Let's Have a Boom! From Forbes Magazin!

A real boom. a long, satisfying one. a boom we can pass on to our children, as our parents did for us.

Today's economy is not a boom. True, the U.S. economy began to grow in July 2009. That's what the GDP numbers say. But the GDP numbers are flawed, gamed by government stimulus (a.k.a.: deficit) spending and the Federal Reserve's easy-money policy, which is to say that the 2010 recovery is not yet on solid footing. The patient is out of bed, but he walks with a cane and coughs. How do we get him sprinting back into the global economy lead? How can we have a real boom?
Let's start by identifying some levers to growth. Here are seven.

--Size of government. Historically, the U.S. economy performs best when the size of the federal government is about 17% to 18% of the nation's GDP. Under George W. Bush that percentage crept up to 20%. After only 16 months of Barack Obama the percentage is about 25%--and headed higher.

Question: How can we get the percentage back down to 20% or lower? Answer: Freeze federal government spending. I would increase military R&D spending, so everything else would have to shrink by 1% to 2% a year. But however you slice it, the overall federal budget should not be allowed to go up until it is less than 20% of GDP.

--Taxes. The Bush tax cuts on income, capital gains and dividends are set to expire at year's end. On top of that some in Congress want to slap on a value-added tax (VAT) of 5%. That would be quite a one-two punch. If you make a six-figure income in a high-tax state, such as New York or California, your overall tax burden would be more than 50%. As go our dollars, so goes our productivity: The federal tax code's forest of confusion, moral hazards and ethical traps means that we spend way too much of our time and energy filling out tax forms.

Question: What is a better tax code? Answer: If 17% to 18% is the ideal size of federal government (as a percentage of GDP), then 17% to 18% ought to be the tax rate. It would apply to everyone's first and last dollar, including capital gains and dividends. There would be no payroll tax because it would be built into the 17% to 18% flat tax rate.

--Dollar stability. Easy Fed policy always shows up as an asset bubble. Last time it showed up in the housing market, and now we're all paying the consequences.

Question: What's a better way to a stable currency? Do we need a Federal Reserve? Answer: Peg the dollar's value to a basket of commodities led by gold. We need a Fed, but it should be smaller and have one objective: a stable dollar.

--Trade. The consensus for free trade is weakening. Obama and the Democrats are shaky supporters, and within the conservative Tea Party movement are America-firsters à la Pat Buchanan and Ross Perot.

Question: Should America look outward or inward? Answer: both. (That's why God gave us two eyes!) Nourishing our multinationals with free trade policies does not hurt our domestic industries. The solution for America's troubled domestic industries is not to protect them but to reduce their tax and regulatory burdens.

--Energy. The price of energy goes up for two reasons: (1) The dollar is wobbly, which encourages speculation in hard assets, such as oil, and (2) demand for energy exceeds supply.

Question: How can the U.S. have dependable and predictably priced energy in the future? Do we need a carbon tax? Answer: Say no to a carbon tax. A stable dollar is enough to send clear price signals and spur investment in future energy sources. Here are some ideas: Drill in ANWR; go full-bore on the new generation of small nuclear plants; convert government car and truck fleets to natural gas; and increase military R&D budgets to investigate potential midcentury solutions, such as space-based solar power.

--Financial reform. New regulations--some good, many unnecessary--are working their way through Congress. But here's a larger question. Does Wall Street and its engine--clever financial engineering--suck up too much of America's IQ? Look at our triumphs over the last 70 years: the Manhattan Project, the space race, the microprocessor boom, the entrepreneurial renaissance, the Internet, bio-technology. What are today's great triumphs--social networks? Is it because our brightest young minds all started writing derivatives?

Question: Are America's big banks too big to fail? Would their failure pose systemic risk to the whole economy? And do banks and hedge funds use up too much IQ, diverting this resource from more productive enterprises? Answer: Banks should be allowed to fail. We don't need more rules. We need transparency and strict enforcement of the rules and guidelines already on the books. As for the IQ diversion question, let's give the banks competition. Let's spend more on military R&D, which will--as did Cold War research from the 1960s through the 1980s--keep us safe, engage the most talented and create real wealth in the years ahead.

--Education. American universities lead the world, but our K--12 schools are not in the top 10 and by some measures are out of the top 20. This bodes poorly for our competitive future, not to mention the strength of our civilization.

Question: How do we get our K--12 education back into the global top 10? Answer: Abolish the requirement of an education degree so that any college-degreed person who is motivated to teach has the opportunity to do so. This would draw more successful people from the private sector into teaching. End tenure, fire the bottom quartile of teachers and pay the good ones more.

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