After eight years of a subdued economy, Americans are feeling good about their prospects.
There's an effort among those whose economic thinking dominated policy during the stagnant times to dismiss current economic growth as a "sugar high."
But the growth is instead the result of better economic policies, according to two economists writing in today's Wall Street Journal. People are more willing to start businesses, hire workers, and invest in the current climate.
With the right policies, argue Edward Prescott, Nobel laureate and director for the Center for Advanced Study in Economic Efficiency at Arizona State, and Lee Ohanian, Hoover fellow and associate at the center, write, a good economy could continue for years to come.
After the 2007-2009 downturn, the authors write, there was a some organic recovery. But the partial recovery was stalled by 2014, they argue, because of higher tax rates and increased regulation. It looked like the economic torpor would continue. That is now what happened:
Yet economic performance began to improve beginning in the first quarter of 2017. Real GDP growth accelerated to about 2.7% between the end of 2016 and the second quarter of 2018, up from about 2% between 2014 and the end of 2016. The share of GDP devoted to nonresidential business investment rose to a historic high.
The best measure of labor input—the total number of market hours worked divided by the 16-and-older population—is growing faster than in 2014-16, and is now close to its all-time high. This is all the more impressive since the growth rate of the working-age population is slowing. Perhaps the most exciting aspect of the current economy: The emergence of better job opportunities has reduced the number of people on disability. This has led the Social Security Administration to reverse its previous warning that the disability system would become insolvent as soon as 2023.
U.S. economic performance is the strongest in years. One policy driving this turnaround is the substantially lower corporate-tax rate, which has made the U.S. more competitive with other countries. Regulatory changes—such as the partial rollback of Dodd-Frank and new leadership within the Consumer Financial Protection Bureau—also have proved helpful, particularly for small businesses, which are benefiting from lower record-keeping and compliance costs.
Meanwhile, the number of regulatory pages in the Federal Register has been cut by a third since President Obama’s last year in office. That’s a major reason the National Federation of Independent Business reports that more small-business owners are hiring than ever.
We hear a lot about lack of growth in wages.
Rising health care costs are swallowing increased in compensation.
So years after the passage of the Affordable Care Act, we are finding out that the Obama era reforms didn't deliver on affordability. Real reform could change this.
Reduction of trade barriers would also help the economy. The authors propose trade agreements, not tariffs, as the way to do this.
I find it fascinating that at a time of economic growth that makes life better for millions of Americans we are seeing a growth in the popularity of socialism in this country.
You'd almost think that advocates of socialism aren't willing to see what actually happens when their policies are put into place.