Next question.
From EconoMonitor:
There’s a spirited debate raging among economists about the long-run potential for growth in the US economy. Among those who expect that the future will suffer a lesser rate of growth is Robert Gordon, an economics professor at Northwestern and a member of the Business Cycle Dating Committee at the National Bureau of Research. In a series of papers recently (here, for instance), he argues that a number of trends (demographics, wealth inequality, falling educational results, rising debt levels) will squeeze the average annual growth rate of GDP in the decades ahead.
The case for managing expectations down is turning into a mini-career for Gordon. In yet another study released this week, he lays out his forecast from a slightly different perspective. This time he reasons that the economic activity that went down the rat hole in the Great Recession is forever lost and that official predictions by the Congressional Budget Office that assume otherwise are expecting too much. Gordon writes in his new piece that “if the projections in this paper are close to the mark, the level of potential GDP in 2024 will be almost 10 percent below the CBO’s current forecast.”
There’s no shortage of analysts who disagree with Gordon’s pessimistic outlook, but he’s hardly alone either. Andrew Smithers, for instance, cuts to the chase in a blog post at the Financial Times last month, writing that “the US recovery has been slow because its long-term capacity for growth has slowed.” A recent forecast from the OECD warns that “global growth will slow from 3.6% in 2010-2020 to 2.4% in 2050-2060 — due to ageing and gradual deceleration in emerging economies.” Meanwhile, Tyler Cowen at George Washington University has rocked the case for optimism with his 2011 book The Great Stagnation, which asserts that the low-hanging fruit that’s fueled growth in the past has been picked and so economic activity will be constrained from here on out....MORE
