Why the U.S. Economy is Down

Why the U.S. Economy is Down

What would make the U.S. economy grow? What has stopped it from growing much over the last few years – indeed over much of the last decade? One theory heard a lot these days is that the economy is burdened by excessive government regulation, interference and taxes.

Only five years ago, American infrastructure used to be ranked in the top 10 by the World Economic Forum. Now we’re 24th. U.S. air infrastructure has gone from 12th in the world to 31st – roads from eighth to 20th.

The drop in human capital is even greater than the drop in physical capital. The United States used to have the world’s largest percentage of college graduates. We’re now number 14, according to the most recent OECD data. The situation in science education is more drastic. Even with the increase in college attendance over the past two decades, there were fewer engineering and engineering technologies graduates.

In other words, the big shift in the United States over the past two decades is not a rise in regulations and taxation but a decline in investment – in physical and human capital. The United States got out of the Great Depression because of the spending associated with World War II but also because during the war, the U.S. dramatically reduced its consumption and expanded investments. People spent less; they saved more and bought war bonds. That surge in investment – by people and government – produced a generation of growth after the war.

If we want the next generation of growth, we need a similarly serious strategy of investment.

 

Source: CNN.com