Eclectic, isn't it? Bear with me; all of them will have an effect on the economy our grandkids will inherit from us, and I tried to cram a few thoughts on all of them into this article.
Yesterday, a reader emailed me with a few questions about the prospects for (and obstacles to) future economic growth. This reader was skeptical that more growth is the correct solution, and there's a non-trivial minority of people out there who feel the same way. But, to put it mildly, I am not a member of the anti-growth crowd, and because my answer to that email touched on several aspects of the broad debate about future growth, I decided to post it for public consumption (...or investment, take your pick).
First, a few key excerpts from the concerned reader's email to me:
How will we grow a workforce large enough and educated enough to fulfill the demands your plan for our kids and grand kids paying off the debt? Current policies in America are not very family friendly and education is not what it needs to be here...
Kids of today are being neglected in ways that mean they are not as educated or emotionally stable as their grandparents or even their parents were before them...
The other solution is to import more workers from abroad, the kids being raised in foreign countries today. One problem might be that these kids, when they grow up under the anti-American sentiment that so permeates all too many foreign nations at this time, may not wish to work in the US as adults...
An excerpt from my response is below. Your thoughts are welcome, as usual. What follows is my own current position, but let me know if you think I missed any key points.
Here's as concise an answer as I can give you without oversimplifying my thoughts...
First: To keep the economy healthy, we need productivity per worker to grow enough to supplement workforce growth, such that GDP per person continues to grow at least as fast as debt per person. (Sufficiently high productivity per worker could offset workforce shrinkage.) Growing productivity per worker requires innovation by entrepreneurs who have sufficient access to venture capital (family & friends' savings, bank loans, etc.) to risk on their new ideas. Most will fail at least once, losing their money in the process; a few will succeed, and will be handsomely rewarded by the masses whose lives have been improved by the innovation. The few who succeed will be made spectacularly wealthy by the masses whose lives they improved -- and, ironically, will probably be despised for having been made wealthy from their innovations, because envy is human nature, and politicians are masters at exploiting that emotion.
Second: Any given generation will need to pay down the debt only if the economy starts shrinking. In a growing economy, we do not need to pay down the debt; we can continue to add to the debt, without hurting our financial condition. That is not an egregious policy, that is a mathematical fact that has been tested over and over again in private sector business as well as public sector government. The debt burden for a nation is indicated by the ratio of its debt to the size of its economy. To maintain a constant ratio, a nation's debt must grow no faster than its economy grows -- or its debt must shrink at least as fast as its economy shrinks. (I shudder to contemplate the latter scenario; it would probably lead to an overthrow of our government.)
Third: Where will we get the innovators who will create the new products, services, and jobs? Good question. Our public schools are focusing more and more on how to feel good about each other and avoid making anyone feel inferior, and on protecting school administrators' jobs -- and less and less on developing in our kids the skills you and I know they'll need to succeed. Math and science education results in this country are a joke compared to most other OECD countries -- largely because focus on results has been eclipsed by focus on feelings. How can we fix that? Maybe we can't; maybe the resistance to change by unions and the feel-good crowd will make the necessary improvements impossible -- and as soon as somebody convinces me that it's hopeless on that front, I will revise my optimism about the future downward. Way, way downward.
Fourth: Immigration policy should be revised, to place a higher priority on people who want to become citizens and have a high likelihood of contributing to the economy or leading us to a better one. We should view immigrants as minds instead of mouths. The more producers and innovators who immigrate, the better. But letting higher volumes of those types of people in, while maintaining proper control of our borders, will require effective management of the new immigration system by our government, and sufficient funding of that better system -- even if it takes supplemental borrowing to do it. It would be a good investment, and borrowing money to help fund good investments is sound financial practice. Convincing enough people that borrowing is perfectly acceptable for good investments is one of the main reasons I take the time to publish at my weblog. However, as soon as somebody convinces me that defeating the demagoguery about deficits and debt is a hopeless cause, I will revise my optimism about the future downward. Way, way downward.
So, if you have lost hope about our education system, our immigration prospects, and our outlook for getting the national debate onto the right track, feel free to try to convince me. If you succeed, I will revise the tone of my blog accordingly. Heck, I might even fold it up and move on to better uses of my free time. After all, my blog is just a hobby.
In any case, I am open to all considered opinions on the subjects above, especially those that suggest as you do that there is little reason for hope -- primarily because it provides me with a rigorous test of the [opposing, pro-growth] positions I hold on those subjects. That rigor has served me well so far, and has occasionally forced me to modify my positions. (One of my favorite quotes is from John Maynard Keynes: "When my information changes, I change my opinion. What do you do, Sir?")
That's it. There's obviously a lot more to say about each of those topics, but that's a nutshell summary of my pro-growth position.
