Economic growth makes a whole lot of the country’s problems easier to solve. Faster growth means higher living standards for Americans — not just flat-screen TVs and sleeker phones, but better medical care, more comfortable homes, and greater opportunities for education and leisure as well. It’s also the easiest way to put the country’s fiscal house in order, since the faster the economy grows, the smaller its national debt — currently near 100 percent of gross domestic product — will be relative to incomes.
Unfortunately, U.S. productivity growth has decelerated in recent years, and with it the speed at which the economy can grow. Even more unfortunately, we haven’t yet heard either presidential candidate provide a plan to significantly and sustainably increase the rate of innovation or the economy’s productive capacity.
There’s a limit to how much presidents can do. But even small changes add up to a big difference over time: If the economy grows 2.3 percent for the next 50 years instead of 2 percent, the result will be an economic pie that’s almost 16 percent larger. That represents resources that can be used for elder care, child care and other vital needs, public and private.
Understandably, the candidates’ emphasis is on promising voters things in the here-and-now. What plans they have for improving growth are at cross purposes with more immediate political priorities, such as appeasing unions.
Former president Donald Trump would further lower tax rates for corporations from the 21 percent set permanently in the 2017 Tax Cuts and Jobs Act and speed up corporate deductions for research, experimentation and investment. These policies would somewhat enhance the rate of economic growth.
But without offsetting spending cuts, Trump’s plans would increase the deficit and federal borrowing would soak up funds that could have gone to private investment. And Mr. Trump’s tendency to view growth as a zero-sum game — he recently bragged that under his administration, America would “take other countries’ jobs … take their factories” — leads to proposals such as across-the-board tariffs, which would mangle supply chains, raise the cost of manufacturing inputs and make the economy less productive.
Vice President Kamala Harris has mentioned innovation on the stump, and she has a number of proposals that might help the economy become more dynamic: reducing red tape, especially regulations that make it harder to build housing; larger deductions for business start-up expenses; and removing unnecessary degree or occupational licensing requirements that keep potentially productive workers out of the best jobs.
But it’s not clear how much she can do to reduce the tangle of state and local policies that inhibit growth. She would also have the government intervene in markets in ways that could make problems worse. She has proposed down-payment subsidies that would increase the price of housing if supply can’t expand enough to absorb the new demand, and promises various sorts of regulations, such as price-gouging laws, that would add more red tape. Her proposals would also add to the deficit, though less so than Mr. Trump’s.
Ms. Harris’s temperament, commitment to democracy and record in office starkly contrast with Mr. Trump’s. But polls still show the former president with a narrow lead among voters on the economy. She needs better and more specific plans to contrast with his ruinous isolationism. That won’t just require smart thinking, but courage, because removing some barriers to growth means offending interest groups that include some key Democratic constituencies.
It would, for example, mean siding with companies that want to accelerate productivity-enhancing automation over unions that want to maximize employment for their membership. More broadly, it would mean fighting the Democratic tendency toward what Ezra Klein has dubbed “everything-bagel liberalism,” in which government programs are loaded down with expensive mandates designed to further secondary goals: prevailing wage laws; “Buy American” provisions; environmental reviews; child-care subsidies; and so forth.
The goals are often worthy, but collectively they increase the cost of government and private action. It would be better to focus on making the government and private sector more nimble, and use the fruits of higher growth to spend what we need on meeting those other priorities.
