Sluggish economy is not political

by John Hood, John Locke Foundation and NC SPIN panelist, published in Daily Reflector, November 2, 2013.

The economic recovery from the Great Recession is painfully sluggish — and it’s not all Barack Obama’s fault.

Nor can the fault be laid solely at the feet of George W. Bush, or North Carolina Gov. Pat McCrory, or former governors Bev Perdue and Mike Easley. Such an observation may be jarring in the current hyper-partisan atmosphere. It won’t excite party activists or provoke outraged letters to the editor. But it is true.

How do I know that the economy’s slow-growth problem can’t be attributed to any of the politicians I named, or even to all of them collectively? Because the facts won’t permit it. North Carolina’s economic performance, for example, began to lag the regional and national averages during the late 1990s. That’s about the same time that America’s average long-term growth rate — 2 percent a year in inflation-adjusted, per-person GDP — became unsustainable. According to the Cato Institute’s Brink Lindsey, projections of future economic growth range from about 1 percent to 1.5 percent over the next two decades.

To put things in a local context, imagine that North Carolina’s economy was a family farm. In the past, we produced many children and trained them effectively to work the land, which they needed to do in order to survive. But the next generation is smaller, less motivated, and in need of new skills to compete in the market for food and fiber. Furthermore, we’ve taken to eating our seed corn, rather than saving it to produce future crops, and failed to invest effectively in the latest equipment, techniques, and management practices.

Although the problem doesn’t really have partisan roots, potential solutions will be politically controversial. Increasing labor quantity means either welcoming new immigrants, raising the retirement age (both in law and custom), or promoting the formation, stability, and fertility of families. Increasing labor quality means shaking up the current system for educating and training future workers, including managers and entrepreneurs. Increasing savings and investment means reforming the tax code and signaling to households that they’ll need to save more for their own housing, health care, education, and retirement needs. And increasing productivity growth probably means spending less money on large bureaucratic institutions such as hospitals and universities as resources shift to more dispersed and wired networks of smaller, more entrepreneurial service providers.

These are the ideas Democrats, Republicans, and independents will be arguing about for years to come.