Room For Improvement In Economic Growth Rates
August 4, 1998
Figures released last week show the U.S. economy grew at an anemic 1.4 percent annualized rate during the second quarter. A number of economists say this should constitute a wake-up call to policy makers.
- Compound annual growth during the current expansion -- which began in 1992 -- has averaged only about 3 percent.
- This compares with much higher growth rates during previous expansions -- for example, almost 5 percent from 1961 to 1969 and more than 5 percent in the 1970 to 1973 period.
- Economists note a number of factors hobbling this expansion -- higher tax rates than in previous periods and government regulations that are not cost-justified.
In addition to reining in taxes and pushing deregulation, economic strategists prescribe privatization of the Social Security system to give growth rates a shot in the arm. Harvard's Martin Feldstein, for example, estimates the present value to the economy of investing future cash flow from Social Security payroll taxes in real assets would approximate $10 trillion to $20 trillion.
Source: David L. Littman (Comerica Inc.), "Worry About Slow Growth, Not Recession," Wall Street Journal, August 4, 1998.
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