The Daily Dish
A Better Growth Policy Needed
SEPTEMBER 17, 2013
Reuters reports this morning that “President Barack Obama's nomination to head the Federal
Reserve after Ben Bernanke leaves will be announced “in the fall,” [according to] White House
spokesman Jay Carney, suggesting the announcement would not happen this week.” This news
comes only two days after Larry Summers withdrew his name from consideration for the
position.
Meanwhile on the economic data front, the Wall Street Journal reports that US Factory output
increased in the month of August, as was expected. “U.S. industrial output rose in August as
auto makers and other manufacturers ramped up production, a sign that the factory sector is
pulling out of a soft patch. Industrial output increased a seasonally adjusted 0.4% last month
and the use of available production capacity inched ahead 0.2 percentage points to 77.8%, the
Federal Reserve said Monday. Both figures were in line with economists' forecasts.”
Eakinomics: Better Growth Policy
President Obama's economic address was overshadowed, correctly, by the Washington Navy
Yard tragedy. If you missed it, you missed nothing more than a rehash of tired policy themes
and political finger-pointing. Still, the core problem remains: the U.S. is growing far too slowly
to employ the army of unemployed and underemployed. It is growing far too slowly to raise
the incomes of working Americans. And it is growing far too slowly to pass to the next
generations the economic opportunities they deserve.
Yet the solution is deceptively simple. As Martin Feldstein argues in today's Wall Street Journal
, the key is genuine entitlement reform. This is simply a matter of arithmetic. In 2013, the
CBO projects that “mandatory” spending — automatic entitlement spending, including interest
— will total $2.2 trillion compared to the $1.2 trillion of annual “discretionary”
appropriations. With every passing year and every retiring baby boomer, the imbalance gets
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larger. Yet the current budget strategy — the so-called sequester — leaves mandatory
spending essentially untouched. Real entitlement reform would address the portion of the
budget that is growing most rapidly and swelling the debt.
It is also limiting policy options ranging from tax reform to a stronger defense to core
government functions like infrastructure and basic research. Entitlement reform should be
the number one priority of the president in this fall's budget talks. Yet one does not hear
anything about Medicare reform, or Social Security reform, or Medicaid reform, or any other
key entitlement issues.
Why? From a political perspective, the bloc stopping reform is liberals in Congress. Their
staunch refusal to reform and the president's dwindling influence over them is the key
impediment to better policy and improved growth.
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