Here’s one matter that Democratic and Republican economists agree on: America’s economy could be doing a lot better.
“The good news is we’re growing, we’re creating jobs, property values are rising. The bad news is we’re not growing quickly enough and there’s tremendous income disparity,” Hank Paulson, the former U.S. Treasury Secretary under President George W. Bush, told CNN’s Fareed Zakaria.
Paulson argued the biggest risk to America’s “long-term preeminence” on the world stage isn’t China — it’s political gridlock.
“The greatest threat is our own political inability to deal with the sorts of things we need to deal with to strengthen and revitalize our economy,” Paulson said.
He pointed especially to the need for a federal tax code overhaul and better trade agreements with other nations.
Both are top issues in Washington right now as President Obama pushes for passage of a new Trans-Pacific Partnership to further open up Asian and Australian markets.
A ‘maddening’ situation: Larry Summers, the former U.S. Treasury Secretary under President Bill Clinton, had a similar take.
He warned that America’s economy is entering a period of stagnation — he dubs it “secular stagnation” — where it won’t be able to achieve its full growth potential because everyone is saving too much and not spending.
“We are doing less investment in infrastructure than at any time since the Second World War on a net basis,” Summers told Zakaria.
He went as far as calling the situation “madness” since it’s incredibly cheap to borrow money right now when interest rates are at a record low.
“[This] is a moment for us, as a country, to do what a business would do, which is to take advantage of low borrowing costs to invest in our future,” said Summers, who worked as a top adviser to President Obama. “This is not the right moment for a lurch to austerity.”
The U.S. economy grew 2.4% last year. That’s good, but not great. Since the end of World War II, America’s economy has expanded over 3% a year, on average. It has yet to get back to that point after the financial crisis.
What needs to change? Like Paulson, Summers believes the tax code needs changes, especially to aid the middle class. He also supports raising the minimum wage, an issue that is taking center stage in the 2016 presidential race.
Several major corporations, including Walmart (WMT) and McDonald’s (MCD), recently raised wages for workers.
As 2016 candidates begin to form their policy teams, Paulson and Summers gave a preview on what the top economic issues are likely to be.
Yes, the U.S. economy is growing again after the Great Recession, but it’s affecting people differently. Wages for many workers haven’t gone up much, if at all, and they feel the inequality with the top. How to change that is up for debate.