Former Florida Gov. Jeb Bush told the House Budget Committee Friday morning that he fears the economy "is stalling again, and growing well below its historic potential." The Republican governor was invited to speak by the committee's chairman, Rep. Paul Ryan, R-Wisc., author of a budget despised by Democrats in part for its proposed changes to the Medicare program for seniors.
Ryan took an immediate political approach. President Barack Obama's policies "take us in the wrong direction," Ryan said, before introducing Bush. "He has called for higher hurdles and greater complexity in the tax code. He insists on wasteful spending on his political allies and regulatory monstrosities that protect the entrenched at the expense of the entrepreneur."
Not to be outdone, the top Democrat on the committee, Rep. Chris Van Hollen, D-Md., fired back. Former President George W. Bush's financial policies "lifted the yachts," Van Hollen scolded his brother, but not the rest of the boats.
Bush, perhaps unused to the partisan tone of House politics, told them he wasn't at the committee to criticize anyone, and said he wasn't used to the "9 am. food fight" that begins when the sun comes up in Washington. Politics don't get such an early start in Florida, Bush said.
Bush's full remarks, after the jump:
Thank you for the opportunity to participate in this hearing.
I want to thank the committee for its focus today on the state of our economy.
It is safe to say that the weak economy is the dominant concern for Americans today. Americans
can see with their own eyes and in their own communities that the economy is not growing like it
should be. We are nearly three years past the end of the recession, and yet few Americans
believe we have recovered from it, nor has our economy begun to grow at a healthy and
The kind of snap-back we have seen in every previous post-war recovery simply has not
happened. Many people who lost jobs in the last four years have not returned to the workforce –
millions have given up trying altogether and have withdrawn from the labor market.
Business owners who retrenched and cut costs have been very slow to invest in the hopes of
future growth. The housing market remains weak. Commercial real estate is still weak in many
What’s worse: There is a strong sense in the business community that the economy is stalling
again, and growing well below its historic potential.
I recognize that the Members of this committee share a common awareness of the problems
facing our economy. And you also share a common resolve to do your part to bring prosperity
back to America.
The only question is how.
What do we need to do in these chambers, or in state capitols, to improve the outlook for job
creation, business expansion and overall prosperity?
I would urge you to look carefully at your primary responsibility – to manage the budgetary
affairs of the U.S. government – as the place to start.
At $3.8 trillion, the U.S. budget is a powerful force on the U.S. economy. Its sheer size means
that entire industries – whether heavily regulated or not – operate in constant awareness of what
you do here.
When you combine this budgetary power with the separate powers of taxation and regulation, the
federal government wields significant influence over the economy, both directly and indirectly. It
is not an overstatement to say that right now, the U.S. economy operates significantly at the
direction and behest of the U.S. government, not the other way around.
I can think of no better example of this trend than the economic growth of the Washington D.C.
area. The district and its surrounding area, is a picture of economic health and growth. Housing
values within the Beltway have not fallen, as they have elsewhere.
There is a simple explanation for this: The near-constant growth of the main industry of this
region – the federal government.
And while the growth of the federal government is healthy for this area, one has to ask at what
cost it occurs? Every dollar spent in this area was taxed from somewhere else – or borrowed, and
therefore not used on some other productive activity.
Let me be clear: I do not believe in a zero-sum economy. But I do believe that if the government
gets bigger and more powerful, it largely does so at the expense of the rest of the economy,
because government does not contribute to the economy the way the private sector does. A dollar
spent on government services is not equivalent to a dollar of private sector investment.
Today’s federal government did not emerge out of the blue three years ago. Far from it. But there
is no doubt that the growth of the U.S. government, as a share of the U.S. economy, has risen
sharply in the past three years. Even when the economy began to grow, the government’s share
was growing faster.
In many cases, the government’s growing size and influence was made possible by good
intentions and hopeful policy ideas. Behind every spending program and every tax incentive and
every regulation is an idea. It might sound good. It might in fact be a good idea.
But those good ideas, as well as the not-so-good ones, add up. And the cost of everything you do
here – every line item, every rule, every carve-out and phase-out and earmark – drains activity
and investment and creative effort out of the private sector of the economy.
That is why my best advice to you is to perform a fundamental cost-benefit reconsideration of
many programs in the federal budget. Please know that no matter your good intentions, the
government creates unintended consequences when it acts.
What would a cost-benefit analysis show? I read recently of the 49 different federal job training
programs – and that the number of such programs continues to grow.
