Pessimism, Unrestrained by Economic Reality

By March 27, 2008Economy, Taxation

Since we’re citing James Pethokoukis of US News today, we appreciated his response to this bit of unnecessary glumness.

This is the most downbeat thing I read today. From the Wall Street Journal:

“We have to accept that this is no longer a nation of 4% real economic growth. This is a mature nation that no longer has a strong manufacturing base,” says Steve Leuthold, chairman of Leuthold Weeden Research in Minneapolis.

My take: The last time I heard this talk was back in the mid-’90s, right before the economy turned on the jets. Back then, the common wisdom was that the economy could grow no faster than 2.5 percent a year or so. Here is a bit from a 1996 New York Times story on the topic:

History and circumstance, in sum, have locked the United States into a level of economic growth that, measured against expectations raised by the 1996 Presidential campaign, is politically unacceptable. “It might be good for our politics if some candidates acknowledged this,” said William Kristol, editor of the Weekly Standard and a Republican strategist, addressing an issue that most politicians don’t, in public.

I might buy into this theory today if it looked to me that the U.S. economy was already optimized for speed. But it clearly isn’t, not with the second-highest corporate tax rate in the world, for instance, or a healthcare system that is a terrible burden on employers. Now is no time to give up on growth.

Right you are, James.

Suppose there’s always a Club of Rome constituency out there, at least among the media and think tank crowds, but the record of economic pessimism is a notoriously bad one. And the record of politicians who embrace that pessmism is even worse.

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