Tuesday, March 14, 2017

Just Say 'Yes' To 4% Growth

Imagine if John F. Kennedy's advisors had told him in 1961, we will never put a man on the moon.  Or what if Ronald Reagan's advisors had assured the Gipper: the Cold War is unwinnable; we should sue for peace.  Actually many naysayers told JFK and Reagan exactly these things, but fortunately these president were visionaries. They asked: "Why not?"

Donald Trump seems to confront these nattering nabobs of negativism in the media and academia every time he announces a policy goal. You can't build a wall.  You can't keep out illegal immigrants.  You can't root out the waste in government.  You can't get Europe to pay more for its own defense. You can never balance the budget.  And on and on.

The one thing Washington is very good at is giving every excuse under the sun for why achievable things can't done.

Which brings me to the revolt of the chattering class against Donald Trump's goal of 4% growth and millions of new jobs when his economic plan is implemented.

The left and even some academics on the right laugh that this is a pipe dream.  CNN Money recently asked leading economists about Trump's promise and they found a strong consensus that "4% growth is impossible, or at least highly unlikely." Why?   They say there aren't enough workers with the retirement of the baby boomers and that automation means fewer jobs available. Productivity is apparantly tapped out.

Even the latest 3% growth goal that Trump's budget team has projected was ridiculed. "Experts" point to a widely cited 2016 San Francisco Fed study which argues that the "new normal" is 1.5% to 1.75% GDP growth — or less than half the post-World War II average pace of progress.  Economists are sounding as myopic as the legendary patent office official who once proclaimed that everything that will be invented has been invented.

So is achieving rapid growth in GDP now unachievable? In the 1960s, after the Kennedy tax cuts were implemented, the economy grew by 4% annually for about five years (1965-69 while  unemployment sank to record lows, and a gold-linked dollar held down inflation.

In the 1980s, following the Reagan tax cut, the economy from 1983-89 the economy expanded at annual clip by closer to 3.75%.  Back then economist Paul Samuelson, a Nobel prize winner, declared that if the Reagan agenda were to produce high growth in outcome and jobs with declining inflation it would be "a miracle."  The miracle happened.

So why not now?

It's worth noting that when Barack Obama unveiled his Keynesian stimulus plans, the White House projected 3% plus rates of growth nearly every year.  He never hit 3% growth in a single year.   I don't recall hearing the hoots of protest against his plans achieving "impossible" rates of growth.

One bogus argument for the new normal of slow growth is that the labor force growth necessary for high growth will not happen.  It is true that baby boomers are retiring at a pace of 10,000 a day.  But the notion that there isn't an available pool of workers to fill millions of new jobs from the tax cuts and deregulation is nonsense.  There are a record 95 million Americans out of the workforce today and a record low labor force participation rate.

Yes, many of these workers are over the age of 65 and retired  But the biggest reduction in workforce participation has been younger people.  Meanwhile many workers over the age of 50 have seen their jobs disappear and have resigned themselves to early retirement.  We know that including the millions of Americans who have given up looking for work or can't find a full-time job means an unemployment rate twice as high as officially reported.

We also know there are millions of Americans on disability or other welfare programs that aren't working. This isn't because there are more disabled people or that more people need government benefits like food stamps.  It is because the benefits are so much easier to get and thus welfare and disability have become costly substitutes for work. Put time limits and work requirements on these programs for employable adults and the labor force will accelerate quickly.

There are potentially tens of millions of workers who could and should be working, but aren't.  Also, we can and should fix our immigration system so many more engineers, scientists, and skilled workers can get visas to come to the U.S. and fill open jobs.

Then there is the issue of productivity.  Federal Reserve vice chair Stanley Fischer declared last year that slow growth in "capital investment and productivity" is the force that's "holding down growth."  No they aren't.  Investment has been low for the past decade because of liberal policies that punished capital investment.  Higher capital gains and dividend taxes, more onerous regulations, ObamaCare, Dodd-Frank, the massive increase in the national debt all have deterred investment.

The war against business under Obama hopefully will become a peace treaty with business under Trump.  We know that there are hundreds of energy projects ready to go — these are investments — that Trump should greenlight in the months ahead.

I'm of the belief that America is just entering a new stage of massive productivity gains as we enter the Digital Age Part Two.

Artificial intelligence and robotics could double or triple the productivity of American manufacturing.  New drugs, vaccines, medical devices, artificial limbs, and medical procedures from our biotech industry will cure or alleviate cancer, heart disease, MS, Alzheimers, and many other debilitating illnesses that sap productivity.

Then there are the automated autos and planes. These will reduce transportation shipping costs by 75% and 80% over the next two decades, leading to massive productivity gains for businesses.

In other words, we are entering a golden age of productivity with undreamed of advances. We will produce more and more output with fewer and fewer workers needed.

We get there mostly by getting the government out of the way.  Trump wants to do that. And if he does, 4% growth can and should be the new normal in America.



