With a higher rate of economic growth, we could ….

Printed from: https://newbostonpost.com/2016/05/02/with-a-higher-rate-of-economic-growth-we-could/

This economy sure isn’t growing. The release this week of the size-of-the-economy measurement, “GDP,” made it plain. So far in 2016, growth is all of half a percent—at an annual rate. This follows on the sub-2 percent trend of the previous quarters, and fully a decade now of yearly sub-3 percent growth, the first time that has ever happened in American history.

Negligible economic growth—bringing with it the masses of dropouts from the labor force, students drifting through universities on loans, and stagnating family incomes—typically calls forth urgent appeals for the trend to be reversed. Not this time. The Democrats are content to identify inequality as opposed to growth as the top issue, while Republicans have a weakness for blaming immigrants and foreigners, as if the relevant matter were reducing the number of people dividing up the pie, as opposed to increasing its size.

In the famous presidential campaign of 1960, pitting Democrat John F. Kennedy against the incumbent Republican Vice President Richard M. Nixon, one of the central issues was economic growth. The recession that was hitting that year was the third in six years, and a nation just beginning to taste “postwar prosperity,” as it came to be known, was ambitious and clearheaded enough to make a bid for uninterrupted expansion.

Kennedy won that election, in no small part because he bested Nixon on the issue of economic growth. JFK’s main stump speech in the campaign stretch run that fall had a repeated line, “With a really high rate of economic growth,” after which the dashing Massachusetts Senator would tick off some great result, such as the ability of young people to be employed, care of the sick improved, or maybe a space program launched.

We should stretch our minds a bit today and ask, how might America change, for the better, “with a really high rate of economic growth”—and the rate Kennedy had in mind (and did get in the 1960s) was 5 percent per year, ten times our current rate.

Pick from our big “insoluble” problems today, say student loans, government debt, and unfunded mandates (social security and Medicare and the like). With a really high rate of economic growth, it is difficult to see how any of these problems could persist.

Student loans. With a really high rate of economic growth, colleges would actually have to compete for students with the market. One of the main reasons so many young people these days pack off to college, community college and four year places and then graduate school, is that employment opportunities for the young are so few. With great growth, employers would seek out talent from all sectors of the workforce, and colleges would have to economize and lower tuition to get seats in the classroom filled. Student debt would not survive its current, monstrous extent, first because fewer people would go to college to kill time, second because college prices would be lower, and third because payment of debts would be easier in a high-wage environment.

Government debt. With a really high rate of economic growth, there would be fewer demands on government programs (welfare, unemployment insurance, earned income credits, affordable housing, etc.) and spending would fall. Moreover, the significance of the debt, relative to all the other assets in the economy, would fall as well, in that growth means that private assets become more valuable. Even if somehow the government could not fully pay the debt, after a long span of real economic growth (and this scenario is rather inconceivable), it would have little financial consequence because the national private portfolio would be so rich.

Unfunded mandates. With a really high rate of economic growth, we shall all have prosperous retirements and great health care. Big growth means that the vast majority will have the resources to put away savings, it means that the innovation at the center of the growth will produce fundamental advances in fields like medicine, and it means that government responsibilities in “safety net” areas will decline. None of these clear results of economic growth is compatible with a retirement or a health care crisis. The nation would be too well off for these things to be abided or even possible.

One wonders why the presidential candidates do not spell it out: align all policy towards growth, and let the results flow in. Growth policy, of course, means getting the government small and modest in all areas, in that the engine of growth is the private sector. Cut tax rates, get the dollar good against market measures like gold, cancel regulation and trade restrictions, and big growth will come in, as government spending inevitably falls in the face of it.

We were sharp enough in 1960 to call on leadership to focus on growth. In our even more stagnant era today surely we can muster the same sense of purpose.

Brian Domitrovic

Brian Domitrovic

Brian Domitrovic is the Visiting Scholar in Conservative Thought & Policy at the University of Colorado. His and Larry Kudlow’s book, “JFK and the Reagan Revolution: A Secret History of American Prosperity,” will be released by Portfolio this summer. Read his past columns here.