At what cost growth?

There has been some debate on my favorite economics blogs (Mankiw, econlog), about the old saw that the best way to reduce poverty is to grow the economy as fast as possible and let the rising tide lift all boats. A recent paper by Larry Summers suggests that the calculus may have changed. Lately, the benefits of the rising economy have gone disproportionately to those in the upper income brackets and those in the lower ones have stagnated or even fell.

So here is the policy issue. Conservatives/libertarians want to stick with the rising tide theory and focus only on maximizing growth. Unfortunately, without smart social policy, there are a lot of starving poor people out there who are drowning in the rising tide. Liberals are willing to sacrifice a bit of growth to protect these poor people. Unfortunately, they seem to have a knack for screwing it up and so they hurt growth more than expected and don't help as many poor people as intended.

What we need is a smart combination of economic/social policy that minimizes the limit on growth the get the maximum protection for those truly in need. The public emergency safety net needs to be efficient and effective (get some Industrial Engineers with expertise in Lean Six Sigma to implement it) and focused on those with no reasonable other options. Then put the bulk of the safety net into "teach them to fish" rather than "give them a fish" kinds of programs. Vocational training, child care subsidy, earned income tax credit, etc. And encourage the private sector to support microfinance and other programs that require selecting winners.

While I am on the subject, these are also my prescriptions for saving the health care mess, protecting the environment, and just about every other domestic policy.