Rethinking What Makes the American Economy Strong

Armstrong Williams
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Posted: Oct 25, 2011 10:01 AM

If you haven’t already, take a gander at a column authored by former treasury secretary and Clinton economic advisor, Larry Summers, in yesterday’s Washington Post.

In it, Summers contends that to truly turn around the nation’s housing market – a key economic indicator and driver – one must in effect, double down on the sector, spending more in both public and private dollars.

“The central irony of a financial crisis is that while it is caused by too much confidence, borrowing and lending, and spending,” argued Summers, “it can be resolved only with more confidence, borrowing and lending, and spending. This is true, above all, of housing policies.”

That’s just dandy. True to the dogma of his former boss, Summers apparently believes we haven’t done enough damage to the housing market through Freddie and Fannie, and Uncle Sam needs to be more involved in driving home construction and sales.

That is best carried out through financing, he posits: “[C]redit standards for those seeking to buy homes are too high and too rigorous.” Can someone quickly get him a history book and turn to the chapters from a few years ago where the housing market began to collapse? The reason wasn’t tightened credit, but rather the exact opposite. Our lending institutions sponsored by the feds such as Freddie and Fannie were practically giving loans to anyone who asked for them – senseless amounts of money with little-to-no credit backing to vouch for the security of the loans.

Now Summers submits that our economy is suffering – with family home construction plummeting by more than 70 percent in some parts of the country.

But let’s turn this entire argument on its head for a minute. I ask: Is new home construction necessarily a good thing? Is it truly an accurate barometer of our country’s economic health? Should it be?

After all, doesn’t the construction of a new home fly in the face of the liberal, anti-growth agenda? More trees and forests must be erased for the timber (assuming we even grow timber in this country any longer; most of it comes from Canadian forests). New plots – perhaps otherwise preserved for conservation purposes – must be surrendered to the invasive species knows as ‘humans.’ More sprawl and consuming of natural resources will take place with new homes. Less bike paths, more roads. Less public transit opportunities to these new subdivisions. Agony to the liberals!

But set that aside for the moment. Since when did Americans constructing things for Americans constitute an economic good that is sustainable and replicable? For that matter, is U.S. consumption a good thing? Yes, it accounts for 2/3rds of all economic activity in the nation. But is that really a good thing, in the long term? I mean, 95 percent of the world’s consumer market is beyond our borders, and in its most base form, if all we’re doing is selling burgers, lawn care and homes to each other, are we really setting ourselves up for the next great _____ revolution, whatever that is? We clearly didn’t miss the Industrial Revolution, or the Tech Revolution, but we as a nation are nowhere near capturing the next revolution headed our way.

Think about it, do we manufacture anything in this nation any more? Apple iPhones and iPads are the one bright ray of hope in an otherwise abysmal picture of innovation.

I’m not trying to “talk down” our future. But I am urging us to rethink, as a society, what an economic future for the U.S. looks like if we’re obsessed with tearing down existing “stuff” and just replacing it with more American “stuff” – homes, shopping malls, roads, bridges…you name it.

To me, the economic messiahs who will deliver us from this malaise are the ones who first learn to tap markets outside of the United States – those who envision us creating something that everyone else wants.

Today, product marketers and designers believe it’s good enough to make and peddle a contraption that Americans will like and the idea ends there. No. That can no longer be the standard by which we judge success.

To truly thrive in this new world economy, we must create products, services and goods that can be spread across the globe. If it’s not a new engineering marvel, then so be it. But it needs to be something the world will want.

To think otherwise is to keep us trapped within the same four walls that have defined our economic growth for the past 50 years. If history has taught us anything, it’s that consumer spending and even leading indicators such as “new home construction” may not be the healthiest and most reliable harbingers of recovery.

Are policymakers trying to jump-start the wrong engines of future, 21st Century growth? Are better roads and bridges to the grocery or laundromat really the beginning of a humming new class of business moguls?

It’s time to rethink the key drivers and indicators of a stalled American economy.