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What Does It Take for U.S. to Avoid Stagnation?

Smick is a Republican — once chief of staff to the late Rep. Jack Kemp (R-N.Y.) — but he blames both parties for creating conditions that could lead the United States to repeat the example of Japan, lost in two decades of stagnation and pessimism.

“Consider this fact,” he said. “Had Americans not been able to take out cheap home equity loans to engage in hyper-consumption, the U.S. economy for the entire George W. Bush administration would have grown each year by an average of 1 percent.”

Since the economy collapsed in 2008, both Bush’s and Barack Obama’s administrations “caved into big banks’ power” instead of restructuring them, leading them not to lend.

“Is America the next Japan?” Smick asked in Florida. “The answer is that we aren’t yet. Japan was unable to innovate itself out of its economic quagmire. The question is whether America can.

“Here’s the good news. Today there are up to $4 trillion sitting on the sidelines waiting to invest in a new era of American confidence” if the government changes policy and encourages small-business and start-up investment.

“It is time for Washington to wake up,” he said. “It is five minutes to midnight. America doesn’t work any more. In the minds of most Americans, big banks, big unions, big corporations and big government have all gamed the system for their own special interests, and Washington has lacked the courage to fight back for the little guy.”

To restore confidence, America needs “a nonpartisan, problem-solving, no-nonsense leader” who “grabs the country by the shoulders, shakes us and says, ‘We can get out of this mess, but it will take time, and sacrifice and imagination,’” he said.

He told me he does not have a current candidate in mind but that “it would have to be a combination of [New York Mayor] Michael Bloomberg — somebody who understands how markets work — and Ronald Reagan, someone who can communicate and inspire confidence.”

That’s a good combination to look for in 2012 presidential wannabes. If Smick is right, our future depends on it.

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