Economics

Can We Get It Back?

Booming economic growth was always the foundation of America.

By 6.5.13

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As Stephen Moore and Julian L. Simon reported in their underappreciated work, It’s Getting Better All the Time: 100 Greatest Trends of the Last 100 Years, the American standard of living (real per capita GDP) grew by seven times from 1900 to 2000. That was the foundation of modern America, and the modern world.

Moreover, it was accomplished with Americans staying in school much longer, and retiring earlier, over the course of that century, which means they worked much less over their lives on average. The average work week, in fact, declined by 50% from 1900 to 1950.

The Fundamental Transformation of America
As a result of that booming economic growth, the typical home that most Americans own today is far superior, bigger, less crowded, and stocked with modern conveniences. By 2000, the average new house in America was 50% bigger than even in the 1960s, with 2-3 times as many rooms per person as in 1900. Moore and Simon add:

It is hard for us to imagine, for example, that in 1900 less than one in five homes had running water, flush toilets, a vacuum cleaner, or gas or electric heat. As of 1950 fewer than 20 percent of homes had air conditioning, a dishwasher, or a microwave oven. Today between 80 and 100 percent of American homes have all of these modern conveniences.

In fact, in 1900 only 2% of American homes had electricity. Michael Cox and Richard Alm note in their book, Myths of Rich and Poor, “Homes aren’t just larger. They’re also much more likely to be equipped with central air conditioning, decks and patios, swimming pools, hot tubs, ceiling fans, and built in kitchen appliances. Fewer than half of the homes built in 1970 had two or more bathrooms; by 1997, 9 out of 10 did.”

It was such booming economic growth that produced the advancements in personal health in modern Western societies. While a typical lifespan was 25 to 30 years throughout most of human history, Moore and Simon report that “from the mid-18th century to today, life spans in the advanced countries jumped from less than 30 years to about 75 years.” From 1900 to 2000, average life expectancy in the U.S. grew by more than 50%. Infant mortality improved from 1 in 10 in 1900 to 1 in 150 by 2000. Children under 15 are at least 10 times less likely to die today, as one in four did during the 19th century, which means their death rate was reduced by 95% by booming economic growth during the 20th century. The maternal death rate from pregnancy and childbirth was also 100 times greater in 1900 than in 2000. What could be more important to the happiness of the modern family?

As Moore and Simon reported, “Just three infectious diseases -- tuberculosis, pneumonia, and diarrhea -- accounted for almost half of all deaths in 1900.” Today, these diseases have been virtually eliminated as sources of premature death in America and other modern western societies, as have typhoid fever, cholera, typhus, plague, smallpox, diphtheria, polio, influenza, bronchitis, whooping cough, malaria, and others. Just ponder the vast difference that has made in modern life. Now, we are making great progress against heart disease and cancer.

Economic growth and accompanying soaring productivity in agriculture has also greatly reduced the cost of food. Moore and Simon explain, “Americans devoted almost 50 percent of their incomes to putting food on the table in the early 1900s compared with 10 percent in the late 1900s.” Most of human history has involved a struggle against starvation, but today in America the battle is against obesity, including among the poor. Moore and Simon quote Robert Rector of the Heritage Foundation, based on data from the U.S. Census Bureau, “The average consumption of protein, minerals, and vitamins is virtually the same for poor and middle income children, and in most cases is well above recommended norms for all children. Most poor children today are in fact overnourished.” Consequently, poor children in America today “grow up to be about 1 inch taller and 10 pounds heavier than the GIs who stormed the beaches of Normandy in World War II.”

U.S. agriculture required 75% of all American workers in 1800, 40% in 1900, and just 2.5% today, to “grow more than enough food for the entire nation and then enough to make the United States the world’s breadbasket.” Moore and Simon add that today, “The United States feeds three times as many people with one-third as many total farmers on one-third less farmland than in 1900,” producing “almost 25 percent of the world’s food.”

Economic growth has even provided the resources to dramatically reduce pollution and improve the environment, without trashing our standard of living. Moore and Simon write that at the beginning of the last century, “Industrial cities typically were enveloped in clouds of black soot and smoke. At this stage of the industrial revolution, factories belched poisons into the air — and this was proudly regarded as a sign of prosperity and progress. Streets were smelly and garbage-filled before the era of modern sewage systems and plumbing.”

The American Dream
The U.S. economy maintained a real rate of annual economic growth of 3.3% from 1945 to 1973, and the same 3.3% real annual growth from 1982 to 2007. It was only during the stagflation decade of 1973 to 1982 that real growth fell to only half long term trends, reflecting the dying Keynesian economics of the time, which Obama has resurrected from the dead.

If we could revive that same 3.3% real annual growth for 20 years, our total GDP, or economic production, would double in that time. After 30 years, America’s economic output would grow close to 3 times. After 40 years, America’s prosperity would grow by nearly four times.

