Last month, an article “Ending America’s Slow-Growth Tailspin” by economist John H. Cochrane was featured in the Wall Street Journal. The author is a senior research fellow at the Hoover Institute – a large research think-tank out of Stanford University. This article is incredibly important because it plainly states what I have been saying for years: “Growth is everything” and in our current political climate, it is something that though many on both sides talk about – few have honed in on the country’s slow-growth since the recession. The author introduces our slow growth problem with startling figures:
“Sclerotic growth is America’s overriding economic problem. From 1950 to 2000, the U.S. economy grew at an average rate of 3.5% annually. Since 2000, it has grown at half that rate—1.76%. Even in the years since the bottom of the great recession in 2009, which should have been a time of fast catch-up growth, the economy has only grown at 2%.”
Another takeaway from this article is that because growth is everything, implementing economic growth policies (in theory) should not just strengthen the economy but fix just about every other fiscal problem that our country is facing.
“Looking ahead, solving almost all of America’s problems hinges on re-establishing robust economic growth. Over the next 50 years, if income could be doubled relative to 2% growth, the U.S. would be able to pay for Social Security, Medicare, defense, environmental concerns and the debt. Halve that income gain, and none of those spending challenges can be addressed. Doubling income per capita would help the less well off far more than any imaginable transfer scheme.”
If the answer to most of our problems is really that straightforward, then why is the economy still stuck in slow-motion? Simple, as Cochran puts it: “A growth agenda doesn’t fit neatly into current policy debates.” What politicians and consumers need to understand is that the economic growth agenda does not need to be politically dividing. Ultimately, the growth agenda does not simply fit in one side, but solves both sides concerns:
1. Taxes: Cleaning out the complex tax code
2. Social Programs: Limiting waste and removing disincentives
3. Education: Better schools with more choices and competition
4. Business: Dramatic legal and regulatory simplification
But of course, the devil’s in the details.
To read the original article featured in the Wall Street Journal, please click here.
To visit John H. Cochran’s blog, “The Grumpy Economist”, please click here.