Most of the country's top economists are gathered this week in San Francisco for the annual American Economic Association conference. And from what I'm hearing, the buzz is all about Robert Gordon, a Northwestern professor who's been arguing for some time that American economic growth is over. His book The Rise and Fall of American Growth: The US Standard of Living Since the Civil War will be out on January 12 and is largely dedicated to putting that claim into historical context.
The way Gordon sees it, rather than view the US's slowdown in economic growth since the mid-1970s as an anomaly, we should understand the rapid growth from 1870 to 1970 as exceptional. Around most of the world, for most of history, growth has been slow.
And he expects growth in average people's living standards in the US to continue to be slow for four big reasons: Educational attainment is slowing down, there's a big overhang of debt, the population is aging, and the rich are gobbling up more and more of the diminished economic pie.
Normally these kinds of big-think books end with a whimper, as the author totally fails to identify solutions to the problem he is writing about. But Gordon's conclusion offers some admirably definitive policy advice.
Specifically, he thinks we should:
- Make the tax code more progressive
- Raise the minimum wage
- Make the earned income tax credit program that grants extra cash to low-wage workers more generous
- Reduce incarceration in part by legalizing drugs
- Invest in quality preschool
- Ensure that K-12 schools with poor students get more money than those with affluent ones
- Make student loan repayment income-contingent
- Roll back excessive occupational licensing rules
- Shift the US immigration mix to feature more skilled workers
- Do broad tax reform that eliminates deductions to allow for lower rates
To me, what's striking about this is that for such a big and ambitious book that is attracting so much debate, the policy prescriptions aren't especially far out.
Items 1, 2, 3, 5, 7, and 8 are all things the Obama White House has come out for, and 9 and 10 are things they've definitely signaled openness to. Items 3, 7, 8, 9, and 10 are all things I've heard leading Republicans endorse, along with some openness to 5. Total drug legalization isn't something that's very mainstream politically, but the overall political consensus is clearly shifting in that broad direction. Only 6 really seems like a nonstarter politically, even though it's absolutely a reasonable idea.
The overall tone of the end of the book is very much on the pessimistic side, but these seem like policy solutions that one could be realistically optimistic about.