from The Clinton Plan’s Growth Deficit by John Cochrane in The Wall Street Journal
America’s foremost economic problem is sclerotic growth. If the economy continues to expand at only 1% to 2% a year, instead of the historical 3% to 4%, then current economic and political problems will become crises. Almost everything depends on growth: progress for the middle class, hope for the unfortunate, solvency for social programs, environmental protection, defense.
This is not a contentious or partisan statement. Larry Summers, Democratic economic adviser extraordinaire, wrote recently in the Washington Post that growth is “the single most important determinant of almost every aspect of economic performance,” and that trying to boost it “has been discredited in the minds of too many progressives.”
So, how does Mrs. Clinton diagnose and suggest to cure the country’s stagnation? Her central pro-growth proposal is “infrastructure” spending, $275 billion over five years, financed in part by some sharply higher taxes.
Sure, America’s roads and bridges could use patching. But how does this fix the growth problem? Nobody thinks that stagnant growth is centrally the fault of bad roads and bridges. No, the economic argument behind Mrs. Clinton’s proposal is simply the endless drumbeat of fiscal stimulus: Spend taxed or borrowed money on anything, and the “multiplier” will increase “demand.”
We’ve been at this since 2008. But the caution that stimulus should be “timely, targeted, and temporary” has now been forgotten. Japan’s massive “infrastructure” spending and weak growth to show for it are forgotten. And if U.S. growth hasn’t been kick-started by the trillions of stimulus so far—the government has accumulated $8 trillion of debt since the recession began—how will another $50 billion a year help?