WSJ Interview with George Shultz

Some interesting areas of the interview:

“For Mr. Shultz, the tax issue is not just about rates—though he believes lower rates often produce more revenue than higher ones, and “it’s the revenues you’re looking for”—but about predictability.

He asks me what sports I like. “Let’s talk about football. . . . You want to know the rules and have an impartial referee, but you also want to make sure somebody isn’t going to come along and change the rules in the middle of the game. . . . Now it’s as though we have all these people who have money on the sidelines and we say ‘Come on and play the game,’ and they say ‘Well what are the rules?’ and we say ‘We’ll tell you later.’ And what about the referee? Well, we’re still struggling for who that’s gonna be. . . . That’s not an environment designed to get people to play.”

Mr. Shultz cites the handling of the auto bankruptcies as an important deviation from rules-based economic policy. The question was “are we gonna have a political bankruptcy or a rule-of-law bankruptcy? Political bankruptcy was chosen. So the result is that the unions got paid off and the regular creditors didn’t.”

Every now and then, you just have to step back and ask yourself, “Why are making this so hard?” We’ve got all of the brightest minds in the country pouring over how to fix the malaise we are in. But even a miracle cure would be negated if the economy has no confidence in the rules. All of the brillance of the best economists is for naught if we can’t get some of the basic fundamentals right. Leave it to the 91-year-old guy to bring us back to reality.

“That would be ObamaCare, of course. “I fear that the approach to controlling costs in the health-care business is moving more and more to a wage-and-price-control approach. And one thing you know from experience is when you control the price of something, you end up getting less of it. So if you control the price of health-care providers, you will have fewer of them and that’s gonna wind up as a crisis. The most vivid expression of that . . . was Jimmy Carter’s gas lines.”

Another obvious point but somehow gets lost in the debates.

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