Economist Dr. Robert Genetski didn't bring a crystal ball with him on stage yesterday as he addressed an audience of credit union professionals and volunteers at the Cornerstone Credit Union League's Leadership Conference & Expo in San Antonio, but his insightfulness certainly gave conference attendees a lot to think about.
Economist Dr. Robert Genetski didn’t bring a crystal ball with him on stage yesterday as he addressed an audience of credit union professionals and volunteers at the Cornerstone Credit Union League’s Leadership Conference & Expo in San Antonio, but his insightfulness certainly gave conference attendees a lot to think about.
Genestski began his “Economic and Financial Outlook 2014 & Beyond” presentation yesterday explaining the difference between the Keynesian and Classical frameworks. The Keynesian theory, he said, assumes when government increases its spending or provides credit to various entities, it adds to the total amount of spending or credit. The Classical economic theory, on the other hand, assumes
government spending and loans come at the expense of private spending and credit.
Dr. Genetski, a longtime advocate of Classical economic principles, told the audience that it was his belief that when the private sector is left on its own, ‘it will make pretty good decisions.”
During his presentation, Dr. Genetski highlighted the Classical economic principles:
Low tax rates and limited government
Protect individual property rights
Dr. Genetski believes that economic freedom encourages the production of goods and services.
“Free markets enable us to have the most efficient use of our resources.
Classical economics respects individual right of choice,” he told the audience. “And freedom is the essence of economic prosperity.”
Although the U.S. has faced significant economic problems, Dr. Genetski pointed out that the U.S. is still the world's largest economy. China, however, is experiencing significant growth and now ranks second. India has surpassed Japan and now has the world’s third largest economy. Economic freedom, Dr. Genetski said, has contributed to China, India and Russia’s economic growth. Japan, he said, is having and will continue to have problems.
Dr. Genetski also highlighted the fast growing states in the U.S., and interestingly, the fastest growing states tend to have lower
tax burdens, as well as right to work laws. In contrast, those states with higher tax burdens and no right to work laws tend to be the slowest growing states.
Texas, he pointed out, has the second most powerful economy in the U.S., and 31 percent of our country’s personal income. Personal income is on the rise in Arkansas and Oklahoma; however, Arkansas has a pretty significant tax burden.
So what factors are boosting the U.S. economy? According to Dr. Genetski:
The banking system, which has substantial reserves
Fiscal agreement, which provides a more stable tax environment
And tax hikes off the table, which offers a greater chance of slower federal spending
And what factors restrain the U.S. economy? Dr. Genetski tells the credit union audience yesterday:
Higher tax burdens
Regulatory burdens depressing productivity
Regulatory burdens depressing job creation
Regulatory pressures on financial institutions to rebuild capital and limit lending
Although the odds are against an economic collapse, Dr. Genetski said the U.S., Europe and Japan would continue to experience slow growth and a decline in living standards. Because interest rates and inflation stock prices are artificially low, Dr. Genetski advised the credit union unions to avoid bonds and consider price escalators in longer-term contracts.