three factors pushed down the debt-to-GDP ratio to about 50%. So what do we learn from this saga in 2020? Lesson number one: Breaking down a cage of regulations can free up resources and encourage the economy to grow faster. Beyond funding and testing antiviral drugs and vaccines, federal and state governments should encourage flexible business pricing, including wages. Is now the best time to force near-bankrupt restaurants to pay waiters more? Probably not (although wealthier restaurant owners could cough up some hazard pay). Is now a good time for California to give up its battle against Uber, independent truckers, and freelance writers and stop forcing gig workers to be regulated as official employees? Probably yes. And is now the time for Congress to repeal the barnacled and protectionist 1886 Passenger Vessel Services Act, which drives jobs away from U.S. port cities? Without question. The White House and Congress should also revamp unemployment benefit programs to nudge laid-off workers back on the job as soon as safe and reasonable employment offers come in. In 2011 in the Washington Post , I proposed “signing bonuses” for individuals collecting unemployment insurance. Because laid-off workers tend to take new jobs just when their unemployment benefits expire, I suggested a sliding scale whereby people would receive more money if they accepted work sooner, before their benefits ran out. If star athletes get signing bonuses, why shouldn’t bank tellers and grocery clerks? Lesson two focuses again on debt duration. The U.S. Treasury should give tomorrow’s
Beyond funding and testing antiviral drugs and vaccines, federal and state governments should encourage flexible business pricing, including wages. A third force came from locking-in borrowing rates for a long time. The average duration of debt in 1947 was more than 10 years, about twice today’s average duration. By the end of the Eisenhower era, the combination of these But how did the monumental war debt get resolved? Three factors stand out. First, the U.S. economy sped along quickly. From the late 1940s to the late 1950s, despite recessions in 1949 and 1953, the economy averaged a 3.75% growth pace, which shunted massive revenue flows into the Treasury. During this period, U.S. manufacturers faced few international competitors. The fearsome factories of Germany and Japan had been pounded to rubble, and China’s primitive foundries could turn out little paper umbrellas for poolside, suburban Mai Tai parties, but not automobiles and home appliances. Second, inflation took off after the war, as wages and prices were released from government captivity. From March 1946 to March 1947, prices jumped 20%. This was not a result of reckless monetary hanky-panky. This was merely allowing prices to reflect the true cost of doing business. But because government bonds paid so much less than the 76% rise in prices between 1941 and 1951, the value of government debt obligations decayed.
54
July 2020
Made with FlippingBook - Online magazine maker