I know that I occasionally repeat myself, but I can’t help it! In my opinion there are two major problems facing our country:
- Slow economic growth which has averaged only an anemic 2.1% since the end of the Great Recession seven years ago.
- Exploding national debt, now the highest it has been since the end of WWII. Unless we can quickly shrink our annual deficits down to zero, and therefore stop adding to the debt, interest payments on the debt will eventually rise to horrendous levels.
Two recent newspaper articles address the slow growth problem. Greg Ip, writing in the Wall Street Journal, points out that (worldwide) employment growth is up while productivity growth is down (see chart below).
Neil Irwin, writing in the New York Times, explains this dichotomy by pointing out that most job growth in the last decade has been in (low productivity) services rather than (high productivity) manufacturing. In other words, the U.S. economy is now producing lots of new temporary and contract jobs which do not add very much to the overall economic growth which produces higher wages and overall prosperity.
The economist John Cochrane has clearly described why productivity growth, and therefore overall economic growth, has stagnated in recent years. Here is a short summary:
- Over-regulation. The Dodd-Frank Act and Affordable Care Act, for example, are hampering growth by strangling the financial and healthcare sectors of the economy.
- Inefficient Taxation. Growth oriented taxation would have the lowest possible marginal rates paid for by shrinking deductions. Taxing consumption rather than income and savings would be even better.
- Illegal Immigration. Solving our immigration problem would turn millions of illegals into productive citizens. An adequate Guest Worker program and e-Verify enforcement would solve this problem without the need for amnesty.
Conclusion: There are solutions to the severe economic problems facing our country. Does our political system have the flexibility to adopt these workable policies?