Big Think

Three Steps to Save the Economy

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Economic policy

If you think the U.S government has flubbed the bailout plan, you'll like Eric Janszen, the sometime venture capitalist and entrepreneur who runs iTulip.com. Janszen spoke at the Nantucket Conference on Friday, giving a likely preview of his book "The Post-Catastrophe Economy." If nothing else, Janszen is provocative. For starters, he thinks the U.S. government's efforts to fix the economy merely guarantee an even bigger crisis in the future. Janszen summarized government actions so far as:

pouring money into insolvent banks
monetizing bad debt (i.e., toxic assets)
stimulus without restructuring (focused on shovel-ready projects, or as he put it, congressman-ready)

Tsk tsk, Janszen said. This "will not produce a self-sustatining economy. Debt will pass some threshold and we’ll have a currency crisis." But all is not lost. He reminds us of Churchill's comment as a nation that will do the right thing, after exhausting all other options. Janszen's prescription:

fiscal spending around a very specific set of goals to increase personal and national savings rate.
increase investment in specific areas
nurture the productive economy, shrink the financial economy
avoid additional debt.

How?

cut debt by revaluing assets to non-bubble levels.
restructure the tax system. Lower income taxes dramatically, and don't tax entrepreneurs and investors in high-risk ventures.
use taxes to push imported oil to $200 a barrel. Use tax revenues from that to fund infrastructure investment and unfunded liabilities.

The result for America: the TECI economy, built around transport, energy, communication and infrastructure. Would it work? We'll probably never know. It's such a radical restructuring that it's unlikely to happen. Even Janszen acknowledges that his first proposal will be "a tough one," since debtholders will lose so much money. Still, he got hearty applause (though not a standing ovation) at the Nantucket Conference. Would you have clapped? (For more from Janszen, see The Next Bubble.)

posted by Michael Fitzgerald
May 3, 2009 @ 8:32 pm

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