James Pethokoukis has an article at Reuters talking about a new economic paper released from Northwestern University economist Robert Gordon forecasting very slow growth in the United States over the next 20 years. This is heavily impacted by current fiscal policies and affects future fiscal policies. Here’s the key paragraphs:
America faced a similar turning point a generation ago. During the Jimmy Carter years, the Malthusian, Limits to Growth crowd argued that natural-resource constraints meant Americans would have to lower their economic expectations and accept economic stagnation — or worse. Carter more or less accepted an end to American Exceptionalism, but the 1980 presidential election showed few of his countrymen did. They chose growth economics and the economy grew.
Now they face another choice. Preserve wealth, redistribute wealth or create wealth. Hopefully, President Barack Obama will choose door #3. Investing more in basic research (not just healthcare) would be a start, as would slashing the corporate tax rate. A new consumption tax would be better for growth, but only if it replaced the current wage and investment income taxes. Real entitlement reform would help avoid the Reinhart-Rogoff scenario. The choices made during the next few years could the difference between America in Decline or the American (21st) Century.
Remember the wonderful projections of deficits ranging between 500 billion and 1.2 trillion dollars a year over the next 10 years? Bad news: that assumes much more robust growth rates, resulting in a lot more tax dollars coming in. If Robert Gordon is on the right track, the graph below is a overwhelmingly optimistic projection.