The tax debate between Republicans and Democrats illustrates two opposite visions of America — one for growth and hope and another for grim limits and ancient prejudices.
From the founding of the Republic through the middle of the recent Bush presidency, America, across recessions and recoveries, averaged better than 3 percent growth. President Obama managed only 1.8 percent, and now Democrats and academic economists tell us that’s as good as it gets.
According to them, productivity growth and adult labor force participation have been permanently reduced by powers beyond the forces of public policy. Eight years of more oppressive government regulations, higher taxes on businesses than abroad, more decadent universities and new policies enabling able-bodied adults easier access to Social Security disability pensions, food stamps, federal housing subsidies, Medicaid and the like had nothing to do with it.
The dismal scientists with whom I share my working life have lined up behind Northwestern University professor Robert Gordon’s view that the easy productivity-improving innovations have been found and advancing commercial know-how is too expensive. For example, econometric studies show the cost of finding new drugs has risen dramatically.
The latter would have been like studying the productivity of mule drivers on the Erie Canal in the 1850s. By then, important segments of the system had been widened and 30 years of experience had taught barge owners most of what could be discovered about the optimal number and size of animals and equipment for moving cargo, but declaring freight transportation improvements at a dead end would have been absurd given the quickening potential of steam power and railroads.
Nowadays, generalizing about potential for productivity growth from conventional drug research or the slowing pace of laptop sales ignores the blossoming fields of DNA-based organ modification, electronic brain implants, artificial intelligence and robotics.
Paradoxically, liberals want to give everyone a guaranteed annual income because computer programs and machines will eliminate the need for most workers. Isn’t that infinite productivity growth — for example, autonomous drive vehicles will take us from one driver per passenger mile to zero drivers per passenger mile?
Alas, logical circles are commonplace in universities that frequently de-emphasize Shakespeare to venerate poet Audre Lorde — a strident feminist who blamed gender and racial oppression for all poverty and inequality, and assigned reason a place akin to superstition.
My colleagues routinely attribute falling adult labor force participation to baby boom retirements. However, in 2006, the Bureau of Labor Statistics projected an aging population would lower the participation rate from 66.2 to 65.5 percent by 2016.
After Mr. Obama and House Speaker Nancy Pelosi used the financial crisis as cover to build out the above-mentioned entitlements and enlarge the client class for Democratic politicians to mine, the participation rate fell to 62.7 percent.
With regulatory and business tax reforms in focus, investment and labor productivity have steadily gained since last spring, and the combination of artificial intelligence, robotics and portable computing — look in your pocket if you are not already reading this on a smart phone — promises a new age of progress.
Old constraints on growth — for example, the financial and environmental costs of providing enough energy — are evaporating. Wind and solar are displacing coal and gas for generating electricity.
Sadly, the regulatory state and high taxes have caused too many American firms to focus on lobbying instead of the next wave. General Electric is staggering from declining demand for coal and gas turbines while Chinese competitors are coining money selling the new stuff — solar panels and the inner workings of windmills.
Ironically, liberals seem to lament America is not organized like China. Having lost the White House to the ultimate populist and ceded 33 governorships and most statehouses to Republicans, they treat Mr. Trump’s election as illegitimate. In the process, they dis democracy.
China is not telling young people work is superfluous or their government owes them a living. Instead, it is cornering the market on energy technology, poised to steal the electric car industry and targeting artificial intelligence as the battlefield for global economic dominance.
Only restoring innovation, the dignity of work and growth will create opportunities for rising incomes, care for an aging population and slay racial- and gender-based enmity. That requires focus on making the pie bigger, not cultivating fear and envy.
• Peter Morici is an economist and business professor at the University of Maryland, and a national columnist.
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