We're OK! We're Really OK! Well--Probably
2006 Washington Economic Policy Conference: Policies to Boost Economic Growth and Security--What's Needed?March 13-14, 2006. Marriott Crystal City at Reagan National Airport
The current draft:
Giving a luncheon talk is always an interesting task, a kind of verbal high-wire act. Normal conference sessions are set up for the speaker's convenience: to try to force you to pay attention: to make everything else in the room as boring as possible, so that you have little choice but to focus your attention on the podium.
That's not true at meals. The people at your table who you're looking in the eye aren't boring. The coffee isn't boring. There's lots of motion as the waiters work back and forth. And I've tried all my life to convince myself that deserts are boring--and conspicuously failed.
If this were fifteen or twenty years ago, I would be standing up here ready to give my "Age of Diminished Expectations" talk. I would have talked about the collapse of American productivity growth--that we were, collectively, getting rich at a much slower pace than anyone back in the 1960s would have believed possible. I would have talked about intractable short-run budget deficits, the combination of overoptimism on the part of Reagan administration policymakers and the collision of limited resources with expansive demands for government nurtured in the fast productivity growth first post-WWII generation. I would have talked about how Social Security as we knew it was unsalvageable: that the resources simply would not be there. I would have talked about how Medicare and Medicaid were in even greater long-run trouble. I would have talked about slow growth and rapidly-rising inequality were together political poison.
I would have, fifteen to twenty years ago, talked about how very, very hard decisions needed to be made about resources and their uses--and how the American political system seemed to be incapable of making them, politicians being eager to tell Americans pleasing lies about how all kinds of benefits and goodies could be provided with "read my lips, no new taxes."
But then things changed. We were fortunate enough to elect some politicians who understood enough macroeconomics to know that if the government does not set out to raise the revenue to meet its spending commitments, then the market will do it and do it in a way you don't like--witness Argentina in 2001. The government shifted from being a source discouraging investment and productivity growth through the crowding-out of productive investment to being a source encouraging investment through crowding-in. We caught the leading edge of the wave of technological revolution to give us the best macroeconomy seen in a generation--and caught the leading edge of the wave in a way that neither Japan nor western Europe has managed to do.