What Is Slowing Down Today’s Economy?


We will soon have a new President and, even though his election was somewhat of a fluke, he will obviously want to help the blue-collar workers who elected him.  The best way to do this is to make the economy grow faster.
The Gallup economist, Jonathan Rothwell, has just issued an excellent analysis of some of the major reasons for our current slow economy, “No Recovery: an analysis of long-term U.S. productivity decline.”

Says Mr. Rothwell:

  • The problem is severe. U.S. GDP growth per capita has declined from 2.6% in 1966 to .5% today. Small differences expand into vast gaps in potential living standards. 1% growth for the next 35 years would expand household income from $56,000 in 2015 to $79,000 in 2050 (inflation adjusted), whereas 1.7% growth would raise household income to $101,000 in 2050.
  • Changes in living standards are fundamentally linked to changes of how the quantity of goods and services relate to their cost. Deterioration in the quality-to-cost ratio for healthcare, housing and education is dragging down economic growth. These three sectors alone have increased from 25% of GDP in 1980 to 36% of GDP in 2015.capture92
  • The cost of healthcare is 4.8 times as high today as in 1980, the cost of education is 8.9 times as high today as in 1980 and the cost of housing is 3.5 times as high today as in 1980. These compare to an overall cost increase of all items of 2.5 times today compared to 1980.
  • These three sectors have all gotten more expensive (without getting more productive), thereby absorbing more of families’ incomes, making it harder to satisfy other wants.

Conclusion.  We all want schools that work, adequate housing, and quality healthcare.  The problem is how to achieve these ends in a much more affordable manner.  Stay tuned!

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10 thoughts on “What Is Slowing Down Today’s Economy?

  1. Good morning Jack,

    I understand that you do not see yourself as an ideologue. And, I think that is a term one should avoid. However, I think we need to have some basic premises that we proceed from as well as look at the evidence. Now we have identified three sectors–housing, health care and education–as requiring attention if we are going to enhance the living standards of all Americans. So what can private industry and the governments–state and federal–do to address this concern. Do we need more private industry or more government involvement? What should be the balance? I think we all agree that the wealth balance has generally always favored the corporations and some smaller entrepreneurs. I think the question is how do the two–government and business–coordinate this effort?

    From my perspective our political system has been stifled for the past several decades. At this point I think we must go back to the ideas and ideals of what kind of society we want for all of its citizens and how to spread those ideals to the rest of the world. I am most reluctant to give private industry more power to make profit off of health care and education, those issues relate to the inherent nature of the person. Housing is another matter, there is of course, a need for shelter. How do we want that to be somewhat fair? Here I can trust, if we can get beyond anyone having to have a roof to sleep under. Shelter is external to the self, health and education are internal to the self. These areas should be seen as services to another, not an opportunity for profit, so I think.

    I will be curious to learn how you make this distinction.

    • I appreciate the distinction you are making between health and education on the one hand, as inherent to an individual, and housing which is objective more than subjective. I am primarily focused on the most cost efficient way to provide these basic services, rather than whether it is through the private sector or the public sector.
      With respect to healthcare, our country is spending 18% of GDP, twice what other developed countries are spending. So fundamental changes are needed.
      With respect to K-12 education, far too many low-income and minority kids are falling through the cracks (as we are observing at Wakonda). So, again, fundamental changes are needed.
      Housing is a less serious situation.
      More tomorrow!

      • On the cost of health care in relation to other counties how do the comparisons between qualify for people being treated between business and governmental expenses, particularly in light of insurance costs as well?

  2. I’m not sure I understand your question. Most, but not all, other developed countries have single payer healthcare systems. A single-payer system, with severe rationing, is clearly one way to hold down costs. But another way, which I favor, is to do it by forcing consumers to pay attention to costs. This is accomplished by having high deductibles and health savings accounts to cover routine expenses.

    • I would even be in favor of that if it were a single payer system in order that insurance companies be taken out of the business of health care. Historically, insurance might be fine with fires and disasters causes by nature. I simply do not understand why there needs to be a middle person here. It results in requiring a gambler.


      • The main reason for our high healthcare costs is not insurance companies per-se but rather our system of third party (i.e. insurance) payment of virtually all health-care costs. This means that healthcare consumers don’t have enough “skin in the game.” The way to fix this is for insurance to pay for catastrophic healthcare only (i.e. with high deductibles) and for consumers to pay for everything else out of pocket with the help of health savings accounts.

  3. With your health savings accounts, I fear that the health care system will devolve into something similar to the governmental and private enterprise methods for dealing with criminal justice for the poor. Those with money will generally make a plea through a good lawyer.

    • It seems to me that healthcare and justice are too totally different areas. Justice can only be administered by a court system which is operated by the government. I can’t imagine this changing.

      • jack,

        I am thinking more of morality and what role the entire society has for all of its citizens. What responsibilities do both the private and public sector have? Our system of charity is horrible.

        I am sure we shall struggle with these subjects far beyond our time. But I do wish there were some way a national dialogue would begin.


  4. What is wrong with our system of charity? Americans are very generous givers to charity. Counting both public welfare and private charity, America has one of the most generous safety nets in the whole world.

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