The Future of Economic Growth in the United States
This paper begins by showing the extent to which the U.S. growth rate has exceeded growth in other industrial countries. The official measure of the rate of economic growth understates the true rise in real income for two reasons. The basic measure of money income ignores fringe benefits and the impact of taxes and transfers. The official measure of real output growth also fails to capture the contribution of quality change and of new products. The primary reason why the pace of U.S. growth as officially measured is likely to decline in the next few years is the growth of the fiscal deficit and the national debt. Revenue could be raised without taxing households and businesses in ways that discourage output. The rising cost of the Social Security benefits is a major part of the increase in deficits and debt. The paper discusses the reason for that cost increase and what could be done to slow it in the future.