Stating the Obvious on Economic Incentives

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In keeping with frustration that the General Assembly can inspire whenever it meets for the purpose of actually passing legislation, here’s an op-ed titled, “Finding America’s Lost 3% Growth,” which Phil Gramm and Michael Solon recently wrote for the Wall Street Journal:

A tidal wave of new rules and regulations across health care, financial services, energy and manufacturing forced companies to spend billions on new capital and labor that served government and not consumers. Banks hired compliance officers rather than loan officers. Energy companies spent billions on environmental compliance costs, and none of it produced energy more cheaply or abundantly. Health-insurance premiums skyrocketed but with no additional benefit to the vast majority of covered workers.

In a world of higher costs, productivity plummeted. Productivity measures the production of things the market values that flow from the employment of labor and capital.

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At the same time the government has made every job in the economy more costly, the authors note, increasing incentives not to work by, for example, “waiving work requirements for welfare,” reduced the incentive of workers to actually work.  This dynamic not only harms us all by reducing opportunity and constraining wealth and social advancement, but it also undermines the availability for many Americans of the dignity of work.

Rhode Island should stop being a case study in this progressive, big-government mentality.

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