There’s a time to pull and a time to push

By Henry R. Irving

The current economic crisis is nothing if not complicated, and when I’m confronted with complex matters, it’s always worthwhile to try to simplify things. I think I’ve gone completely simple lately, probably the result of reading too many crisis-ridden articles in the papers and on-line, and I’ve got it down to one basic question. To get the economy out of its near-clinical depression, whether nationally or at home in Cambridge, should we pull or should we push?

Interestingly, the push versus pull argument has a history in economics, which is to say I didn’t make it up for this column. Milton Friedman compared monetary policy to a rope, saying you can pull on it (i.e., slow down growth…tighten a knot) but you can’t push on it (i.e., jumpstart economic activity). And we’ve all heard the expression, “you can’t push on a string,” right?

Speaking of crisis-ridden articles, there was an op/ed in the Wall Street Journal several weeks ago by Steny Hoyer, a Maryland Democrat and majority leader of the U.S. House of Representatives. He wrote about dramatic policies being developed in Washington to jump-start things including legislation to provide jobs or job security, plans to address the mortgage mess, and ways to get credit flowing to families and businesses. It read like this kind gentleman was trying to piece together a long lifeline that he could throw down to me and then pull me out of the deep hole I’m in…if the line held, that is.

I’m no physicist, but I think the general rule is that pushing is easier than pulling. You get more leverage by pushing. If my old Volvo were stuck in a Cambridge snowdrift I wouldn’t dream of asking some poor passerby for a pull. Yet neighbors come out of the woodwork when I need a push. Even poor Sisyphus has the wherewithal to push the rock up the hill.

Days later I came across an article on economist and Nobel Laureate Robert Mundell that conveyed his three-step prescription for what ails us: stabilize the dollar, slash the corporate tax rate, and declare a two-year capital-gains tax holiday. He’s saying that leaving money in the private economy is the fastest way to fund and fuel economic growth locally and nationally. It’s the kind of fiscal policy that in the past has been a much appreciated wind at our backs, providing a welcome push onward and upward. Look back to the days of JFK and Ronald Reagan. I don’t know why it wouldn’t work again today…if it were implemented, that is.

Leaving money in the private economy means more resources for the individual risk-takers who historically have been the engines of economic growth. Who are these risk-takers? I suggest that everyone reading this column counts as one. Not everyone may provide the same kick to the economy, but each of us does our part day-to-day to push the Cambridge economy forward, as long as we have the necessary resources in our wallets.

I’m as aware as anyone that our fair city and our country are confronting a very complex and serious crisis. It’s a good question if anyone knows when and why it will end, but pretty much everyone agrees on one thing – liquidity is crucial. My wallet’s not got enough of it. Cambridge’s wallet isn’t big enough. Sufficient liquidity means government has an important role to play and I don’t think there’s any way around it. Like any good actor, though, the government has to learn its role, and from my seat in the theatre, it seems like we’re still in rehearsal and it’s hard to tell who is the director.

Our government is throwing lifelines everywhere, hoping that when parts of the economy grab hold it will have the traction to pull them up. In the meantime, the government is not getting much push from below, from the potential risk-takers in towns and cities like Cambridge. In fact, it’s hardly trying. If anything, its lack of attention to stabilizing the dollar, slashing corporate taxes, and temporarily zeroing-out capital-gains taxes is making life worse.

What is going on? Is it a control thing, a lack of trust in the people? Does the government think it can pull the full weight of the nation up by itself? Does it want to take all the credit when this particular crisis is behind us? It seems noticeably ahistorical to me. Ingrained in every American community, even Cambridge, is a capitalist tradition. It’s not perfect, but it’s there and it’s the best thing going. Within it is

America’s most dynamic force: the energy and enthusiasm of the individual pushing the way forward. Give it more room!

Ultimately, isn’t it in every administration’s interest to do everything it can to give incentives to individuals? Say things get really bad…a real worst case scenario…and we’re down to the last man standing. If he’s from government, he’ll come up short. Now think of this poor fellow on a cold winter night in Cambridge with his car stuck in the snow. There’ll be no lifelines from government and he’ll be sad when no neighbors come out to give him a push.

Henry R Irving is the chairman of the Cambridge Republican City Committee and lives on Bigelow Street.