Can Clinton or Trump or ANYONE Actually Grow the U.S. Economy?
Definitely the Democrat or the Republican, who are locked in a 20th-century model of an expansive, all-encompassing state.
Earlier this year, economist Robert Gordon published his magisterial treatise, The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War, which charted a dire course for the United States in the 21st century. Gordon essentially argued that economic growth, which is essential to rising standards of living, was slowing for all sorts of reasons: the ageing of the population and a reduction in birth rates, a decline in technical innovation, the end of private-sector unions, increased global competition, and on and on. However well-intentioned, his policy prescriptions at the end of the book —more taxes and regulation to distribute income gains more broadly and an activist government when it comes to ensuring all sorts of outcomes—are unlikely to do anything else than carve up smaller pieces of a shrinking or steady-state pie.
But Gordon is certainly right to call attention to long-term declines in economic growth. In The New York Times, he writes:
Perhaps it's the country's dismal economic growth rate [that rankles Americans]: From 1947 to 2007, the economy grew at 3.4 percent per year. But over the last four years, gross domestic product expanded at only a sluggish 2.0 percent. In 2016, G.D.P. has barely reached 1 percent growth.
Voter unease reflects more than the impact of wage stagnation. Globalization and automation have hollowed out manufacturing, eliminating millions of middle-income blue-collar jobs. Roughly six million workers who want full-time jobs hold part-time positions that lack employer-paid medical insurance and force them to juggle irregular schedules. An "atomization" of the workplace has led to the increased use of temporary and on-call workers like Uber drivers and episodic forms of employment that don't offer traditional benefits. Medical insurance with high deductibles and co-payments threatens families with unpredictable financial setbacks in case of a medical emergency.
Boosting productivity and, with it, economic growth, is the main task before the presidential candidates. Indeed, Donald Trump's speech today in Detroit is an attempt to answer the issue of slow-to-no-growth. That it will be an extended attack on Hillary Clinton for real and imagined crimes is not particularly heartening, especially since Trump and the Republican Party are slipping into a neo-protectionist mode that is virtually identical to that of Clinton and the Democrats. Both parties are declaring a pox on free trade and free movement of people, goods, and services across international borders. To the extent that the Dems are friendlier to immigrants already in the United States, they are also dedicated to expanding the welfare-warfare state by expanding major entitlement programs and projecting American military power around the globe.
Neither major party or its candidate seems capable of recognizing that we are no longer living in a Bismarckian world, where rising birth rates and populations made it possible to create and expand entitlements with relative ease while also flexing military might as a way of getting access to the resources and markets you wanted. Indeed, economist Gordon can't look to a future that operates differently than the past and as a result, his basic prescription is to double and triple down on 20th-century policies:
Policy changes can help: Imposing higher taxes on the superrich and eliminating tax loopholes and deductions that primarily benefit higher-income taxpayers would make some headway both against rising inequality and flagging tax revenue. Minimum wage increases directly attack inequality, because the wage boost to those who retain their low-income jobs substantially exceeds the extent of any resulting job losses.
The tax revenues from a superrich tax surcharge and from loophole-busting tax reform would provide the funds for a huge program of investment following the example of the Interstate Highway System, which is generally regarded as a prime source of robust productivity growth in the 1960s. Mrs. Clinton's proposals thus far include substantial infrastructure spending, and this is an area, along with tax reform, where she has the potential to gain bipartisan approval.
Gordon ultimately doesn't even believe in economic growth but rather more effective sharing of a smaller pie. He invokes Australia, Canada, and "the Nordic countries" in which he says "insecurity is less acute because government institutions are more robust."
If this is the best we can do, put a fork in us. The road to economic growth isn't paved with new Interstate projects, especially if the projects aren't actually creating anything new and useful but merely repairing and maintaining old infrastructure. I'll note, too, that Donald Trump has called for double the infrastructure spending that Clinton has demanded; neither has bothered to suggest serious ways to pay for it all. Although federal spending is already at a historically high level as a percentage of GDP, both candidates propose hiking it further still. Trump would take it from 22 percent of GDP to 22.5 percent while Clinton would jack it even more, to 22.7 percent.
In the 20th century, this mentality used to be called rearranging deck chairs on the Titanic. Perhaps we need a different metaphor in the 21st century so that we understand preserving past ideals of government and society are not a recipe for a productive, attractive future but rather an acknowledgement of defeat or at least surrender. We need a different operating system, one that doesn't choke off economic growth via swelling government debt, which correlates strongly with reduced gains for decades. And we need to recognize, contra Gordon and other pessimists, that there are many improvements that economics doesn't really account for, including 3D printing, artificial intelligence, and greater longevity.
There is no reason to believe that either Clinton or Trump has a vision to right-size government in the 21st century. Like Gordon, they are backward-looking and stuck in a nostalgia that pretends to present itself as wisdom. They are either hostile to the sharing economy or completely ignorant of it; they have little sense of what it means to drive a car, much less work and live as a regular person born after the baby boom. And yet the next president will be either Clinton or Trump. That's regrettable, for sure, but it's up to us to make sure that 2016 is the last election of the long 20th century, whose model of top-down, ever-expansive government has worn out whatever usefulness it might once have provided.