“Once one starts thinking about [actions to accelerate economic growth], it is hard to think about anything else.” — Nobel Economic Laureate Robert Lucas
The Supercommittee, if rumor, speculation and common sense can be credited, now will shirk its role as political suicide bomber. The Supercommittee was created in a fit of ambiguous revulsion against the truly gargantuan, obnoxious, deficit. It got off on a macho, but false, premise: that the path out was by mutual pain: raising taxes and cutting entitlements.
Wrong premise. There is a way to balance the budget. Figure out how to get the economy growing at 4% (or even 5%) instead of its current stupefied 2% range? Extra growth compounds fast. Accepting stagnation — economic growth that barely keeps up with population growth — means that nobody prospers except at the expense of others. No wonder most Americans consider the country off track. Americans are committed to prosperity.
As economist Ike Brannon (and as has been here previously cited) observed: “The primacy of economic growth in generating tax revenue cannot be overstated: the fastest post-war increases in tax revenue growth occurred in 1997-2000 and 2004-2007, when revenues went up by nearly 50% in each instance. Tax rates did not go up at all during that time — the rapid increase in revenue occurred because we were in a sustained period of strong economic growth.”
There is a cornucopia of plausible, palatable, recipes for such growth. Economic growth has been addressed by many distinguished economists. In pondering economic growth dynamics future Nobel laureate Prof. Robert Lucas laid out the questions he was formulating on behalf of poorer countries struggling to achieve prosperity:
Is there some action a government … could take that would lead the … economy to grow …? If so, what, exactly? …. The consequences for human welfare involved in questions like these are simply staggering: Once one starts to think about them, it is hard to think about anything else. (Lucas, “On the Mechanics of Economic Development.” Journal of Monetary Economics 22: 3–42, p. 5; italics original.)