America's Growing Pains: Why Is 3 Percent a Dream?
From The Wall Street Journal :
Census data show that real economic growth averaged 3.7% from 1890-1948. British economist Angus Maddison estimates that the U.S. averaged 4.2% real growth from 1820-89. Based on all available data, America has enjoyed an average real growth rate of more than 3% since the founding of the nation, despite the Civil War, two world wars, the Great Depression and at least 32 recessions and financial panics.
Since 1960, the economy has experienced 30 years of growth of 3 percent or more and 26 years of less than three percent. During the 3 percent-plus years, 79 percent of jobs were created, the poverty rate fell by 73 percent, and income rose by $20,519. In the years of less than 3 percent growth, 21 percent of jobs were created, the poverty rate rose by 37 percent, and household income fell by $12,004.
Those are some stark numbers. During the down years since 2010, when growth was less than 3 percent, what happened? Labor force participation - the number of people willing and looking to work - has declined. Disability rolls have increased. Work requirements for assistance have been waived. The number of people living beyond the expected life span after retirement has skyrocketed (not a bad thing in and of itself, but the retirement age maybe needs to be reconsidered). Health care policy has forced companies to push people off full-time status to avoid the massive expense.
Add to that a decline in productivity. Productivity measures how much employment of labor and capital creates products that people will pay for. Here's what happened in the last decade.
The Bureau of Labor Statistics reports that labor-productivity growth since 2010 has plummeted to less than one-quarter of the average for the previous 20, 30 or 40 years. Productivity fell during the current recovery, not during the recession. With high marginal tax rates, especially on investment income, new investment during the Obama era managed only to offset depreciation, so the value of the capital stock per worker, the engine of the American colossus, stopped expanding and contributed nothing to growth.
In other words, everything that makes us a healthy, wealthy, and wise country has been shoved aside by bad policy. What does that tell you? Time to get policies that encourage 3 percent-plus growth.
With 3% growth, the American dream is achievable and virtually anybody willing to work hard can live it. Let 3% growth die and a lot of what we love most about our country will die with it.
So where do we start?