I wonder about that number. What do we, as taxpayers, get from 49 job training programs that
39 or 29 or just 9 couldn’t accomplish? I wonder as well about the people who need the job
training. How do they know which one is right for them? And who runs these training programs
– are they being measured on the success with which they get people retrained?
Do these 49 job-training programs operate with any sense that they could – and should - be
closed if they fail? This is the daily worry of every business in America, but I would guess that
not one of these programs ever worries that they will be put out of business by any of the other
programs – or by their Congressional funders.
I wonder about what these job-training programs do, indirectly, to programs which are effective
at providing focused skills training? Are we, by creating government programs, competing with
those who actually do this work quite well in the private sector?
In this matter, the sheer size of Congressional ambition is one problem. But there are other
problems, too. The complexity of the programs. The failure to see whether taxpayer money is
well-spent. The likelihood is great that by setting up these programs, government may be
keeping someone else from doing the work. Someone who might do the job better than the
government can, build a business from it, hire employees, pay taxes on profits, and so on.
In short: When you try to solve one problem, you may not only fail – you may create several
Now if you multiply that one example across the economy, in multiple industries and multiple
ways, it is not hard to see what will happen, and has happened.
The government, by growing in influence and extending itself into all corners of the economy,
makes it less likely that enterprising business people will address social needs through some kind
of business idea or business plan. So it’s not only that the government grows bigger through
every program. Through the power of taxation and regulation, it also displaces the private
economy – the innovators and inventors, the people who risk their own savings on a business
idea, the established businesses who could grow but don’t.
The losses that follow are significant.
Someone recently asked a good question: What if the federal government tried to invent the
mobile phone? What if Congress said: “People need to talk to each other and receive information
while they are out and about, and we need to provide them that technology. So, let’s fund a
bunch of research, and get people the tool they need.”
Well, you think, that didn’t happen and wouldn’t have happened. It sounds like an extreme
example, but in reality, the federal government tries to invent solutions to people’s problems all
the time. Problems far more complex than mobile phone technology. Many well-meaning
programs in the federal budget have this exact flaw: They try to accomplish through government
fiat what would be better done by individuals and businesses who have a vested stake – through
the profit motive – in achieving success.
We see this in spending programs, and we see it in taxing programs as well. Tax policies that
advantage certain economic activities are usually just another form of government spending and
subsidy. And while they grant an advantage to some companies and industries, they tend to
disadvantage other companies and industries.
There is a simple question of fairness that I pose to this committee: Why should a company pay
taxes to support government subsidies for one of its competitors?
I understand that there may be political support for specific industries and companies. But we
know from recent experience that the government is not good at picking winners and losers in
the economy. And fundamentally, it’s not the job of government to pick winners and losers in the
Again, I recognize why government tries to control the marketplace by sheer power and size. I
recognize it because in my post-governorship life, I see it in the private sector as well.
Big businesses often struggle at innovation because they wrap innovation in a heavy veil of
bureaucracy and groupthink. Good ideas bubble up from time to time, but it takes a special
organization to recognize how to let it breathe, how to invest in its growth slowly, and how to let
it struggle before demanding it return a profit. There are countless examples of great companies
who fail to move with the market, simply because a smaller and more nimble competitor arrives
first with the winning solution.
But in the private sector, when a big company is beaten to the punch, it either learns fast or gets
smaller fast. That’s just how it is. Big companies routinely fail because they don’t adapt. And
while we may bemoan the loss of capital and jobs that follows, we should remember that failure
is a natural part of a competitive market.
Most successful business leaders experienced failure at some point in their careers. And there is
little shame attached to the experience, provided one learns from it and improves after it.
The problem here is that the U.S. government will not fail. None of us will allow the government
Because the institutional bias within the U.S. government – especially the U.S. Congress – is not
to punish policy failure, nothing is allowed to fail. What would occur in most private
organizations and institutions – failure followed by defunding – simply doesn’t happen here.
And so I urge this committee to look carefully at all proposals to zero out programs that do not
achieve their goals. A simple expectation – one that should not be terribly controversial. But I
realize this will be a new concept to many federal programs
I want to return to the rationale behind such a process. This is not simply about making
government more efficient. Government efficiency and effectiveness is a worthwhile cause, and I
I am speaking of a much more fundamental goal, which is to apply a constant break to the size of
the government. To make the government a smaller part of the economy.
The impulse to do something here in Washington D.C., to resolve problems that exist in the
country, is perfectly natural. But this impulse has only made government bigger, while the
problems remain. We have to ask ourselves whether the status quo – an expensive and
unaffordable status quo – is the best way to address the problems that the Congress has set for
itself to solve.
I thank the Committee for its attention to these issues, and look forward to answering your