Yet, real economic growth in President Obama’s first term was less than 1%. No, that was not the recession, stupid. The recession ended in June 2009. It was already on its way out when Obama entered office just five months before. It was President Obama’s consistently anti-growth economic policies, which shifted America from focusing on growth to focusing on Obama’s foreign vision of “fairness.”

But what is fair about poverty soaring at the fastest rate since the Great Depression? What is fair about sharply declining real, middle class incomes, falling by nearly 10% in Obama’s first term? What is fair about the longest period of the highest unemployment since the Great Depression?

The traditional, booming American economy has been the foundation of America’s world leading, superpower status. That booming growth provided the funds to finance the world’s militarily dominant national defense, which further promotes economic growth by ensuring security for property and capital investment in the U.S. As Brian Domitrovic explained in his brilliant history of supply-side economics, Econoclasts: The Rebels Who Sparked the Supply Side Revolution and Restored American Prosperity, “The unique ability of the United States to maintain a historic rate of economic growth over the long term is what has rendered this nation the world’s lone ‘hyperpower.’”

Such booming, world-leading, American economic growth dates back to the early 18th century. It was the foundation for the founding of America, as it was that booming growth and opportunity that gave the American people the confidence to believe that all they needed was liberty, and they could take care of themselves. It was that booming growth that gave the American colonists the confidence to break away from the British Empire, the dominant global power at that time, and for the next 150 years.

It was that booming economic growth and opportunity that created The American Dream, which is why millions came to America from all across the globe, crossing oceans, deserts, mountain ranges, and rivers. It is that booming economic growth and opportunity that defines the fundamental character of America.

Such booming economic growth and prosperity was always the antidote to Marxism and socialism in America. The majority of the American people were always smart enough to know to vote for booming growth, instead of redistribution, when given the choice. This goes all the way back to the election of 1803, when they voted for the first supply sider, Thomas Jefferson. This is what country club Republicans, socially embarrassed by their wealth, don’t understand, and why they can never lead to a Republican majority. It is why it took Reagan to do that. This is the foundation of the Republican resurgence, the Republican National Committee to the contrary notwithstanding.

The Roadmap to the Future
The number one, first priority for America must always be maintaining that traditional, historic, booming, high rate of American economic growth. That is the foundation for solving every problem.

Such booming economic growth is the real solution to poverty. Indeed, the American historical experience is that the poor in America always reach the same standard of living as the middle class of a generation ago, because of traditional, booming, American economic growth. So the poor of the 1980s had the same standard of living as the middle class in the 1940s, and the poor of today, in general, have the same standard of living as the middle class in the 1970s. Indeed, in many ways, the poor today live so much better than the middle class of the 1970s, when no one had the internet, cell phones, or big screen TVs.

Such booming economic growth is also far better for working people and the middle class than income or wealth redistribution. Redistribution just shrinks the pie because of the resulting anti-growth incentives. The government’s redistribution programs would never have increased the standard of living of the middle class by seven times in the 20th century.

Booming economic growth is also the foundation for solving the problems of the nation’s chronic and soaring deficits and national debt. Booming growth produces booming revenues, without tax increases, slashes spending on the poor and needy. It reduces the national debt to manageable levels as a percent of GDP.

Booming growth will also solve the problems of health care. With Patient Power market incentives to control costs, booming growth would rapidly reduce health spending as a percent of GDP, and produce enough revenues to ensure that the poor and sick would enjoy essential health care. Such a booming economy will also provide the resources to enable rapidly advancing modern science to solve tragic health problems that seem intractable today, meaning longer and healthier, more comfortable lives.

With a booming economy, there would be more than enough resources to maintain the world’s dominant military, with rapidly advancing science providing the military breakthroughs to maintain American global military dominance. There would also be plenty of resources for the world’s best education, and to clean up and maintain a healthy environment.

If we would just maintain that traditional, American, booming economic growth into the future, imagine where the American people would be in 2100. The biggest problem might be that Americans are living too long, with too much leisure time on their hands, as robots increasingly do all the work. With the wonders of modern technology seniors could maintain their productivity for decades into what is retirement today. Poverty, meaning material deprivation, would be a problem of the distant past. Our great-great-grandchildren, if we could see them, would probably seem like demigods to us today, with the capabilities of futuristic technology.

But we are never going to get there with socialist equality. The Chinese, embracing capitalism today, will do it instead.

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About the Author
Peter Ferrara is Director of Entitlement and Budget Policy at the Heartland Institute, General Counsel of the American Civil Rights Union, Senior Fellow at the National Center for Policy Analysis, and Senior Policy Advisor on Entitlements and Budget Policy at the National Tax Limitation Foundation. He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush.