America’s 4% Growth Challenge

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America’s 4% Growth Challenge

Between 1950 and 2000, the U.S. economy grew at a 4 percent annual rate roughly half the time. Since then, it has grown by 4 percent only once, in 2003-2004.

Since the end of the Great Recession in June 2009, the U.S. economy has posted 23 quarters of lackluster growth, with an average annual rate of just 2.2 percent. Several economists and pundits now insist that this is the “new normal” and that we’re unlikely to see a return to higher growth rates.

For example, economic consulting firm IHS Global Insight dismisses growth rates of 3 percent as “relics of the past.” Likewise, the Congressional Budget Office, the White House, and the Federal Reserve all predict that, going forward, growth will be closer to 2 percent.1

However, it wasn’t long ago that it was widely expected the economy would grow at a faster rate after the recession ended. For example, the Federal Reserve’s “Long-Term Outlook” for economic growth in December 2009 forecasted that real GDP would increase by an annual rate of 3.6 percent in 2010, 4.5 percent in 2011, 4.7 percent in both 2012 and 2013, and 3.2 percent in 2014. That represents an average of 4.14 percent annually.

There was certainly justification for such optimism, because historically the period after a recession has been marked by robust growth. For example, the economy grew by 3.6 percent annually for the 23 quarters after the recession of 1973-1975, and it surged by 4.8 percent for the 23 quarters after the recession of 1981-1982.

What happened this time? Why didn’t the economy grow by an average annual rate of 4.1 percent for the 20 quarters after the most recent recession, as the Fed forecasters predicted it would?

Some economists now say that the economy, for various reasons, simply is no longer capable of achieving 4 percent growth.

The Trends editors strongly disagree. Instead, we assert that the malaise the economy has been going through is not a permanent situation, but merely a transitional phase.

In fact, by looking at long-term techno-economic trends, it was easy to foresee that growth would stagnate in the second decade of the 21st century. Those same trends reveal that, with the right economic policies, 4 percent growth can be achieved.

As detailed in Ride the Wave, by Fred Rogers and Richard Lalich, the world has experienced five great “Technology Revolutions” over the past 200 years, from the Industrial Revolution to the Railway Revolution to the Steel Revolution to the Mass-Production Revolution to the current Digital Revolution...

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