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

Overview

If you think the current administration is mismanaging the economy straight towards disaster, you're not alone: so do two top economists from both sides of the political aisle. In Seeds of Destruction, former Bush chief White House economist R. Glenn Hubbard and well-known CNBC commentator Peter Navarro explain why current economic policy is a catastrophic failure. Then, they offer a comprehensive, bipartisan blueprint for reversing the decline of America's currency, manufacturing base, and standard of living - ...

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

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Overview

If you think the current administration is mismanaging the economy straight towards disaster, you're not alone: so do two top economists from both sides of the political aisle. In Seeds of Destruction, former Bush chief White House economist R. Glenn Hubbard and well-known CNBC commentator Peter Navarro explain why current economic policy is a catastrophic failure. Then, they offer a comprehensive, bipartisan blueprint for reversing the decline of America's currency, manufacturing base, and standard of living - setting the stage for the epic policy debates that will precede the 2010 elections. Hubbard and Navarro begin with a "checklist" of what it takes to be a prosperous, democratic nation - and show why Obama's policies (some of Bush's also) fail on every level. They explain why the activist Federal Reserve and Obama fiscal stimulus policies are doing far more harm than good... why we must restore the U.S. manufacturing base, whatever China says about it... how to transform tax policy into an engine of growth and innovation... how to apply the "tough love" needed to save Social Security, Medicare, and Medicaid... why America must resign the job of world policeman... how market-based solutions can finally deliver real energy independence... how to reform our antique financial regulatory system without imposing heavy-handed rules that cause even more trouble.

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Editorial Reviews

From the Publisher

" ... 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 ... "

-Library Journal

"This is a good and useful book."

-Financial Times

“Hubbard and Navarro provide a cogent analysis of America’s dangerous economic decline as well as a carefully thought out plan for recovery based on a manufacturing renaissance.”

Clyde Prestowitz, Founder and President of the Economic Strategy Institute, and author of The Betrayal of American Prosperity and Three Billion New Capitalists

“A well-argued–and exceedingly timely–call to action for the White House and Congress to end partisan political bickering and move the American economy back to sound principles like free markets, entrepreneurship, and a renewed manufacturing base that will restore our nation’s greatness. Hubbard and Navarro focus a bipartisan perspective on practical policy reform.”

Larry M. Wortzel, Ph.D., Commissioner and former Chairman of the U.S.—China Economic and Security Review Commission

“It is time for a clean sheet of paper that creates the ultimate focus on creating real jobs and driving the success of our private sector by significantly improving our global competitiveness and not further eroding it. Kudos to Glenn Hubbard and Peter Navarro for doing just that!”

Dan DiMicco, Chairman, President, and CEO, Nucor Corporation

Seeds of Destruction is everything that Washington policymaking is not: sober, lucid, reasoned, timely, bipartisan, and constructive. The United States is on a path to greater danger and diminished aspirations. Hubbard and Navarro illuminate the path to fulfilling this generation’s obligation to leave behind a nation with greater freedom and prosperity than it inherited.”

Douglas Holtz-Eakin, President of the American Action Forum, and former Director of the Congressional Budget Office (2003—2005)

“Glenn Hubbard and Peter Navarro combine their unique experiences in government and politics with their crystal-clear economic insights to produce a lively and compelling account of the origins of the financial crisis and the problems now plaguing the American economy. The book convincingly explains how government policy planted the seeds of destruction and how a change in government policy can root them out and plant the seeds of prosperity. Their diagnoses and remedies should be read, studied carefully, and applied.”

John B. Taylor, Mary and Robert Raymond Professor of Economics at Stanford University, and former Undersecretary of the Treasury for International Finance

“A thoughtful and politically provocative diagnosis of America’s economic ills.”

Kenneth S. Rogoff, coauthor of This Time is Different, and Thomas D. Cabot Professor of Public Policy, Harvard University

“This book is a ‘must-read’ for all persons who are concerned about our economic future. It shows the disastrous folly of our current economic policies and, more important, it lays out the proper policies to achieve a sound and prosperous economic future.”

John Cogan, Leonard and Shirley Ely Fellow, Hoover Institution, and Professor of Public Policy Program, Stanford University; former Deputy Director of the Office of Management and Budget, Reagan administration

"This is a compact blockbuster of a book that gives six reasons why the U.S. economy has sunk so far and offers ten initiatives that the authors believe will lift us back up. It spares neither political camp and it appeals to both camps to take actions that will repair the damage they have caused over the past decade."

-Edmund Phelps, McVickar Professor of Political Economy, Columbia University, and 2006 winner of the Nobel Prize in Economic Science

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.
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Product Details

Meet the Author

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.

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Table of Contents

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

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    BN you are Killing Nook

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