Five Priorities to Improving the World’s Economic Future. Science fiction was popular not long ago. It inspired us to dream of a better future through futuristic visions like Star Trek and Back to the Future. The options are limited to dystopian futures ruled by violence and poverty, like Divergent and Elysium.
These days, pessimism has become commonplace. Six years after the financial crisis, the world recovery is fragile and weaker that any of the postwar eras. Time and again, growth has failed, battered repeatedly by government shutdowns and fights over debt ceiling and weather-related slowdowns.
Is there a new mediocrity?
Our last annual review of US economic prospects showed that we expect potential growth of 2% over the next few years. This is a substantial drop from the more than 3% average growth rate for the past 20 years.
Two factors are responsible for this decline in outlook: slower workforce growth and slower productivity.
The workforce has grown at an average annual rate of 1 1/4% over the last 30 years. Current projections predict that this rate will stabilise below 1/2%. The decline can be attributed to aging. About 10,000 baby boomers will reach 65 today and another 10,000 will do so every day for the next 19-years.
The smaller increase in productivity is offset by the decline in workers. The decline in labor productivity has been evident since the Olympic leap of the late 1990s, which was largely due to the technological revolution. It is not clear at this point if the slowdown is temporary or permanent. It is possible that there will be more technological advances in the future, or productivity gains caused by an “energy revolution”. However, we can assume that labor productivity will rebound from the minimum of 1/2% in 2013. This would still be below the average growth rate (2 3/4%) observed between 1998-2007.
How can you reach a “new moment in momentum”?
The US Congress and the government must agree to a set of measures that encourage productive investment, innovation, reverse the declines in productivity growth, and increase the supply of hand in order to stem the decline of potential growth. working.
We have five priorities to reach that goal:
To reverse the decline in quality and quantity of public capital in the United States, invest in infrastructure.
To simplify the tax code, increase the base, and lower marginal rates, particularly for corporate income taxes, reform is needed.
Promotion of innovation and improvement in educational outcomes through the restoration of the research and development credit, financing early childhood education and increased support for science and technology engineering and math programs.
Comprehensive, skills-based immigration reform is necessary to ensure that employers have a workforce that can meet their needs by providing innovative and highly skilled workers.
These policies promote active labor, which improve training programs and offer more job search assistance. They also provide better family benefits (including childcare), an extended earned income tax credit for youth to encourage employment, modification of the disability insurance program to ensure that part-time work does not lead to a loss in benefits, as well as incentives for those who hire people affected by long-term unemployment.
Most of these policies have a cost, except for immigration reform which could result in a slight reduction of fiscal deficits. The global cost of these policies isn’t that high: it would only be about 1/3% of GDP annually over the next 2 to 3 years, according to our estimates. These policies would accelerate growth, which would offset part of the fiscal cost. These measures should be accompanied by a more comprehensive and long-term fiscal consolidation plan.
A wealth of good ideas
Improving the World Economic Future. Not everyone will agree with this priority list. There must be a public discussion about which shows are more profitable. There are many ways to improve the prospects of economic education in Singapore, without compromising the sustainability of the public finances.
It will be difficult to find a political compromise around a set of ideas that can convince both the ruling party as well as the opposition. Recent developments, such as the budget bill, show that an agreement is possible. This is especially true given the interplay of congressional and government proposals in areas like corporate tax reform, infrastructure, job training programs, and immigration. Finding common ground and taking action will be the key to long-term global growth.