Five Priorities for Improving World Economic Future. Not so long ago, science fiction made us dream of a better world through promising visions of the future like Star Trek and Back to the Future. Today, the offering is limited to a dystopian world ruined by poverty and violence, such as The Hunger Games, Divergent, and Elysium.
Pessimism is commonplace these days. Six years after the financial crisis, World recovery is fragile and weaker than any in the postwar era. Growth has disappointed time and again, battered by government shutdowns, fights over the debt ceiling, and weather-related slowdowns.
Are we reaching a “new mediocrity”?
In our last annual review of the US economy, we project potential growth of just 2% in the coming years, which represents a significant cut from the average potential growth rate of more than 3% seen over the past two decades.
What is happening?
The reasons behind this deterioration in the outlook are two: a slower expansion of the workforce and a slowdown in productivity.
Over the past three decades, the workforce has expanded at an annual rate of 1¼%. According to current projections, this rate will stabilize below ½%. Much of the decline is due to aging: About 10,000 members of the baby boom generation will turn 65 today, and about 10,000 more will celebrate that birthday each day for the next 19 years.
But to the decrease in the number of workers is added the smaller increase in productivity. After the Olympic leap in the late 1990s – largely thanks to the information technology revolution – the rise in labor productivity undoubtedly slowed. At this moment it is difficult to say if it is something temporary or permanent. There certainly could be another round of technological advancements in the years to come, or perhaps productivity increases caused by a new “energy revolution.” But even if we do not go to one extreme or the other and we assume that labor productivity will recover from the minimum of ½% it reached in 2013 but remaining below the average growth rate of 2¾% observed between 1998 and 2007,
How to reach a “new moment of momentum”?
To stem the decline in potential growth, the US government and Congress must be willing to adopt a program of measures that will encourage productive investment and innovation, reverse the decline in productivity growth, and expand the supply of hand. working.
Our list of five priorities to achieve that goal is as follows:
- Investing in infrastructure to reverse the downward trend in the quantity and quality of public capital in the United States.
- Tax reform to simplify the code, broaden the base and reduce marginal rates, especially for corporate income tax.
- Promoting innovation and improving educational outcomes by restoring the research and development tax credit, promoting and financing early childhood education, and providing increased support for science, technology, engineering, and math programs.
- Comprehensive and skills-based immigration reform to maintain a workforce that responds to the needs of employers by providing highly skilled and innovative workers.
- Active labor policies that improve training programs, provide more effective job search assistance, offer better family benefits (including childcare), extend the earned income tax credit to youth to promote employment, modify the disability insurance program so that part-time employment does not result in a loss of benefits, and provide incentives to those who hire those affected by long-term unemployment.
Many of these policies come at a price, with the notable exception of immigration reform, which would likely produce a small reduction in fiscal deficits. However, the global cost is not that great: according to our estimates, it would be around ⅓% of GDP per year in the next 2–3 years. But part of that fiscal cost would be offset by the acceleration of growth driven by these policies. Ideally, these measures would be accompanied by a much-needed and broader medium-term fiscal consolidation plan.
The abundance of Good Ideas
Improving World Economic Future, Not everyone will be able to agree with this priority list, which is logical. But there certainly has to be a public debate about which shows could be more profitable. There is an abundance of ideas to improve the prospects for economic tuition in Singapore without neglecting the sustainability of public finances.
The challenge will be to reach a political agreement around a group of ideas that will convince the ruling party and the opposition. Recent advances, such as the budget law, demonstrate that the agreement is possible, particularly given the intersection of government and congressional proposals in areas such as corporate tax reform, infrastructure and job training programs, and immigration reform. World long-term growth will depend more than anything on finding common ground and acting.