In my opinion both of the two main presidential candidates have overall poor economic plans. But at least several major Democratic figures such as Hillary Clinton, the NYT columnist Thomas Friedman, and the economist Larry Summers do understand the importance of economic growth.
In particular, says Mr. Summers, “What is unfortunate is that many (progressives), in their eagerness to focus on fairness, neglect the single most important determinant of almost every aspect of economic performance – the rate of growth of total income, as reflected in the gross domestic product.”
- More growth means more employment. For each 1 point increase in adult male employment, the employment of young black men rises by 7%.
- More growth reduces the need for desperation monetary policies that risk future financial stability.
- If U.S. growth continues to have a 2% ceiling, it is doubtful if we will achieve any of our major national objectives. If we can boost growth to 3%, interest rates will normalize, middle-class wages will rise faster than inflation, debt burdens will continue to melt away and the power of the American example will be greatly enhanced.
- The question is not whether business success is desirable. The question is how it can be achieved.
All of the above is very positive on the part of Mr. Summers. But then he adds, “What is needed is more demand for the product of business. This is the core of the case for policy approaches to raising public investment and increasing workers’ purchasing power.” In other words Mr. Summers is ignoring that:
- Our national debt is huge and growing way too fast.
- Wages are now increasing fairly rapidly which increases demand by itself.
- Investment in new business structures, equipment and intellectual property has now fallen for three quarters in a row.
Conclusion. The way to achieve the faster rate of growth which Mr. Summers (and almost everyone else) wants is not more public investment but rather more private investment. The House Republicans have a plan to accomplish exactly this.