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FRONT PAGE CONTRIBUTOR

On Sustainability.

“Sustainability” is something of a corporate fad.

Shell Oil has a sustainability policy. So does ExxonMobil.

Dow Chemical. Walmart. Mattel.

Even Ben and Jerry’s has a sustainability policy.

Even though “sustainability” may be interpreted differently in different companies, sustainability is something that corporate boards have come to expect of their managements.

Is it too much to expect our government and the people who run it to act as if they’re conscious of its sustainability?

Corporations usually put an environmental spin on sustainability. Broadly, their sustainability efforts would lead them to recycle, not make too big a mess, and not kill their employees, customers and neighbors.

Our government, though, threatens to kill our economy. The hungrier it gets, the more it grows, the more the engine that ultimately feeds it — the private sector, and specifically entrepreneurial capitalism — shuts down.

Common cuckoo being fed by its warbler host-parent. Wikipedia image.

I am reminded of two images. One is the “brood parasite” strategy of the common cuckoo, which lays its eggs in the nest of another species. The host dutifully raises the baby cuckoo as its own. The voracious cuckoo nestling demands more and more of the host until it crowds its nest mates out and works its host-parent to death.

The other image was a graph from a freshman-year Engineering 101 project on population growth. We were given the historical population figures for the City of Houston and for the United States up through 1970. Population data often plot as a straight line on semi-logarithmic paper; in this case Houston had a 12% annual growth rate, and the U.S. a 3% growth rate. When the curves were extrapolated, the conclusion was inescapable: by 2040, the curves intersect, so 100% of the U.S. population will reside in Houston.

The growth of government is unsustainable. In spite of high marginal tax rates on the wealthiest (and the poorest!) Americans, Government revenues are 15% of GDP, while Government spending is 26% of GDP.

Healthy corporations are forced by competition to trim deadwood. The alternative is a drag on earnings, reduced competitiveness, ultimately leading to bankruptcy or acquisition by a stronger competitor.

Government doesn’t know these market forces. Every single dollar of Government expenditures has a built-in constituency who will fight to the death before letting go the teat. Have you ever known a Government program to shrink? More commonly, the bureaucracy spends money lobbying to expand its sphere of influence.

To make matters worse, we’ve become conditioned to expect Government to provide the ultimate solution to all problems, from providing us jobs, to making the air cleaner than Yellowstone, to making our kids stop eating so much junk food and making our toilets not waste water. Excessive regulation is strangling the host.

The only possible fix for our economic woes is to unleash the mighty pent-up engine which is the American Capitalist Economy.

I’d do this by:

  • Reforming the tax code. President Obama favors high tax rates out of “fairness”, even if it can be shown that lower rates increase Government revenues. The increasingly progressive income tax may make us feel more “fair”, but it is why tax revenues lag. The “rich” will always be willing to money on lawyers, accountants or moving vans, if that’s what it takes to avoid what they perceive to be excessive taxes. The tax code needs to be flatter with fewer (or no) loopholes. The capital gains tax needs to be intelligently-structured to encourage innovation, capital formation and job growth, class envy be damned.
  • Reforming entitlements. That may mean means-testing or it may mean increasing the age of eligibility for benefits. But most importantly it means no new entitlements until we figure out how to pay for our current obligations. Period.
  • Reforming the Federal budgeting process. Start with -10% as a baseline, not +8%. Cut departments and regulation wherever possible. Reconsider the role of the Departments of Energy and Education, for starters. Take away EPA’s trump card to stifle development wherever it strikes their fancy.

The warning signs are there for anyone who cares to pay attention. Government has grown beyond the economy’s ability to sustain it.

Cross-posted at stevemaley.com.


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