Posted: 31 May 2016 09:08 AM PDT
I’ve been meaning for a while to knock out an article on the theme, “there’s nothing wrong with America that 4 percent growth won’t solve.” That’s an exaggeration, of course, but not much of one. Faster economic growth will alleviate a number of our leading problems, especially stagnant wages, a sinking labor force participation rate, badly unbalanced budgets, adult children living in basements, ESPN’s sinking ratings, etc.
One difficulty is that one of our major parties is completely uninterested in revving up economic growth. Unlike the Democratic party of John F. Kennedy, which held an explicit doctrine called “growth liberalism,” embraced the idea that “a rising tide lifts all boats,” and campaigned on the theme of “let’s get the country moving again” (sounds a little but like someone’s current campaign slogan, no?), today’s liberals care not for growth, but are obsessed with redistribution and what James Piereson rightly labeled “punitive liberalism.” (Another historical irony is that the liberals of the Kennedy era were scornful of Eisenhower because they thought economic growth in the 1950s was too slow; now liberals like Paul Krugman look back at the 1950s as a golden era for the middle class, and especially for union power.) An administration that was serious about economic growth would at the very least approve the Keystone pipeline, and fast-track every possible construction project in the country, instead of embracing policies that make energy more expensive and clog up labor markets (just for starters).
I’m agnostic about whether income tax cuts will juice economic growth in the same fashion as the 1980s, though our corporate tax system badly needs to be reformed and would likely have some measurable positive benefit. I’ve received a thorough briefing of the Tax Foundation’s economic model—the one they’ve used to score each of the candidates’ economic plans and which the media have referenced in questions in the debates—and its essentially a cost-of-capital model whose largest growth and income effects come not from tax rate changes but the tax treatment of business investment, which has been flagging badly of late.
A much bigger factor is likely the huge revival of heavy government regulation, like Dodd-Frank, the new overtimes rules, and the pending “Clean Power Plan” that essentially nationalizes the nation’s electric utility industry. There’s been a lot of talk about “regulatory uncertainty” in the Obama era, as we wait to see the full effects of the burdens of Obamacare and other mandates. Today the Wall Street Journal has a major article on Dodd-Frank that makes for sober reading. It provides an extraordinary look at just how out of control Obama-era regulation has become: