When Newt Gingrich was House Speaker and John Kasich was Chairman of the House Budget Committee they struck a deal with the then sitting Democrat President, William Jefferson Clinton. Gingrich still gives Kasich much of the credit for that deal. The deal balanced the Federal budget. Indeed, surpluses were garnered for several years.
From where did the surpluses come? Growth! Sadly, President Bush with the “help” of Republicans in Congress squandered the surpluses. Wars cost money, but it wasn’t just the post-911 war. A major entitlement expansion also occurred – under supposedly fiscally conservative Republicans. Oh well, the “base” is certainly justified to loathe that “establishment” betrayal.
Between 1950 and 2000 the US economy grew at an average pace of 3.5%. If we reestablish pro-growth tax and regulatory policies most economists believe we could re-establish and sustain that level of growth. Even Paul Krugman does not believe we are “stuck” at 2% growth. The crushing debt run up by Barack Obama (and to a lesser extent, President Bush) is an impediment but not one that couldn’t be overcome. However, the American diet of entitlements is likely to be the most significant problem to overcome. Individual Americans will each want another America to go on a diet, but not themselves.
The Great Recession ended in September 2009. We have had 6 1/2 years of “expansion.” However, few Americans are cheering the “Obama recovery” – the worst recovery since pretty much EVER!
[Sources: Growth Is the Answer to Everything, by John Mauldin and A Primer on Growth, Politics, and Taxation, by Daniel J. Mitchell]
Little Changes Add Up
[From the Mauldin article] …John Cochrane, a senior fellow at the Hoover Institution, …wrote a paper on economic growth last year… He begins by showing how small changes matter a great deal in the long run. (As noted, our) economy grew by over 3½% from 1950 to 2000. From 2000 the economy has grown at about half that rate, or 1.7%. And therein lies the reason that incomes have been so punk for much of America…
Small percentages hide a large reality. The average American is more than three times better off than his or her counterpart in 1950. Real GDP per person has risen from $16,000 in 1952 to over $50,000 today, both measured in 2009 dollars… GDP per person has more than tripled… That’s in constant dollars, so it isn’t just “growth” by inflation.
Yet this tripling would not have occurred if the economy had grown at 2% a year instead of 3.5% during my lifetime. That extra 1.5% made an enormous difference. In fact, the difference is even greater…
The official Congressional Budget Office long-range outlook, which assumes 2.2% growth from now through 2040. That would be an improvement over the recent past, but it’s still historically low.
If you change that assumption from 2.2% to 3.5%, total GDP in 2040 will be 38% higher. That GDP boost means tax revenues will be 38% higher, and much of our debt problem will disappear… Conversely, Cochrane notes that 1% GDP growth over that period would yield a 26% drop in GDP and tax revenue, leaving us in a deep hole.
My friends, we are already in a deep hole ($19 trillion) and that hole will be much deeper under a Hillary Clinton administration. Does anyone believe she will reduce the size of governments and entitlements? We are one recession away from a fiscal nightmare! Republicans must coalesce around a candidate that will change this future.