The Bush Institute: Let’s get America’s economy growing at 4 percent – Part II

Ryan Streeter

Following on my previous post about the Bush Institute’s 4% project, here I lay out some interesting observations and take-aways for those who like the challenge of big ideas.

• Conservative, even libertarian-leaning types, are perfectly comfortable with the notion of (1) lower, fairer, simpler taxes and (2) a consumption tax. When Mitch Daniels expressed support for such a notion last fall, Grover Norquist said the only acceptable explanation for such a view was that Daniels was on drugs. There is huge disconnect between the people who are actually creating the jobs out there in America and the Washington establishment on this issue.

• Manufacturing is alive and well in America, but very different than in the past. Susan Schwab detailed some interesting points:

• American manufacturing is 20% of global manufacturing.
• If our manufacturing sector were a country, it would be the 8^th largest country in the world.
• One in six people in the U.S. still work in manufacturing.
• From the mid-1990s through 2007, manufacturing growth outpaced economic growth overall, 62% to 49%.

• Exports matter like never before. They are 13% of GDP, but 46% of our GDP growth is because of exports. This means that trade enforcement is a high public policy priority.

• New firm creation is incredibly important, and will become even more important if we are to increase GDP. Bob Litan spelled out the following:

• Over the past 30 years, nearly all of the jobs in America have been created by young firms.
• The net job creation of existing firms is essentially zero, as layoffs and reorganization and new hires cancel each other out.
• The trend over the past couple decades has been a slowing in new firm formation, which is troubling.
• To get to 4% growth, we would need 30-60 billion-dollar firms to start every year (i.e., firms that start in a given year that eventually grow to be billion dollar firms). Historically, in the past 150 years, we’ve averaged only 15 such firms per year.

• If we could increase K-12 school performance in America to equal that of the world’s top-performing country, Finland, the economic gains would be equal to six times our current GDP, or $103 trillion. And we’re arguing about whether and how to limit collective bargaining for teachers… The work of Eric Hanushek is highly illuminating on this front.