As recoveries go, this one is a stinker.
In a new white paper, the Cato Instituteâs Brink Lindsey delivers the gloomy news that âreal U.S. gross domestic product â¦ as of October 2013 was only 5.3 percent higher than it had been 70 months earlier when the Great Recession began.â The six previous recoveries performed nearly four times better âat the same point in the business cycle.â
Between 1870 and 2010, inflation-adjusted GDP, per capita, expanded at an annual rate of 1.96 percent. Economists from all ideologies are deeply concerned that the figure isnât sustainable. Trends in âgrowth in labor participation, growth in labor skills, growth in investment, and growth in output-enhancing innovation,â Lindsey laments, âare âuniformly unfavorable.â The population is aging, fewer of us are working or looking for employment, net domestic investment has been on a downward trajectory âfor decades,â and total factor productivity has been disappointing since the dot-com bust.
Lindseyâs âLow-Hanging Fruit Guarded by Dragons: Reforming Regressive Regulation to Boost U.S. Economic Growthâ lays out a persuasive series of proposals that stand apart from âthe red-versus-blue divide.â Itâs a declaration of war on âlaws and policies that discourage participation in the labor force, frustrate accumulation of human capital, deter productive investment, and inhibit innovation or block its diffusion throughout the economy.â
Intellectual property is Lindseyâs first target. Excessive shielding of copyrights and patents, he argues, hikes âthe prices of protected goodsâ and can thus âinflate the costs of innovation and â¦ retard the growth of productivity and output.â Criminal prosecution of and civil lawsuits filed against intellectual-property violations are rampant. Attacks by âpatent trolls,â which âneither manufacture nor sell products, but instead specialize in amassing patent portfolios for the purpose of initiating infringement lawsuits,â have exploded. Lindsey recommends ending criminal liability for copyright infractions, abandoning penalties for ânoncommercial copying,â reducing copyright terms to â14 years, plus an option to renew for another 14 years,â and scrapping patent safeguards for âsoftware and business methods.â
Next on Lindseyâs list: immigration. (Close-the-border types, skip ahead a paragraph.) Foreigners played a huge role in building Silicon Valley, and in 2011, more than 50 percent of U.S. doctorates issued in electrical engineering, industrial engineering, civil engineering, mechanical engineering, materials engineering, chemical engineering, and computer science went to STEM specialists born abroad. But Washington is ânot especially welcoming to highly skilled immigrants.â Policy is too focused âon reuniting family members; only limited spaces are made available to immigrants on the basis of employment or other economic considerations.â Promising reforms include granting âpermanent residency immediately to all college graduates who want to live and work here,â establishing an auction system that sells visas to âthe highest bidders,â and inducing competition âfor global talentâ by allowing states to issue temporary work visas.
Dragon-to-be-slayed No. 3 is occupational-licensing overkill. Even the Obama administration, no fan of capitalism, wants states to investigate ârequirements [that] create an unnecessary barrier to labor market entry or labor mobility and where interstate portability of licenses can support economic growth and improve economic opportunity.â
In dozens of states, government approval is necessary for barbers, massage therapists, makeup artists, animal breeders, manicurists, personal trainers, casino dealers, and taxidermists. Lindsey charges that âlicensing regimes and the requirements they impose are all too often highly arbitrary,â while âempirical studiesâ have failed to prove a connection between the red tape and âbetter service for consumers.â The Federal Trade Commission can pursue âopportunities to roll back licensingâs barriers to entry,â and Congress can âmandate that, for selected major occupations that are widely licensed, anyone with a valid license from any state would then be entitled to perform that job in all other states.â
Lindsey wraps up his prescription with a disturbing look at zoning. The âregulatory taxâ documented by economist Edward Glaeser is because of the âprogressive tightening of land-use restrictions.â By âprotectingâ homeownersâ property values, plannersâ micromanagement keeps âpoor people away from rich people.â What is needed are methods to placate the NIMBY lobby, âideally in a way that doesnât add to housing costs,â and âdecisionmaking proceduresâ that âmobilize and energize diffuse pro-development interests.â
Unemployment is down to 5.3 percent. Consumersâ spending and confidence are up. The Pew Research Center reports that âAmericans are picking up and moving again as â¦ personal finances improve and housing markets recover.â
The worst of the Bush-Obama economic apocalypse appears to be over. But headwinds are hampering stronger growth. âLow-Hanging Fruit Guarded by Dragonsâ is a useful, pan-ideological guide to tools that can help turn an anemic recovery into a robust expansion.
Former Nevadan D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology from Corrales, N.M. Follow him on Twitter @dowdmuska.