The 2014 budget and debt ceiling are hot issues. Are lawmakers talking about problems with low growth?
The majority tend to simply hope there’s a strong recovery in the next year or so. There’s a growing gap between political hope and economic reality.
Why aren’t we getting the big growth we once did?
Typically it’s interpreted as a short-run fixable problem, that there must be some magic bullet that will deliver a decent recovery in economic activities.
Your argument is different, though. How so?
We [saw] an unusual golden age from the 1950s to the end of the 20th century. A series of one-off effects temporarily lifted the growth rate from a longer term steady-state growth rate. One effect: the extraordinary opening up of world trade.
Stagnant economies create an impediment for needed political reforms, you say. How to break the cycle?
Each vested interest believes reforms will damage its particular lifestyle; there is tremendous resistance. Growth rate remains weak and the promises we made become in more danger of being broken.
With demands on Medicare and Social Security, you say we need an 'intergenerational social contract.' Why?
Boomers need to recognize how vulnerable they’ll be without young people. No matter how much savings they have, if there isn’t enough production, the savings will be made worthless.