solutions

Two days ago, Jon Henke posed the question, "What policy should Republicans be advocating and pursuing to limit government and regain popular support?"

With Barack Obama and the Democratic Congress proposing new bailouts and a significant amount of additional government spending to create jobs and restore the economy, Republicans have a phenomenal chance to reinforce our earnest belief in limited government.  I propose a simple policy that will allow us to both "limit government and regain popular support": Republicans must fight Democratic efforts to build a nanny state to solve the economic woes. Instead, our policy should be offering solutions to revive the economy that are rooted in free market principles.

Indeed, Thomas Sowell points out that government intervention may actually be harmful to the economy:

Even in the case of the Great Depression of the 1930s, increasing numbers of economists and historians who have looked back at that era have concluded that, on net balance, government intervention prolonged the Great Depression.

I recently had a unique chance to discuss the economy with renowned economist and monetary policy expert Dr. Allan Meltzer (which you can read at length here).  Meltzer and other leading economists have observed that the big problem plaguing the economy is the housing crisis, and that the government's efforts to breathe life into the economy have neglected this issue.  Meltzer proposes a free market solution to the housing crisis that could be immensely effective as a step toward getting the economy back on track:

To address the housing problem, Congress and the administration should take actions that increase the current demand for housing. For a limited time, say up to the end of 2009, allow buyers to use the value of their down-payment (or some part of it) as a tax deduction. Or, reduce the tax rate for qualified buyers who purchase a house between now and January 2010. Or do both. Give the benefit to all home buyers, including those buying a second or third house.

The bottom line is that the battle of free markets versus government control is one Republicans can – and should – win.  Dr. Meltzer noted that he often says, "Capitalism without failure is like religion without sin."  Yes, the free market will inevitably fail on occasion – and Republicans, as champions of capitalism, must pursue a policy that ensures that the free market is given the chance to fix itself as it has many times before.  If Republicans can identify innovative free market solutions to the economic woes like the proposals outlined by Dr. Meltzer, we can help ensure limited government while making real progress toward economic recovery.