Alan Blinder at a recent LEAD Conference at Georgetown University said that the U.S. report card should be marked, “needs improvement,” next to both “growth” and “sharing of income gains.” In what he calls “a horribly muddled debate,” Blinder reminds us that growth is demand-driven in the short run and supply-driven in the long run. This is an important dichotomy to keep in mind, although how government produces short-term inducement. Since the U.S. economy will remain below its potential growth rate for many years, the combination of short-run demand stimulus and long-term supply-side policies that can accompany a 10-year deficit reduction plan is in Blinder’s view our best bet. But the Challenge is how to raise growth. Given that the U.S. has averaged 2 percent real growth over the past 100 years, a rise to 2.2 percent on a sustainable basis would be quite an achievement.
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Economic Viewpoint Dilemmas to US Growth
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