I’d like to thank our former president and potential First Man (Is that the title? First Husband? Boy will Saturday Night Live have a field day with that one!) in a few months for inspiring my title this week. We had another quarter of anemic economic growth. This lack of growth is inspiring support for presidential candidates that would have been on the fringe at best only a few years ago. Barring a year end growth spurt, the US will have its 11th consecutive year of under 3% growth in real GDP. Our country has never gone this long with such pathetic growth. At the risk of offending readers on both sides of the political aisle, I’ll outline why I think we have had such poor growth.
- We’re getting older. Older people produce less. Earth to Republicans: the US economy grows when the population grows. We need immigrants. I’m pretty sure most of you are descendants of immigrants. I am. We need immigration policies that work, not walls.
- Government policies. NLRB rules. Tax increases on capital. Bank regulations. I could go on and on. Earth to Democrats: when you make something more expensive, you generally get less of it. Check out Economics 101 and the supply/demand curve. If you make it more expensive to hire someone, you make alternatives (automation, outsourcing, overtime) relatively cheaper. Rationale economic actors choose the cheaper alternative. That leads to lower employment growth. If you want more jobs, make it easier to hire people. If you want economic growth, reduce the regulatory burden on businesses.
- Federal Reserve policies. I do give the Fed credit for trying to counteract #1 and #2 by keeping interest rates low. Their theory is people will invest more if money is cheap. It helped a little and gave our banks time to re-capitalize themselves. But the punch bowl is empty and I think their policies are now having negative consequences. Go back to demographics. If you are retired, how do you generate income with interest rates near zero? If you can’t generate income, will you spend a lot of money? Of course not. If you’re a business facing a low-growth environment, does cheap money outweigh the lack of demand for your products? No, it keeps marginal competitors afloat longer than they would be able to stay in business if they had to pay to borrow money. Raise rates.
- Anti-capitalism/anti-business rhetoric. I recently saw survey results that claimed more than half of millennials do not believe in free markets. We’ve got presidential candidates on both sides spouting how “rigged” the system is. (It is interesting to hear Democratic candidates talk about how bad the economy has been under a Democratic president.) We’ve got extremist professors with tenure teaching our youth what a bad place the USA is. Shame on all of you! I have a simple solution: while we might have people talking about building walls to keep people out, there’s no wall keeping you here. If you’re not happy, go somewhere else and spout your negativity. We’ll be just fine without you. I do encourage you to talk to someone who came here recently. You might realize it’s not so bad here.
Despite all these challenges, let’s not forget the most important thing: the economy is growing! We aren’t contracting. Could and should the economy be growing faster? Of course. Will it? Yes. If I knew when, I’d be blogging from a much nicer place than my current locale! Keep a positive attitude, make decisions based on facts, not rhetoric, and good things will happen.