Kellyanne Conway suggests even wider surveillance of Trump campaign

The White House is offering yet another wrinkle in its attempt to support President Trump’s allegation — unfounded, so far — that his campaign headquarters in Manhattan was wiretapped by the Obama administration. The latest comes from Trump’s senior counselor Kellyanne Conway.

She says the “surveillance” may be broader than even Trump suggested.

In a wide-ranging interview Sunday at her home in Alpine, where she lives with her husband — a possible nominee for U.S. solicitor general — and their four children, Conway, who managed Trump’s presidential campaign before taking the job as one of the president's closest advisers, suggested that the alleged monitoring of activities at Trump’s campaign headquarters at Trump Tower in Manhattan may have involved far more than wiretapping.

“What I can say is there are many ways to surveil each other,” Conway said as the Trump presidency marked its 50th day in office during the weekend. “You can surveil someone through their phones, certainly through their television sets — any number of ways.”

Conway went on to say that the monitoring could be done with “microwaves that turn into cameras,” adding: “We know this is a fact of modern life.”

Conway did not offer any evidence to back up her claim. But her remarks are significant — and potentially explosive — because they come amid a request by the House Intelligence Committee for the White House to turn over any evidence by Monday that the phones at Trump Tower were tapped as part of what the president claims to be a secret plot by the Obama administration to monitor his campaign.

The White House has not said whether it will provide any corroborative support to back up the president’s claim of the alleged wiretapping. The allegation came to light nine days ago when Trump wrote in an early-morning Twitter message that he “just found out that Obama had my ‘wires tapped’ in Trump Tower just before the victory.”

Trump did not offer any evidence in his original Twitter message. And while criticism mounted in the following days that Trump may have overreached, neither he nor the White House provided any means to verify the claim. Indeed, the wiretapping claims have dominated much of the discourse in Washington, often overshadowing the president's attempt to promote changes in the Affordable Care Act and institute new immigration regulations.

Now comes Conway’s insinuation of a much broader surveillance plan against Trump. Her suggestion, while further stirring up the debate, appears to indicate that the White House does not plan to back down from Trump’s original Twitter claim in spite of strong assertions that it is not true from the U.S. intelligence community as well as from former president Barack Obama himself and members of his inner circle.

In the interview, Conway reiterated the request by the White House that the allegations of wiretapping  — and what she hinted might be other forms of surveillance — should be wrapped into a Congressional investigation into whether Russian intelligence operatives tried to influence the outcome of last November’s election.“What the president has asked is for the investigation into surveillance to be included into the ongoing intelligence investigations in the House and Senate,” she said.

The strategy of dueling inquiries — along with Conway’s suggestion of even broader surveillance by the Obama administration besides wiretapping — certainly complicates any investigation that involves Russia. But it may also confuse the issue.

While Conway seemed to call for a closer look into the so-far unfounded allegations of wiretapping by so-far unnamed members of the Obama administration, she also was dismissive of the extent and impact of the alleged Russian scheme. The Russian attempt to hack into computers within the Republican and Democratic campaign organizations is largely not disputed within the U.S. intelligence community.  What is disputed is whether the Russian scheme had any impact on the outcome of the election.

Conway’s remarks, however, may complicate the matter in other unforeseen ways.

She claimed in the interview that Democrats who called for a deeper investigation of the alleged Russian links – while also ignoring Trump’s claim of wiretapping by Obama — were really trying to undermine the Trump presidency. “The investigation is about a bunch of people who can’t believe that Hillary Clinton lost the election,” Conway said, her voice rising when asked about the possibility that Russian operatives may have helped to defeat Clinton and insure that Trump won.

“I was the campaign manager,” Conway added. “I was there every day and every night. I talked to people in Macomb County, Michigan, not in Moscow.”

She said that “this whole conspiracy” is a “waste of people’s oxygen, and air and resources and time when we could be helping those who are hungry, who need health care, who are in poverty, who need tax relief, entrepreneurs who want to get off the ground.”

In the interview, Conway addressed a variety of topics, including Trump’s efforts to assemble a coalition of support for his plan to revamp the Affordable Care Act, and her belief that Gov. Chris Christie may eventually join the Trump administration in some capacity, perhaps not for several more years, however. Conway even noted that Christie had come to her home recently to discuss his effort to improve services for drug addicts.

“The president likes Governor Christie a lot,” Conway said. “They talk all the time.”

But at various points, she continued to return to a seeming favorite topic — that Democratic critics of Trump are incapable of accepting the fact that he was able to defeat Hillary Clinton.

“They haven’t gotten over it,” Conway said, noting that she found many Democrats still working through “the stages of grief,” which range from anger to disbelief and, finally, acceptance of a loss.

“I know they’re not in acceptance,” Conway said. “That’s too bad for the country. The campaign is over. Now it’s time to govern.”



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