In this century, economic growth has averaged 1.9 percent per year —
down from the 3.4 percent the prior two decades — and anemic growth
is a major force squeezing wages, the middle class and working poor.
Conservatives and liberals blame too much or too little government.
Either way, getting policy right is critical to restoring
opportunity for everyone.
Here are four issues that will be tough to solve but warrant serious
attention:
1. The Baby Drought
The birth rate predictably fell during the recent recession but has
not recovered. At 948 children per 1000 women, fertility is below
what is necessary to maintain even a steady population.
Family formation is a major driver for the housing sector and
supporting industries, and the baby drought is an important reason
we hear so much about too little demand to sustain growth. Longer
term, the U.S. risks the stagnation besetting Japan and northern
Europe.
Since the 1970s, public policy has focused on educating young people
about avoiding teen pregnancies and opening wider career paths for
women, but the time has now come to start talking about childbearing
at an appropriate age, responsible parenting and the adverse social
consequences of postponing family formation too long.
2. Dumbing Down of Education
National policy emphasizes pushing as many young people as possible
into college. Young adults emerge heavily in debt — further slowing
the birth rate — but just as important, colleges are not doing a
terribly good job.
Besieged by large numbers of emotionally and academically unsuitable
students, universities are spending huge sums on mental health,
social and remedial services and failing to provide the basic core
of a college education — about 40 percent of graduates lack critical
reasoning and complex-problem-solving skills.
Universities need fewer students and less money. Meanwhile community
colleges, whose vocational programs are starved for cash, should be
beefed up to provide skilled technical workers who industry leaders
say are in short supply.
3. Vanishing Startups and Small Businesses
Prior to 2000, small businesses created more jobs than large
corporations did, but not any longer. Burdened by student loans, the
number of young entrepreneurs has fallen off and new business
startups — incubators for the next generation of Apples and Googles
— are down overall.
Tougher government regulations — ranging from healthcare benefits to
hiring practices — impose overhead that is more easily spread across
large enterprises. To better bear compliance costs, smaller banks
are merging into larger ones, but small banks tend to specialize in
funding small businesses and startups — be it candy making or
cybersecurity.
Streamlining regulations for small businesses — especially community
and regional banks — and student debt relief for young people
starting businesses — similar to loan write-downs offered for those
entering public service — would help.
4. Evaporating Edge in Basic Research
Government and corporate spending for basic research has been
falling for decades.
Breakthroughs such as the laser, invented at Bell Labs, and the
personal computer, much of which was pioneered at Xerox, require
investments whose benefits often are not appropriable to financing
entities. Yet, those investments are essential to launching new
industries — like fiber optics — and enterprises — like Microsoft.
The federal government must fund more basic research and incentivize
private companies to do the same if the United States is to continue
reaping economic benefits from cutting edge innovation. That
requires tough choices about shifting resources away from other
purposes to ensure adequate growth and tax revenues 10, 20 and 30
years from now.
Overall Americans have been myopic — focusing too much on the
immediate benefits of personal and public decisions — by excessively
limiting family size, emphasizing quantity over quality in higher
education, choosing job security over the risks of starting a
business or devoting too much more money to social programs than to
science.
A prosperous economy and secure future for our children simply
requires more unselfish behavior and risk taking.
Peter Morici is an economist and professor at the University of
Maryland, and a national columnist. He tweets @pmorici1.