Chris
03-07-2013, 06:36 AM
In these times of slow economic growth doesn't it make sense to slow government growth? Other nations show our current policies wrongheaded and that there's another direction to head in.
...Economic growth is the product of increases in the labor supply and productivity, he argues uncontroversially.
But the U.S. labor force -- even assuming we get back to full employment -- is not increasing as rapidly as it did when baby boomers and Gen Xers were reaching their working years.
As for productivity, Cowen argues that we simply haven't had the kind of innovations in technology or means of production that we saw in the late 19th and early 20th centuries.
..."Government accounting is explicitly based on the assumption that spending grows, in real terms, every year -- difficult to achieve unless the economy grows at least as much."
Which suggests a question: Is new-normal slow growth inevitable?...
...Barack Obama has been trying to stimulate the economy with record-high government spending funded by higher tax rates and Fed Chairman Ben Bernanke's low interest rates.
But as Stanford economist Michael Boskin points out in The Wall Street Journal, "Japan tried that, to little effect, in the 1990s." Slow growth has become the new normal there.
...There are alternative policies. One is to cut government spending, or cut it more than you raise taxes. As Boskin points out, the Netherlands in the mid-1990s and Sweden in the mid-2000s "stabilized their budgets without recession (with) $5-$6 of actual spending cuts per dollar of tax hikes."
And he notes that Canada reduced government spending in the mid-1990s and early 2000s by an amount equal to 8 percent of gross domestic product.
Those cuts weren't painless, but they put Canada on a trajectory different from ours. Canadian voters value budget surpluses, and Canada managed to avoid almost all the bad effects of the 2007-09 recession.
...
@ Spending Cuts May Be Answer to Slow Economic Growth (http://www.realclearpolitics.com/articles/2013/03/07/spending_cuts_may_be_answer_to_slow_economic_growt h_117319.html#ixzz2Mqv82rku )
...Economic growth is the product of increases in the labor supply and productivity, he argues uncontroversially.
But the U.S. labor force -- even assuming we get back to full employment -- is not increasing as rapidly as it did when baby boomers and Gen Xers were reaching their working years.
As for productivity, Cowen argues that we simply haven't had the kind of innovations in technology or means of production that we saw in the late 19th and early 20th centuries.
..."Government accounting is explicitly based on the assumption that spending grows, in real terms, every year -- difficult to achieve unless the economy grows at least as much."
Which suggests a question: Is new-normal slow growth inevitable?...
...Barack Obama has been trying to stimulate the economy with record-high government spending funded by higher tax rates and Fed Chairman Ben Bernanke's low interest rates.
But as Stanford economist Michael Boskin points out in The Wall Street Journal, "Japan tried that, to little effect, in the 1990s." Slow growth has become the new normal there.
...There are alternative policies. One is to cut government spending, or cut it more than you raise taxes. As Boskin points out, the Netherlands in the mid-1990s and Sweden in the mid-2000s "stabilized their budgets without recession (with) $5-$6 of actual spending cuts per dollar of tax hikes."
And he notes that Canada reduced government spending in the mid-1990s and early 2000s by an amount equal to 8 percent of gross domestic product.
Those cuts weren't painless, but they put Canada on a trajectory different from ours. Canadian voters value budget surpluses, and Canada managed to avoid almost all the bad effects of the 2007-09 recession.
...
@ Spending Cuts May Be Answer to Slow Economic Growth (http://www.realclearpolitics.com/articles/2013/03/07/spending_cuts_may_be_answer_to_slow_economic_growt h_117319.html#ixzz2Mqv82rku )