Sunday, April 17, 2011

Can the private sector grow while government shrinks?

The Federal Government and the states are in a financial pickle, to be sure. That's not going to end any time soon. However, the conversation in Washington D.C. and in state capitals around the country these days is about how to cut and how much to cut. It's no longer about new government programs and increased spending. From the standpoint of the business community, the worst may be over.

Whoever wins the next election, it's not likely to be the candidate or party that promises continued deficits and bigger government. Politicians down to the local level are now seeking ways to encourage and incentivize small business. Many of them still don't really understand or trust the free market, but at least they're now giving it a look. That's a positive development.

The health care law is not likely to survive intact and may well be scrapped and replaced altogether. A Constitutional amendment requiring a balanced budget was a pipe dream just a short time ago. Now it is at least a real possibility.

Growing government sucks resources from the private sector, not the least of which are human resources. When government increases its payroll, a lot of talented, creative people wind up in less than productive jobs. When the unemployment checks run out and the government's not hiring, people find another way to make a living, whether it's considering employment they had previously shunned, trying something completely new and out of their comfort zone or starting their own business.

They also start paying closer attention to how government affects the marketplace. Not everyone comes to the same conclusions, but more people really paying attention means we have a better chance of getting it right over time.

There is new technology coming to market now and in the near future that can spawn a new run in productivity and economic activity. The new political reality may well inspire cash-heavy companies and even shoe-string entrepreneurs to get back in the game. Inspiring people to take a chance with their assets, talents, ideas, time and effort doesn't require waiting until conditions are ideal. There just has to be a light at the end of the tunnel. If the business community gets a sense that their efforts wont be wasted, real recovery will take hold.

We could be at the beginning of an odd situation. One in which the private sector is growing and thriving while the public sector continues to struggle with the financial mess they've made of their budgets. Will the public keep up the pressure for fiscal discipline in a healthy private sector environment? I don't know. The big government proponents will no doubt argue that their big spending caused the recovery, not the anticipation of its ending. Will that spin sell? I don't know. It has in the past, but there are a lot more people tuned in these days.

My sense is that, at least in the near term, tax hikes, increased regulation and more government are a no go. Americans have no more stomach for stimulus and bail outs and subsidies. I wont say the era of big government is over just yet, but it's looking tired and starting to get wobbly. I think we have better economic weather ahead. I hope we will take this opportunity to better educate the younger generations, not only in reading, writing and 'rithmatic, but also in the role of government, the art of civil discourse and debate, the meaning of freedom and the consequences that come with it and the mechanics of the free market.

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