by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Real economic growth in the United States has stunk on ice since the financial crisis: 1.6 percent in 2016, 2.6 percent in 2015, 2.4 percent in 2014, 1.7 percent in 2013, 2.2 percent in 2012, 1.6 percent in 2011, 2.5 percent in 2010. The economy shrank by 0.3 percent in 2008 and plunged by 2.8 percent in 2009. We’re a long way from the almost 5 percent growth of 1999.
The powers that be in Washington dream of stronger growth, because stronger growth would mean that they could put off some hard and unpleasant decisions. Stronger growth would raise revenue without raising tax rates, bolster Social Security and our other wobbly entitlement programs, and potentially lower deficits. And while stronger growth helps on the revenue side of the budget, it also helps on the spending side, too: When growth is strong, unemployment tends to be lower and wages tend to be higher, which relieves pressure on welfare programs. You can understand the economist Robert Lucas’s maxim: “Once you start thinking about economic growth, it’s hard to think about anything else.”
People associated with the Trump administration have taken up 3.5 percent economic growth as a goal. It’s a fine goal, but it probably is not going to happen.
Even if you exclude the financial crisis and the slow-growing years that followed, 3.5 percent real growth — “real” here meaning adjusted for inflation — is higher than our long-term average, which ran 3.2 percent from 1950 to 2008.