Political uncertainty is holding back the economy
By Doug Rich
The biggest problem facing this country right now is not a broken economy but political uncertainty, according to Professor Emeritus Barry Flinchbaugh, Department of Agricultural Economics at K-State. Flinchbaugh was the featured speaker at the Kansas Commodity Classic held Jan. 16 in Manhattan, Kan.
"The biggest myth is that the economy is broken," Flinchbaugh said. The basics of the economy are relatively sound. If we had some political certainty the economy would grow more than 3 percent. If we had political certainty we would have economic certainty."
Flinchbaugh said he has never seen the nation's capital more dysfunctional, more partisan, or mean spirited than it is right now. All the election did was preserve the status quo.
The No. 1 problem is not the debt ceiling, which is just a political pawn. Flinchbaugh said it is the budget deficit.
"We just avoided the fiscal cliff for another two months," Flinchbaugh said. "We increased revenue but not enough to balance the budget and did not touch spending. Now we will get bogged down in a political argument over the debt ceiling when we all know the United States government has no choice but to pay its bills."
Flinchbaugh said there is one great thing about the American economy: the marketplace always takes care of political folly.
There is a lot of talk about how much money the U.S. owes to China, but Flinchbaugh said China only owns around 8 percent of our debt. In fact, Flinchbaugh said the Chinese economy couldn't function without the U.S.
"This China thing is a myth," Flinchbaugh said. "If we default we are defaulting on ourselves."
The real issue is to get this economy to grow. That solves the problem. Flinchbaugh said taxes don't solve the problem and spending won't solve the problem; only growth will solve the problem. How do you get it to grow?
"The first thing is to get some guts in Congress to make tough decisions," Flinchbaugh said. "You have to put your job on the line to make tough decisions."
Everyone knows where the money goes, Flinchbaugh said. It goes to defense, Social Security, Medicare, and interest on the debt.
"If we want to solve this problem, then ignore AARP and deport Grover Norquist," Flinchbaugh said.
Flinchbaugh thinks some form of the Simpson-Bowles bill will pass this summer and that a farm bill will be passed by September. The farm bill will look very much like the House version from 2012.
"If you want this economy to grow, get that budget balanced, get the government out of the capital markets, bring some certainty to the process, and let capitalism work," Flinchbaugh said.
Doug Rich can be reached by phone at 785-749-5304 or by email at email@example.com.