Seeds of Destruction: Why the Path to Economic Ruin Runs Through Washington, and How to Reclaim American Prosperity »

Glenn Hubbard, Dean of Columbia Business School, served in the Bush White House from February 2001 until March 2003 as the Chairman of the Council of Economic Advisers and the OECD’s Economic Policy Committee. He also was the Deputy Assistant Secretary of the U.S. Treasury Department for Tax Analysis from 1991 to 1993. His commentaries appear frequently in the “Nightly Business Report,” “Marketplace,” The Wall Street Journal, and the Financial Times.

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Peter Navarro is a business professor at UC Irvine, CNBC contributor, and a widely sought-after speaker. He has appeared on Bloomberg TV and radio, CNN, NPR, and 60 Minutes. His books include Always a Winner and The Coming China Wars. His Web site is www.peternavarro.com.

In this book, a top Republican and Democratic economist explain why Obama’s economic policies are failing…and offer a commonsense blueprint for re-igniting long-term growth and prosperity for all Americans. They show how to overhaul the tax system, increase business investment, slash government spending, control entitlements, and even rebuild American manufacturing.

Library Journal

Hubbard (dean, Columbia Business Sch.; former chair, U.S. Council of Economic Advisors) and Navarro (business, Univ. of California-Irvine) are deeply concerned about America's economy. Here they intentionally aim at positive economics (what is) and normative economics (what should be) as they translate their apprehensions into concrete policy proposals. Description of basic macroeconomic theory is followed by prescription for reversing course from "the path to economic ruin," which they unabashedly ascribe to Washington's bad economic policies. Many writers criticize the U.S. stimulus efforts and the staggering shortfalls of the entitlement programs or assign blame for the recent housing bubble, but Hubbard and Navarro propose a set of realistic solutions. The authors bring their vast academic and policy experience to bear on weighty issues such as U.S. oil dependence, health-care reform, Medicare, and housing imbalances. Their solutions have a distinctly bipartisan flavor, with smaller government and lighter taxes for tastes of the Right and interesting new oil import taxes that should appeal to the Left. VERDICT Recommended for a general audience with marginal interest in economic policy; required reading for those crafting U.S. economic policy.—Jekabs Bikis, Dallas Baptist Univ.

Foreword

About the Authors

Introduction: The White House Plants Its Seeds of Destruction 1

Part I Getting from Seeds of Destruction to Seeds of Prosperity 7

Chapter 1 America's Four Growth Drivers Stall and Our Economy Stagnates 9

The GDP Growth Drivers Equation 11

GDP Growth Has Been Well Below Potential Growth 12

The American Consumer's Roller Coaster 15

Where Has All the Business Investment Gone? 19

There's Too Much Government Spending 21

Net Exports Are a Net Negative 25

Conclusion 27

Chapter 2 How to Lift the American Economy with the Ten Levers of Growth 29

Lever One Free Markets Free of Corruption and Monopoly Best Promote Growth 29

Lever Two Free and Fair Trade Helps All Countries Grow 31

Lever Three Entrepreneurship is the Linchpin of Long-Term Growth 33

Lever Four Without Savings, There Can Be No Investment and Growth 34

Lever Five Without a Stable Banking System and Strong Financial Markets, Savings Can't Be Transformed into Investment 35

Lever Six Innovation and Technological Change Matter More Than Machines and Workers 36

