3 things the economy needs to recoverWhat's going to fix the economy? An entrepreneurial spirit, free market structure, and the infrastructure to bring them together to bear fruit will help the U.S. pull through. But we've already got those things.

With anemic GDP growth, elevated unemployment, and extreme deficits slowing an already weak recovery, what we really need are three things that on the surface seem less concrete than new tax laws and regulatory changes. What we need is certainty, innovation, and, most importantly, time.

We Need To Provide Businesses Some Certainty

Success is never guaranteed. But past results, peer performance, and common sense combine to make a pretty good guide for most business owners. Now imagine trying to thrive in an environment where even the standard operating procedures are up in the air.

Companies today are operating in just such a place, frozen by a heightened level of uncertainty. Unpredictability abounds -- from regulatory changes to macroeconomic growth rates to politics -- making it a volatile environment for even the most established businesses.

  • If a product developer or manufacturing engineer doesn't know how regulations will affect the products they're trying to make, it's harder to plan finances and production.
  • When financial managers build projections about a project, they must make assumptions about growth rates and other factors, but when the tax rate is uncertain, it throws another wrench in the equation.
  • If the U.S. passes some sort of punishment for currency manipulators (that is, China), as we saw the Senate vote in favor of this week, it could throw plans for multinational companies up in the air.

When a multinational like General Electric (GE), 3M (MMM), or Johnson & Johnson (JNJ) makes decisions, any uncertainty can lead to millions of dollars for or against a project. They will almost always err on the cautious side if a project is in question.

The only way to reverse this giant roadblock is to give businesses some certainty around regulations, taxes, and tariffs that affect them.

We Need To Foster Innovation and Support Novel Ideas

Innovative revolutions drove the economy for decades and improved our standard of living:

  • The industrial revolution fueled economic growth in the 18th and 19th centuries.
  • At the turn of the 20th century, the automobile and mass production were starting to change the way we moved and produced products.
  • As recently as the '80s and '90s, the personal computer and Internet changed the way we work, communicate, and transfer information.

Existing products and industries rarely drive growth in the economy; it's the new companies that will drive us forward. It's Facebook, Google (GOOG), First Solar (FSLR), and Netflix (NFLX) upending existing industries that will help the economy grow.

Counting on big businesses to hire back workers is a pipe dream that will lead us nowhere. The country needs the companies that will make current businesses obsolete.

What we need is more innovation -- more small businesses starting in garages, the next Silicon Valley to emerge and get the economy moving.

We Need Patience To Let Time Help Heal Us

Finally, perhaps the most important thing the economy needs to fully recover is time.

It's hard to accept that time will heal our wounds instead of tax reform, stimulus, or regulatory changes, but that's what the history of debt and financial driven recessions tells us.

Recessions like Japan's "lost decade," which started in the 1990s, and our Great Depression weren't like other recessions. They took longer to emerge from, and they came with extended periods of pain for those who were affected most. And so, too, will this one.

We couldn't sustain the debt-ridden path we were on, and our financial system had become too large and too complex to sustain. Those challenges aren't fixed overnight, and it will take time for our massive economy to adjust.

It may take five years -- maybe longer -- but the U.S. economy will get back on its feet again. Banks like JPMorgan Chase (JPM) and Wells Fargo (WFC) are already on stronger footing than they were four years ago, and slowly, they're starting to lend again.

With time, a little certainty from our leaders, and a little innovative magic, the U.S. economy will get moving in the right direction again.

Motley Fool contributor Travis Hoium owns shares of First Solar. You can follow Travis on Twitter at @FlushDrawFool and check out his personal stock holdings. The Motley Fool owns shares of Johnson & Johnson, First Solar, Google, JPMorgan Chase, and Wells Fargo. Motley Fool newsletter services have recommended buying shares of First Solar, Google, Johnson & Johnson, 3M, and Netflix, as well as creating a bear put spread position in Netflix and a diagonal call position in Johnson & Johnson.



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421 Comments

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frank1946

Limit Federal Spending to 20 % of GDP

Lower Corporate Tax Rate to 25 %

America Grows Again !

October 24 2011 at 8:02 AM Report abuse rate up rate down Reply
GeorgeOrwells

Hello, I think we really need to focus on developing" greener" energy. It IS the future, why let countries like China get a head start. AND SAY NO TO THE KEYSTONE PIPELINE!

Don't let greed get the best of you.

October 23 2011 at 9:23 PM Report abuse rate up rate down Reply
savemycountry911

I'm evan / idiot / crazy / mess.
For the record I must confess.
Forget the lie of change and hope.
I am just Obama's dope.

October 23 2011 at 3:55 PM Report abuse +1 rate up rate down Reply
someoneole

oust the Tea Party

October 22 2011 at 8:06 PM Report abuse -2 rate up rate down Reply
1 reply to someoneole's comment
savemycountry911

Oust Obummer.

October 23 2011 at 3:07 PM Report abuse +1 rate up rate down Reply
hgeorgech

(1) A new resident @ 1600 Pennsylvania Avenue

(2) Total cleanout and replacement of Congress

(3) Elimination of the liberal media

October 22 2011 at 2:09 PM Report abuse +3 rate up rate down Reply
savemycountry911

AOL is locking me out. This may be my "last song" Don't applaud looney left.

I hear the lib train comin. It's comin round the bend.
I ain't seen so much stupid since I don't know when.
Obama's stuck on Socialism and the waste goes on.
We'll oust him next election and we'll send him home.
(Kenya, Chicago, his 57th state? We don't care.)
His Hope and Change fiasco, now it was just a lie.
When libs find out he's goin, they'll hang their heads and cry.

