If you’re wondering why John Hood spends so much time studying public policies that promote economic growth, consider Barron’s latest cover story. Jonathan Laing documents the impact of a “snail economy.”
Growth depends both on increases in the size of working-age populations and gains in their productivity, or output per worker hour. Unfortinately, each measure shows signs of dramatically slowing.
This new slow-growth era could have broad repercussions that will affect not only the pugilists in Washington but businesses and investors. Weaker growth will make it harder for companies to improve earnings, fatten dividends, or garner better stock returns. It also threatens to fan social inequality and class tensions and limit the ability of government to fund various entitlement programs like Medicare and Social Security. Tax revenues are also likely to fall short of projected levels.
These new realities are only beginning to seep into official forecasts.