Lever Seven "Human Capital" Matters as Much as Physical Capital 38

Lever Eight Oil Price Shocks Stunt the Growth of Oil-Import-Dependent Nations 39

Lever Nine A Healthy Nation Is a Productive and Prosperous Nation 40

Lever Ten A Solid Manufacturing Base Makes for a Strong Economy 41

Part II Fixing America's Destructive Duo: Monetary and Fiscal Policy 47

Chapter 3 Why an Easy-Money Street Is a Dead End 49

The Return of Fed Activism 52

The Maestro or a Bubble Maker? 53

President Obama Crosses the Activist Rubicon 54

The Road to American Prosperity Cannot Be Paved with a Cheap Dollar 57

Where Have You Gone, William McChesney Martin? 60

Chapter 4 Why You Can't Stimulate Your Way to Prosperity 63

From John Maynard Keynes to the Kennedy Tax Cut Revolution 66

Part III Getting the "Big Three" Right: Tax, Trade, and Energy Policy 83

Chapter 5 Why Raising Taxes Lowers America's Growth Rate 85

Ideological Gridlock Over Broad-based Tax Reform 88

From a "Class Tax" to a "Mass Tax" 91

From Double Taxation to Double Whammies 93

Income Tax Evolution or Consumption Tax Revolution? 95

Meeting on the Middle Ground 97

Chapter 6 Why the Best "Jobs Program" May Be Trade Refrom 101

The 2000s: A Decade of Large and Chronic Trade Deficits 103

America's Trade Deficits Cause Inflation and Loss of Political Sovereignty 104

The World's Poster Child for the Modern Protectionist-Mercantilist State 104

China's Great Wall of Protectionism 106

China's Eighteenth Century Mercantilism 111

Chapter 7 Why America's Foreign Oil Addiction Stunts Our Growth 125

How Does America's Oil Import Addiction Harm Our Economy? Let Us Count the Ways 128

Risky Business 130

Moving Toward Forging a Political Consensus on Reducing Oil Import Dependency 132

The Smart Path Embraces Both Soft-and Hard-Path Options 133

The Folly of Energy Independence Redux 136

Achieving a Targeted Reduction in Oil Dependence 137

Why This Proposal Has Economic and Political Merit 140

The Thormy Politics of Oil Import Fees 142

Part IV Good Politics Usually Makes for Bad Economics 147

Chapter 8 Cutting the Gordian Knot of Entitlements 149

The Imperative of an Economic Rather Than Accounting Solution 151

Why Social Security Is Easier to Fix Than Medicare and Medicaid 153

Saving Social Security in Two Easy Pieces 154

Closing the Social Security Spending Gap: What Won't Work 158

Closing the Social Security Spending Gap: What Can Work 161

Forging a Political Consensus 165

Saving Medicare and Medicaid: Mission Impossible? 167

A Flexible and Focused Way Forward 168

Chapter 9 Why ObamaCare Makes Our Economy Sick 173

The Big Health Care Picture 174

Are We Getting What We Are Paying For? 176

ObamaCare Puts the Coverage Cart Before the Cost Horse 178

ObamaCare Provides a Far-Too-Sweet Entitlement 180

Truth or Consequences 181

ObamaCare and the Law of Unintended Consequences 183

Toward a More Market-Driven Health Care System 184

What Can Be Done? 191

Conclusion 192

Part V The American Economy at a Crossroads 197

Chapter 10 How to Prevent Another Financial Crisis--- and Housing Bubble 199

#1 Easy Money 201

#2 Not Enough "Skin in the Game" for American Home Buyers 202

#3 Not Enough "Skin in the Game" for Mortgage Lenders 203

#4 Way-Too-Exotic Mortagages for Borrowers 205

#5 The Mortagage-Backed Securities Meltdown 208

#6 The Collateralized Debt Obligations Credit Rating Debacle 211

#7 A Flawed Insurance Market: Credit Default Swaps 213

#8 Inflexible Bank Capital 216

#9 Too Big to Fail: Last Rites for Financial Dinosaurs 218

#10 A Fragmented and Sectoral Model of Regulation 219

#11 Subsidies for Nonproductive Investment, Taxes for Productive Investment, Taxes for Productive Investment 221

The New Law as the End of the Beginning 222

Chapter 11 How to Implement Our Seeds of Prosperity Policy Blueprint 229

Our Seeds of Destruction Problem 230

Our Seeds of Prosperity Solution 231

Conclusion 248

Index 251