While not discounting the importance of Ann Coulter's epithet and David Geffen's slams, someone might want to also ask the 2008 presidential candidates about their agendas to help grow the economy. Earlier today, the Labor Department reported that 2006 productivity growth was a so-so 1.6 percent, the weakest showing since 1997. Between 1997 and 2006, we had eight fantastic years of productivity growth, so maybe 2006 was a statistical fluke. Yet why take the chance? Productivity is the key, ultimately, to higher living standards and higher wages. Higher productivity makes dealing with problems from Social Security to healthcare to climate change a whole lot easier. Right now, the various presidential candidates are all a little light on the details of their economic agendas, so maybe their pro-growth policies are yet to come, whether it's tax reform or regulatory reform or more spending on basic research or government-sponsored innovation prizes. For now, though, Hillary Clinton is talking about confiscating oil profits and working on equal pay for women. Barack Obama is pounding the Iraq war. John McCain, at least on his website, is focused on fiscal discipline and ending wasteful spending. Rudolph Giuliani talks about cutting taxes on New Yorkers but fails to link to an overall growth strategy. Mitt Romney has come about the closest among the candidates to pushing a clear pro-growth message on trade, taxes, and innovation, but he still skimps on the details.
Now being pro-growth is as much a way of thinking as it is a set of policy proposals. Let's say a candidate is for tax cuts. Is it because the cuts increase the pro-growth incentive to work, save, and invest or is it merely so voters can "keep more of what they earn." And being "pro-growth" isn't just some euphemism for a being a Republican supply-side tax cutter. Back in 2005, former Clinton economic adviser Gene Sperling wrote a book, The Pro-Growth Progressive, in which he outlined a pro-economic growth, pro-innovation agenda for Democrats that included establishing universal 401(k) plans to increase savings. In the book, Sperling opined that "Democrats cannot just be the party for you when something bad happens. They also need to be the party of your optimistic aspirations. ... Continuing to push for a growing economic pie should be critical."
Lazear answers the dreaded "Mankiw Question." Back in 2004, Gregory Mankiw, then chairman of the Council of Economic Advisers, took some terrible heat after saying that outsourcing was a plus for the U.S. economy. In my recent chat with Edward Lazear, the current chairman of the CEA, I asked him if outsourcing was a plus or minus for the economy. Here is his extended answer:
"I think that trade is a net plus for the economy and workers. It's obvious that whenever you have trade, it adds more new opportunities to the economy. New opportunities are good. No one would say you don't want to have new opportunities. Just like technology. No one would say technology is bad. Yet if you have technological change, that makes some jobs obsolete. Similarly, if you open up trade, some people are going to be affected by that, and we always worry about that. ... You particularly worry about it when there are skilled individuals whose skills are specific to that particular occupation and that goes away and then it's hard to replace it. So what I would say is the way you deal with it is you think about the skill side, you've got to think about retraining, you've got to think about having a mobile workforce."
Also here is his extended answer on so-called worker angst and income inequality:
"It's hard for me tell you what these polls reflect. It's not really my area of expertise. I'll tell you how I think about it. We certainly worry about equality. We know that if you look at the numbers over time, there has been about a 25-year increase toward ... I would call it disparity between wages at the top and wages at the bottom. It's not that wages at the bottom have been declining so much or even at the middle have been declining. It's really that they've been relatively flat but that wages at the top have been growing. That's a good thing. It's a good thing when wages at the top grow because what that means is that investments in skills are paying off at higher rates than they paid off in the past. We like it when our investments pay higher returns. That's good. What we don't like is if people are precluded from making those kinds of investments. Then we worry. So the way I think about inequality is more on the opportunity side than on the outcome side. ... I don't feel like we want to punish the rich. I think what we want to do is give the people on the bottom the opportunity to move up and the way I think you move up is through skills. That sounds like a cliché, but I've got to tell you, I'm a labor economist, that's my background. I know this literature very well. I know virtually everybody who has contributed to that literature. ... We have pretty similar views on this stuff, that most of it is a function of skills and that is really where you have to go. You just can't fix it any other way and I think economies and societies that have tried to fix it with more draconian measures that seem to be directly suited to this have found it to backfire."
Blogger Feedback: 1) It seems everyone (here, here, and here) had an opinion about my posting, "Did the Drudge Report Help Tank the Stock Market?" My response: The Drudge Report is the home page on all my computers. 2) The bearish Barry Ritholtz of The Big Picture calmly puts the shiv to my posting "Don't Use the Market to Predict a Recession." 3) The Everyday Economist puts in his two cents on "Wall Street Democrats Try to Revive Clintonomics."
Best of the Blogosphere: 1) Arnold Kling deftly analyzes the political economy of alternative energy. 2) Newmark's Door rounds up various thinking on the chances of a recession. 3) The Entrepreneurial Mind says the Kauffman Foundation is out of touch with small business.