Tissue?

October 21 2011 at 8:37 PM Report abuse rate up rate down Reply
Setanta

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Countdown until Obama leaves Office

456 DAYS

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

October 21 2011 at 7:54 PM Report abuse +2 rate up rate down Reply
1 reply to Setanta's comment
savemycountry911

Thanks, that makes me soooooooo happy.

October 21 2011 at 8:04 PM Report abuse rate up rate down Reply
sfamilyent

The article is full of WHAT the author thinks should be done, but very weak on the HOW...

Certainty for business? I'll bet if consumer demand picked up that businesses would ramp up production regardless of uncertainty about taxes and regulation...

Innovation and novel ideas? Right... Today I will innovate, create, and invent... And just how do you sort through the new ideas to find the ones that will foster a successful business enterprise. Don't forget that much of today's technology resulted from our government sponsored space program that paid for the research and development - that private enterprise was unwilling to invest in on their own...

Patience? This is the right wing let the economy sort itself out, government should not intervene in the economy approach... While the right wing continues to claim that tax cuts for businesses and investors will stimulate the economy, businesses are holding capital. What are they waiting for? Increased demand... Supply side economics does not work during a recession... We need to stimulate demand, and accelerating the rebuilding of our infrastructure is a good place to start...

October 21 2011 at 7:05 AM Report abuse -1 rate up rate down Reply
1 reply to sfamilyent's comment
warrenbent

Innovatino and competition are the conrnerstones of free enterprise.

But innovation doesn't depend on a centralized effort to sort through new ideas to find the ones that will foster a successful business enterprise. Consumers already do that very effectively.

The problem is that innovators can't KNOW in advance that their ideas will be viable. After all, if they did, it wouldn't be an innovation. As a result, FAR more entrepreneurial activities never produce results than do the ones that ultimately become common parts of our lives. This means that undertaking the significant risks inherent in innovation needs to be rewarded with significant benefits for thsoe who succeed. Otherwise, there is no incentive to assume the outsized risks of failure.

Knowing that the government respects proivate property rights and won't come confiscate the fruits of all your hard work and assumption of risk is a prerequisite.

October 21 2011 at 9:00 AM Report abuse -1 rate up rate down Reply
Protect US Jobs

We need to bring manufacturing back to the United States of America!

Most US Citizens could care less about a “Global Economy”, but they do care about being able to earn a living, their children’s future and the future of our country. The “Global Market Place” is not a level playing field! We should provide tax incentives and if necessary even partial subsidies to companies that manufacture products here in the USA with US Citizens. We need to add tariffs that are proportionate to the inequities in wages and regulations in the country where the goods were produced and or where we’re importing them from. We could then use the money raised by these tariffs to help companies build state of the art manufacturing plants here in the USA, which would create more jobs here at home for US citizens, which would then in turn increase our income tax revenue. We also need to bring customer support services back to the United States of America and staff them with US Citizens. Both political parties sold out the American people by letting Wall Street open the floodgates. The people in these other countries deserve to earn a higher standard of living, but our leaders can’t allow it to happen at the expense of the American people, who they’re supposed to represent. Both the Democrats and Republicans have to stop just arguing along party lines and actually get things done that are in the best interests of the United States of America and all US Citizens, including the majority of our citizens.

We have to stop letting Wall Street and CEOs promote sending US jobs to countries where they work for slave wages, no benefits, no OSHA safety standards or no real environment regulations. The “Global Market Place” is not a level playing field! Wall Street may have made higher profits by doing this, but they've been putting middle class Americans who are a good part of the world’s customer base out of work. I’m not a lefty or member of any union. I run a business that employees 22 people and produces products that are purchased by customers that do manufacturing and packaging. I’m just an average Joe, but I've been saying this for more than 10 years now. If I can see it, so can our so-called leaders (political leaders) who are beholden to the same people who are exporting our jobs. We need a 3rd party that actually does what's best for all Americans (US Citizens) rather than just worrying about their party and winning the next election. Even though I usually vote Republican, I think they put the interests of Wall Street above the interests of the majority of Americans (US Citizens). Again most US Citizens could care less about a “Global Economy”, but they do care about being able to earn a living, their children’s future and the future of our country.

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(Under Clinton jobs to China, Under Bush I & II influx of illegals or cheap easily abused labor into the US and jobs to Mexico/NAFTA) I voted for Reagan, Reagan, Bush, Perot, Bush, Bush and McCain

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We Also Need to Stop Illegal immigration:

They’re not just doing jobs that Americans don't want. Do they pay taxes? Don't get me wrong most of these people work very hard, but are a drain on the system if they don't pay taxes, have healthcare coverage, learn the language or get paid wages that are in line with their American counterparts. We all know that the health care provided to uninsured illegals here in the states is being averaged into our hospital costs and our insurance premiums, which have proportionately increased along with illegal immigration over the last 20 years? And who’s footing the bill for the education of their children and the infrastructure around them?

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Regarding Unions: They were necessary at one time in our country, but now they've gone over board and just make us less competitive with the rest of the world.

October 20 2011 at 8:32 PM Report abuse +1 rate up rate down Reply
donut999

housing market improvement, housing market improvement, housing market improvement

October 20 2011 at 4:09 PM Report abuse rate up rate down Reply
1 reply to donut999's comment
savemycountry911

Nobama, nobama, nobama.

October 20 2011 at 8:06 PM Report abuse rate up rate down Reply