade or two to ascribe magical powers to our institutions, especially the Fed, in the solving of problems or in the correction of imbalances, and that must change.

The Fed is not going to be capable of finding the fix for our problems by itself. Nor is fiscal policy--to the extent that one still exists--the solution. Let's face reality: we are a nation that has over spent and unless we fix the result of our prolificacy at numerous levels, our future will be dim indeed. We are at a point were we cannot tax our way to prosperity; nor can a cut in expenditures lead the way to salvation. We have created a society in which it is impossible, by law, to cut to the extent that would be required; we can dramatically slow spending and slightly reduce it but anything else is a pipe-dream. These right/left battles as to the way out of this mess and questions as "what can the Fed do" are total nonsense and a waste of time. Sorry Mr. Bender, but your thoughts, while correct, just took up space.

This economy has to grow, it is the only way out. Therefore, any conversation that does not begin with a plan for economic growth and conclude with a blue print to achieve that purpose is a complete waste of time. The growth of government does not produce the kid of growth about which we are speaking. The government returns nothing to the society except (hopefully) stability but fiscally it provides nothing; indeed it is a taker and user of assets which could be better employed in the creation of wealth or, if you prefer, jobs which create goods and services. Almost by definition the growth of government at whatever level inhibits the growth of private enterprise by diverting the capital from productive enterprise in order to pay for its own growth. We have, in this and in the last century seen an explosive growth of government which has been occurring irrespective whether it serves Republican or Democratic constituencies. This has to stop. This starts with the tax code and since I have promised not to be political in this blog (ok, I fall off the wagon every once in a while) tomorrow's edition is certain to get everyone mad. Stay tuned.