Broken Government Needs to Find a Third Way - TheStreet

American government is broken, failing under promises it can't keep.

From Medicare and Medicaid to fixing the environment and potholes, governments face huge deficits. Taxes must go up, and services curtailed dramatically, or massive borrowing will create hyperinflation.

The private economy is growing too slowly for taxes to keep up with spending. Innovations in product design, customer service and problem-solving that swept through most private industry in recent decades have largely bypassed private health care and government agencies, much as they did General Motors.

In the trenches writing budgets, health care reform, environmental regulations and policies to create jobs, Democrats and Republicans remained hued to ideology. They spend ever more on failed programs and tax breaks and impose burdensome rules rather than embrace radical renewal in the spirit of Alexander Hamilton, Franklin Roosevelt or Ronald Reagan.

America can't turn to prescriptions that worked for another age, but it can adopt the mindset retired British Prime Minister Tony Blair called finding a "Third Way."

President Obama's 2010 budget offers more middle class tax breaks, and Republicans would slash taxes for everyone with reckless abandon. More folly!

Instead, stand still taxes and benefits, for now, and address problems in ways that do more with less -- just like

Wal-Mart

(WMT) - Get Report

,

Ford

(F) - Get Report

and other successful enterprises.

On health care, President Obama proposes ladling more money on a broken system, patching coverage gaps with bigger subsidies and taxes on the rich. Republicans embrace some regulatory fixes, such as interstate competition among health insurers. Neither side wants to genuinely tackle the inefficiencies causing Americans to annually pay $1 trillion to $2 trillion more for health care than would a comparable population in Europe.

Rather, let liberals create their public or nonprofit option, modeled on the British system. Empower it to pay no more for drugs and administrative costs than the Europeans, and free it of torts liabilities. Then let Americans choose between that and their private providers. Competition between public and private insurers would quickly drive down costs.

Despite scientific controversy, congressional liberals believe CO2 emissions drive global climate change with the certainty that New York is three hours ahead of Los Angeles. Moderates and conservatives are reluctant to pass sweeping restrictions on emissions, because those would impose huge costs on U.S. manufacturers that Chinese competitors don't bear.

Now, President Obama plans to impose those emission restrictions through executive order at the Environmental Protection Agency.

Whatever the truth on climate change, Americans spend too many dollars on imported oil that do not return to buy U.S. exports. That puts a huge hole in demand for U.S. goods and services and is a principal reason the private economy grows too slowly.

Most imported oil is for gasoline, and technology is already at hand to dramatically boost fuel efficiency and eliminate most imports. Nuclear power has proved a winner in France.

Instead of tying a millstone around the neck of manufacturing or throwing money at more failed stimulus spending, initiate a national program to quickly build a fleet of efficient cars and trucks and 25 nuclear power plants over the next 10 years.

Those would cut CO2 emissions dramatically, bypass the theological debate on global warming, jump-start growth and tax receipts and set examples of pragmatism the rest of government could follow.

Professor Peter Morici, of the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Prior to joining the university, he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in leading public policy and business journals, including the Harvard Business Review and Foreign Policy. Morici has lectured and offered executive programs at more than 100 institutions, including Columbia University, the Harvard Business School and Oxford University. His views are frequently featured on CNN, CBS, BBC, FOX, ABC, CNBC, NPR, NPB and national broadcast networks around the world.