Recently, the Economist had a special feature on economic growth. One of the consequences they pointed out related to growth was improved survival of endangered species. I do not think we need to verify that work at this time, though it got me thinking about the consequences of economic growth for economic policy.
Growth makes just about everything easier from a policy perspective. At some level this is what we have seen in U.S. economic history. Difficult decisions are easier to make when they are made during a growth period. Raising your taxes? Easier to do when the overall household finances are growing. Cutting spending? Easier to do when growth in the economy implies that individuals can pay for more on their own.
In many ways you get the sense that both Republicans and Democrats have been waiting for a higher growth regime to take hold in the U.S. If such a situation unfolded, they would be able to execute their visions through policy more easily. This waiting game of course means that nothing gets done, and the fiscal morass worsens. Currently this manifests itself as political parties waiting for control of Congress and the White House. This is all well and good, but sensible policies are likely to be left behind, unless growth occurs.
While there is still much to discuss here, there are two related questions to address:
- Are there problems that occur in a growth environment, such as that in North Dakota currently?
- Why have we seen lower growth in this recovery than others in the past?
I will deal with these questions for much of the rest of this week.