Just as forced unionization and government intervention exacerbated the economic downtown of the 1930s, today's regulatory agenda is creating too much uncertainty for a sustainable recovery Steve Forbes said Thursday during a labor forum on Capitol Hill.
Instead of putting capital to work, small business owners and entrepreneurs are retrenching in anticipation of potentially burdensome legislation set up to benefit organized labor at the expense of the larger economy, Forbes explained.
The magazine publisher who previously ran for president as a champion of the flat tax was joined by former Labor Secretary Elaine Chao and two other witnesses who discussed the impact union favoritism has had in their respective workplaces.
"Go back to the Great Depression when the government had forced unionization," Forbes said. "The U.S. had one of the worst recovery records in the 1930s but after World War II when the government did nothing to the economy except cut spending with a few small tax cuts and the reform bill of Taft-Hartley and low and behold we experienced a post war boom."
The "culture of favoritism" is one of the main factors holding back what could otherwise be a robust recovery, Forbes explained, because the Obama policies are fueling artificial price increases that have come not in response to consumer demand but to "government diktats."
Consequently, the current "sub-par" recovery is beginning to mimic a cycle last experienced in the 1970s when the economy retracted again after a short period of jobless, economic growth, he warned.
"One of the patterns you see over the years is that the more government spends as a proportion of the economy, the higher unemployment goes and the less well the financial markets do," Forbes said.
Forbes recommended reforming the tax code and lowering tax rates as opposed to mailing out rebates that do not have a lasting impact in his view. He also criticized the Bush Administration for maintaining a weak dollar and said there should be "equalized treatment of businesses and individuals" in pursing health coverage.
As an alternative to current proposals, Forbes suggested that policymakers allow for nationwide shopping for health insurance that puts companies in competition and the patients in charge.
With the right mix of incentives and restrained government policies, America's creative energies can be released again, he added.
