Wednesday, November 2, 2016

The Consequences of Slow or No Economic Growth

Normally in economic recoveries, the United States has been blessed with almost double digit economic growth in the early stages (25 percent in 1933, for example) and then things taper off to four percent for the balance of the next five to six years.  There have been differences here and there, but US recoveries have been powerful in all cases, except for the period after 2000.

Why?

The growing tenacles of big government have made it increasingly hard for the American economy to grow. This same pattern has been evident in Europe for decades.  High taxes, massive regulation, burgeoning entitlements reinforce one another to curb any real chance for economic growth.  It is what it is and we are where we are.

But, who suffers?

Those who lose jobs to international trade cannot find new ones in a sluggish economy.  We lost jobs to trade in every decade since World War II, but we more than made these jobs up by the vigor of the American economy.  Now we don't make those jobs up because our economy has lost its zip.

People at the bottom of the economy had real opportunity before 2000, but now they don't.  Why?  Regulatory barriers, high taxes, minimum wage regulations, Obamacare, and on and on.  Thus, concerns mount about inequality.  These concerns were largely absent when the US economy had high levels of economic growth.  Now with no growth, inequality concerns are front and center.

The elites don't get this.  They don't see economic growth as a problem.  They don't see economic stagnation as a problem.  The elite have jobs, they have tenure, they have union protections and they plan to hold on to them.  They don't really care what happens to those at the bottom, as long as those at the bottom vote to keep the elites in power.  Beyond that concern, the elites could care less.

As the US economy deteriorates, social and economic problems will multiply.  There will be calls for even more government control and spending (note the current calls for increased infrastructure spending).  All of this pushes those at the bottom of the economic pile further down and enhances the wealth and status of the elites.

The idea of America as a land of opportunity becomes more and more a memory of the days when the American economy grew and American politicians were committed to that economic growth.  We are now in a very different environment.

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