An individual with a non-chronic medical issue sees a doctor and the doctor prescribes a pill. This relieves the symptoms temporarily and the patient feels better. The patient continues to take the prescribed pill. Over time the continuous dosage of the medicine causes a side-effect. The patient mistakenly ascribes the side-effect symptom as another independent medical issue and returns to the doctor. The doctor prescribes another pill. This causes new side-effects. Over years this cause and effect repeats itself. The patient is taking multiple pills to relieve symptoms that can no longer be isolated to individual issues. The effect of multiple pills, causing and masking numerous side-effects has rendered the patient’s health unstable. The doctor diagnoses the patient with chronic ill-health and tells the patient that the best he can hope for is a reduced level of health for the rest of his life. The doctor prescribes another pill.
The solution for this patient is to cease taking pills and return to a simple, stress-free lifestyle of healthy diet and exercise. The adjustment for the patient will be difficult and painful in the beginning. Years of unnecessary pills have caused toxic addictions that the patient must cleanse. When the patient regains his health naturally and is free of unnecessary chemicals, the patient can once again enjoy a healthy and productive life. We will call this medical prescription the “magic solution”.
Economies are no different. Government enacts bad economic policy. Initially this action appears to address an economic problem and there is the “illusion” of beneficial results. Over time as the initial illusion wears off, economic distortion is the result. This distortion causes more economic stress that harmed constituents once again petition government to address. Government enacts more bad economic policy. This negative process repeats itself for years and then decades. Eventually, separating individual bad policy from the whole becomes impossible. The economy is one giant mix of multiple enactments of bad economic policy interacting upon other bad policy. The “economists”, whose advocated prescriptions are responsible for this sad state of affairs, declare the mess a “conundrum” and invent a new economic term to explain away their lack of comprehension. They reluctantly and solemnly aver that we have entered the age of “secular stagnation”. Economic growth is no longer possible. It is all beyond anyone’s control or understanding and we must simply accept our declining standard of living as a new, mysterious economic phenomena. One of the befuddled economists then flies to Stockholm to accept the Nobel Prize in Economics.
Like our pill-popping patient, the solution for the sick economy is to shed all the multiple, layered on, bad economic policies and return to basics. Classical Economists Adam Smith, Jean-Baptiste Say, and David Ricardo—among others—recorded the economic “magic solution” in the 18th century and history has proven its efficacy. Like a healthy lifestyle, healthy economies require a return to basics. The economic “magic solution” requires stable money, low taxes, limited government, beneficial regulation, and rule of law. Not surprisingly, our Founding Fathers constructed the U.S. Constitution based upon the “magic solution”, which propelled the U.S. to the top of the global economic pyramid. Shedding the multiple layers of economic distortion due to decades of harmful policy and returning to basics may result in short-term economic pain while the economy cleanses itself of economic distortion. The long-term result is a return of economic growth, productivity gains, higher standard of living, savings and investment, reduced debt, and the ability to fund promised commitments.
The only “conundrum” is how economic thought has devolved to such embarrassing depths that the obvious is now considered a conundrum.