#AmericanDream #disappearingAmericanDream #economicgrowthrates
The American Dream is disappearing, by many accounts.
America needs the 3.5% solution.
No, it’s not a chemical that will magically remove all our country’s woes.
It an economic growth rate we once saw as a nation, but for which there is no projection to ever achieve again, under current circumstances.
That’s the premise of an article by U.S. Sen. Bill Cassidy (R-La.) and Louis Woodhill, an economics writer and venture investor. The article was published May 1, 2015, in The Wall Street Journal.
Then, on May 3, 2015, Michael W. Kraus, assistant professor of psychology at the University of Illinois, Shai Davidai, a Ph.D. candidate in psychology at Cornell University and A. David Nussbaum, adjunct assistant professor of behavioral science at the University of Chicago published an article in the New York Times that says we vastly overestimate the amount of upward mobility in our society.
Finally, Peter Morici, professor of economics at the University of Maryland, says the slow job growth and low interest rates are decreasing the number of “safe” investments for savings, while allowing big companies cheap money for mergers and acquisitions. Morici’s column appeared in the May 12, 2014, edition of The Atlanta Journal-Constitution.
What does all this mean for the average working person – or, perhaps, the average person who is no longer working? If you get a new job, it will likely pay less than the one you lost. You’ll struggle to get any kind of return on what little you are able to save, if anything at all. And, the big companies will combine into entities that will put more people out of work.
Cassidy and Woodhill say the Congressional Budget Office projects a meager growth rate of 2.3% for the gross domestic product over the next decade. Meanwhile, from 1790 to 2014, the average growth rate was 3.73%, they say. However, the two men have a way they believe will help generate the kind of growth the U.S. needs to prosper: allow oil exports, and not taxing repatriated overseas profits of U.S. companies.
Cassidy and Woodhill point out another fact: had the GDP grown from 2001 to 1014 at the 3.87 annual rate it had grown between 1993 and 2000, the federal government would have had a $500 billion surplus in 2014, instead of that big a deficit. Certainly, a 1 percent difference in the economic growth rate makes a big difference in the outcome for all of us. The writers also point out that current GDP growth per person is $2,433, lower than Papua New Guinea’s.
If we are truly in for growth rates in the 2s rather than the 3s, we will certainly see a decrease in upward mobility, as the trio who wrote in The New York Times suggest.
To extrapolate more on Morici’s column, low interest rates cannot be sustained forever. Average people usually can’t go looking for riskier investments at higher returns, lest they get burned. Yet, Morici says that is what some are doing.
Let’s look at Cassidy’s and Woodhill’s recommendations. Oil-company TV ads are telling us that the U.S. is currently the No. 1 producer of natural gas, and soon to be No. 1 in oil. The tendency, after decades of buying energy ingredients from countries who hate us, is to keep all that oil and gas we are now producing to ourselves.
But Cassidy and Woodhill say we should sell some of it. Perhaps we should analyze what it would cost us to ship the oil and gas elsewhere, vs. distributing it domestically. It’s cheaper, for example to ship Alaskan oil to Japan and other Pacific nations, rather than getting it to the U.S. mainland.
Then, there are the profits U.S. companies make overseas. There are trillions of U.S. assets awaiting repatriation. But, much of that would go to taxes in the current milieu. One has to analyze whether it’s better to bring the money home, tax-free, and put it to work here, vs. allowing it to sit in foreign institutions while we still collect no taxes on it. That’s certainly worth a full vetting.
As for our own prosperity, you may be among those who have given up looking for work, or who has been forced to take a job that pays less than the one you lost. The good news: there are many ways out there to make incomes without having to have a traditional job. Sure, there is work involved, but no boss and no threat of layoffs. For one of the best, visit www.bign.com/pbilodeau.
Sometimes, when all looks bleak, there’s a huge ray of hope that will guide those who would go for it. It may require new thinking and motivation, but sitting around complaining of bleakness and wishing ill on those who have it better than you accomplishes nothing.
Peter
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