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June 28, 2011

How the Economy Would Recover

Justin Katz

It's kind of surprising to see this reported as news, but perhaps it's been so thoroughly forgotten among politicians and in the culture that it's actually a new discovery for journalists:

You get laid off. Your job search goes nowhere. Your savings dry up. Now what? The answer for many is as old as capitalism: Start a business.

This isn't the new Google, here. This is Bob's Landscaping and Junk Hauling or Alicia's Cake Baking and Daycare — whatever it takes to bring in a serious income. It might be a hobby or side business that morphed into a lifeline, but the key for most people is starting with relatively little capital — a lawn mower, computer repair tools, a sewing machine, all of which they might already own.

That's why the best approach to repairing the economy isn't to soften the experience of unemployment while throwing wads of debt-derived dollars into the economy. Rather, what's needed is to maintain a reasonable safety net while easing regulations.

Rhode Island especially needs to learn this lesson. Not only does the General Assembly look likely to tax new items (albeit many fewer than the governor wanted), but we frequently see the state and municipal governments ratcheting up fees, expanding fines, and otherwise making it more difficult to negotiate the economy.