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Don't Plan on Four Percent Growth

By Joseph Lawler on 11.7.11 @ 10:21AM

Mitt Romney's outline for lowering deficits includes an assumption that the U.S. economy will grow at 4 percent annually. Tim Pawlenty was questioned for making a similar promise in his economic plan, and rightly so. Although 4 percent GDP growth, especially in the wake of a recession, should be attainable, there's nothing to be gained by assuming that it will happen. For Romney to use a 4 percent growth baseline in planning to lower deficits is a perversion of "plan for the worst, hope for the best."

So I'm not persuaded by arguments like Jim Pethokoukis's:

Romney said his policies would help U.S. growth accelerate to 4 percent annually. Gutsy. Recall how Tim Pawlenty was mocked mercilessly for setting a 5 percent growth target. Overall, U.S. GDP growth has averaged 3.3 percent the past 50 years. But many economists think aging America will need to settle for growth closer to 2 percent long term. Romney, however, seems to agree with consultant McKinsey that a higher retirement age and smarter immigration policy, along with smarter regulation and pro-investment tax policy, could allow the United States to maintain its historic growth rate, if not higher. More importantly, the target represents a rejection of the declinist mentality.

Promise all the growth you want. Just prepare for a lingering recession when you're figuring out how much spending needs to be cut.

View all comments (3) | Leave a comment

JP| 11.7.11 @ 11:06AM

Mitt promises to slash $500 billion of federal spending during his 1st term. Using the current defecit baseline of $1.4 trillion a year, Mitt's cuts amount to a net reduction of $125 billion a year. That is, the defecit will not shrink but continue to surge forward. In all, during a Romney administration, the national debt will grow from $16 trillion to almost $21 trillion.

There is no way the economy will grow 4% annually with these kinds of defecits; we will be lucky to see 3%, and will more than likley so no net growth as government spending continues to consume huge amounts of current GDP as well as future GDP. If one takes into account 4 years of Obama defecits ($7 trillion) and add 4 years of proposed Romney defecits ($4.8 trillion) they equate to nearly the sum total of all US economic activity for one year. And this assume near static returns of US bonds, no change in the S&P credit rating, 0% interest rates,and no change in demographics and no scoring of ObamaCare.

The difference between Mitt and Romney is one of degree and not kind.

JeffC| 11.7.11 @ 11:39AM

maybe you missed the 5 trillion in government spending that didn't make a dent in the recession ... ??? maybe, just maybe, govt. spending isn't the fuel of the economy but the anchor on the economy ... the evidence says it is but you seem to be willing to ignore said evidence ...
this is another example of the "hidden" ... you see the government spending but ignore the lost spending that would have occured had the government not first pulled the money out of the economy ...