June 1, 2012

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Guiding Principles

The 2012 Elections will be a Referendum on the Economy

Natalie Gochnour is the chief economist at the Salt Lake Chamber.

June 1, 2012

The year was 1982, the age of Reagan. I was a young Hinckley Institute of Politics’ intern in Washington, D.C., working in Congressman Dan Marriott’s office. I hung out with the BYU interns because they were always attending events with D.C. superstars. We had dinner with the famous journalist Jack Anderson, attended lunch with the nation’s clean air chief Joe Cannon and even celebrated President Reagan’s birthday at the White House with other College Republicans.

But the BYU event that has stuck with me all these years was an event with Charles and Mary Bradford, an accomplished banking economist and Utah editor and poet, respectively. A student asked Mrs. Bradford whether she was a liberal or a conservative. Without hesitation she said, “I believe in conserving ideas that are right and true and liberating ideas that are right and true.” I was instantly moved by the correctness of her approach. The goal isn’t liberalism or conservatism. The goal is to make correct decisions in the face of enormous challenges and to adhere to true principles along the way.

And let’s be clear…our country and state face huge challenges. We have 80,600 Utahns on the roles of the unemployed. Utah’s education system needs attention. Healthcare in our country is broken. And there is no hint of fiscal responsibility in Washington, D.C. If ever there was a time when we needed “right and true,” it is now.

During the next six months, we have the chance to select a President of the United States of America. The central question in the campaign will be the economy and government’s role in it. Both campaigns will spend upwards of a billion dollars to convince us that their way is right. It will be referendum on the economy like we have never seen before, and each of us will need to make choices about what is right and true.

Knowing that reasonable people can disagree, I offer these economic guidelines to help in your deliberations.

  1. Markets are the best way to organize economic activity. Markets provide goods and services to the people who value them most from producers who produce at the lowest cost. This creates efficiencies and makes the whole economy larger, providing more wealth and opportunity for all. No government program, plan or policy can do this as well as markets. In fact, many government regulations impair the ability of the market to perform efficiently.
    Policy implication: If you can find it in the yellow pages, think twice before asking government to do it.
  2. Government can occasionally improve market outcomes. This doesn’t happen often, but at times the invisible hand has an invisible foot and needs intervention. This is why we have automobile safety requirements, regulations on pollution, national defense, the national weather service, public education, and subsidies for research and development, to name just a few. The great debate is where to draw the line between public and private sector activity.
    Regulation is a good example. Too often government focuses on enforcement, when the real goal should be compliance. There are some bad environmental actors who deserve punishment, but the vast majority of businesses try in earnest to comply with regulations and grow the economy. We need to find a way to help them do both.
    Policy implication: Find a way for business and government to work together.
  3. Recognize the limitations of government. Even if you believe that government can improve market outcomes, it doesn’t mean it will. The political process is far from perfect. Some policies are designed to reward the politically and economically powerful. Too often decisions are made by elected leaders who are not well informed.
    Policy implication: It’s a pretty good rule to set a high bar for government involvement.
  4. Government that is closer to the people is generally best. When there is rationale for government involvement—like public education, public transit or healthcare—it is best for states and local communities to be in charge. Our former three-term elected Governor Mike Leavitt used to say, “That government is best that is within walking distance.”
    Policy implication: Make government as close to the people as possible while still achieving your objectives.

I’m an economic conservative. As I look back on Mary Bradford’s profound statement to me as a young intern, I’m reminded that market economies produce greater efficiencies, create greater wealth, reward work and innovation, and result in a higher standard of living for the greatest amount of people. Market economies are an idea that we should conserve.

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