GNP and the Future of Your Children
GNP and the Future of Your Children
Mar. 30, 1991
NEW YORK (AP) _ The broadest measure of the nation's economic growth has slowed in recent years, and that's very bad news for you and your kids. It means the American dream is losing luster.
The gross national product, or total of goods and services produced, used to grow about 4 percent or so a year, but many in leadership positions today would settle for half that.
Right now, in fact, they'd be happy with any growth at all because GNP has been falling rather than rising since late last year, when the first recession since the early 1980s got under way.
If events transpire as forecast, of course, GNP should rise again before the end of the year, at which time you may be certain of an increase of another sort: Cries to curb growth before it threatens to reignite inflation.
Based on the experience of the 1980s, that cry is destined to go up when growth reaches 2 percent on an annual basis, or half the rate of increase that was enjoyed during the 1960s, when inflation was relatively tame.
Observing this phenomenon, J. Marc Wheat, who directs tax and budget policy for a nonprofit group, Citizens For A Sound Economy, got out his calculator to determine the impact of this more timid view of economic growth.
This is what he found:
If the economy grows 2 percent this year, it will result in a gross national product of $5.521 trillion. Should that growth rate be maintained until the year 2016, GNP would be $9.026 trillion. And to 2041, about $14.78 trillion.
You might be inclined to say that wouldn't be bad, but that's before you see the figures for growth at a 4 percent rate. At that latter and larger rate, GNP would be $14.68 trillion in year 2016, and $39.1 trillion in 2041.
Stated in percentages, life in the year 2016 would be 62.6 percent better at a 4 percent growth rate than at 2 percent, and by the year 2041 life would be 164.5 percent better at 4 percent rather than 2 percent growth.
Wheat states it in another, perhaps more meaningful way: ''When our grandchildren come of age, an economy expanding at 4 percent annually would provide over 2.5 times the standard of livng than one growing at 2 percent.''
That's still a bit abstract and statistical. Just what is ''standard of living?''
First off, it isn't as materialistic as it is sometimes protrayed. It includes a lot of things that can't easily be measured - qualities rather than quantities - but it is difficult to turn a quality into a statistic.
For this reason, the figures generally used to measure living standards are indeed more quantitative than qualitative. You can measure the costs of food, clothing, shelter, medical care and transportation more easily than happiness. But who will disagree that good medical care is associated with happiness?
Wheat and his group consider themselves advocates of prudent fiscal and monetary policies, which puts them at odds with many of the practices and proposals of today. Wheat feels many of these practices limit economic growth.
''There is no silver bullet,'' he says; no single piece of legislation that can guarantee a high rate of economic growth. But he believes that a combination of changes could make a significant difference in growth rates.
He would lower taxes on labor, capital gains, and savings, and put a 4 percent a year cap on the growth of federal spending. Had we imposed that cap in 1983, he says, ''we'd be running a surplus in the budget, and the national debt would be one-third its size.''
He would limit mandated benefits, or personal benefits Washington requires of business or units of government. And he would seek a North American free trade zone, which he says would increase trade, create jobs, and lower costs.
If we don't do something to enhance productivity, investment and savings, he says, we and future generations will see, feel and be discontent with the results.
End Adv for AMs Saturday, March 30