The root cause of poor jobs creation and falling incomes is slow economic growth that has bedeviled Presidents Bush and Obama. During the Reagan-Clinton era, GDP growth averaged 3.4 percent; however, since 2000 the pace has halved to 1.7 percent, thanks to well meaning but ill conceived government policies,
Trade agreements have further exposed U.S. manufacturers to foreign competition, but have not similarly improved their market access abroad. Principal competitors China, Japan and Germany all systematically undervalue their currencies to make their exports artificially cheaper than U.S. products both in domestic and rapidly growing Asian markets.
Similarly, unlike Canada, which shares many of the same demographics shaping U.S. labor markets, the United States has chosen to outsource—not reduce—environmental risks associated with petroleum development by shutting down or curtailing production on the Atlantic and Pacific Coasts, the Gulf and Alaska.
Those policies are responsible for a $485 billion trade deficit, which easily suppress growth from 3.4 to 1.7 percent. Just the lost R&D, so prevalent in manufacturing and energy but now captured by foreign competitors, could boost U.S. economic growth by 2 percentage points a year.
Also, dysfunctions in banking, higher education and health care imposed by misguided regulations and government subsidies permit professionals to earn inflated incomes but harm the availability of credit, workers with the skills employers need and affordable health care and insurance. Along with the inefficiencies imposed by the excessively complex corporate and personal income tax systems, those lower productivity, investment and growth dramatically.
Emerging from a long recession, the economy should grow at 4 or 5 percent and create the needed jobs, but misguided and abusive government policies do not permit the economy to accomplish takeoff speed and raise wages.
Peter Morici is an economist and business professor at the University of Maryland, national columnist and five-time winner of the MarketWatch best forecaster award. He tweets @pmorici1