Marc Goldwein on NPR's Planet Money: How to Get 3% Growth
Achieving 3 percent sustained annual growth would be incredibly difficult, yet that assumption is embedded in President Trump’s proposed budget. In an episode of NPR’s Planet Money podcast, CRFB senior vice president and senior policy director Marc Goldwein discussed how unlikely it would be to accelerate growth up to 3 percent. The episode was hosted by NPR's Stacey Vanek Smith and Robert Smith.
In the podcast, Goldwein explains that growth can come from more capital, more labor, or more productivity (these three key drivers of economic growth are explained in “How Fast Can America Grow?”). However, achieving enough change in any single factor to get to 3 percent sustained growth would require outlandish changes. For example:
- Doubling the current immigrant population. This would entail repeating the last 80 years of immigration in the next 10 years.
- Putting every single working age adult to work, including full-time parents, the unemployed, the disabled, those in prison, and those in graduate school. That would put far more people back to work than if today’s unemployment rate was reduced to 0 percent.
- Initiating two simultaneous dot-com-size booms. Even the possible widespread adoption of self-driving cars might not add up to one dot-com boom.
- Developing and utilizing innovations more consequential than electricity. This would require a technology so revolutionary that we haven’t even thought of it yet.
These examples aren’t serious proposals, but illustrate how difficult it would be to get to 3 percent growth.
As a goal, 3 percent is a worthy aspiration, but it should not be confused with a serious foundation for current budgetary projections. Economic growth is expected to be 1.8 percent annually over the next decade, which is over a percentage point below historic levels.
The main driver of slower growth is our aging population. The retirement of the baby boom generation means the labor force will grow much more slowly in the coming decade than its historical average.
While stimulus measures can temporarily hasten growth, there is no feasible path for them to boost the sustained long-term growth rate to 3 percent or above.
Goldwein explained, “My goal number one is let’s get to the right side of 2 percent,” which is above what CBO currently projects. Goldwein also suggested 2.5 percent sustained growth could be achieved by enacting a number of pro-growth reforms simultaneously – including tax reform, immigration reform, entitlement reform, and deficit reduction.
He said, “3 percent growth is [only] possible if absolutely everything goes right at the same time. And that means everything going right in terms of policy, and it means everything going right in terms of luck.”
- How Fast Can America Grow?, where we explain the headwinds to growth and how difficult it would be to achieve 3 or 4 percent sustained growth.
- Policies to Grow the Economy, which provides recommendations for a pro-growth agenda.
- CBO Economic Forecast Sees Major Headwinds Facing Growth, where we explain CBO’s analysis of long-term growth projections.
- President Trump's Full FY 2018 Budget, which summarizes our main findings from the President’s budget.
- Re-Estimating the President's Budget with Reasonable Economic Assumptions, our paper that shows what happens if you remove rosy economic growth assumptions from the President’s budget.
- All the President's Budget Gimmicks, which describes the other gimmicks in the President's budget.