Innovation Drives Prosperity - NOT Big Government

The question now is how to stop the bleeding? The first thing to do is change the government from one of over reaching regulation and control to one that believes the people are the ultimate source of prosperity.

The Innovation Nation vs. the Warfare-Welfare State
Source: Alex Tabarrok, "The Innovation Nation vs. the Warfare-Welfare State," The Atlantic, January 26, 2012.

We think of ourselves as an innovation nation, but our government is a warfare/welfare state. To build an economy for the 21st century we need to increase the rate of innovation and value research into new goods. However, this lofty goal is a far reach from the status quo, as the lion's share of the federal budget is allocated to defense and safety net programs to the exclusion of research and development, says Alex Tabarrok, an associate professor of economics at George Mason University and research director for the Independent Institute.

Nearly two-thirds of the U.S. federal budget, $2.2 trillion annually, is spent on the four biggest warfare and welfare programs, Medicaid, Medicare, Defense and Social Security.

Meanwhile, the National Institutes of Health, which funds medical research, and the National Science Foundation spend $31 billion and $7 billion, respectively. All federal research and development spending together amounts to just $150 billion -- a mere 4 percent of the budget.

The distinction between a thriving, innovation-centered nation and a regulation-choked, stagnant economy can be seen in three separate areas: health care, building and energy. The recent dialogue over the constitutionality and efficacy of the Affordable Care Act crowds out important policies promoting greater research and experimentation in the field of health care.

The increases in life expectancy from fewer deaths brought on by cardiovascular disease over the 1970 to 1990 period, for example, were worth over $30 trillion. If medical research could reduce cancer mortality by just 10 percent, that would be worth $5 trillion to U.S. citizens.

Furthermore, extensive government regulations make simple market actions such as construction and energy development impossibly onerous. The United States has seen the construction of only one new airport since 1978, causing crowding and delays at current sites.

Meanwhile, China will construct between 50 and 100 airports in the next 10 years.
Energy production has also been strangled: 97 percent of hydroelectric dams produce no electricity because the regulatory climate makes it too risky.