I spent most of a week at the policy meeting of the National Association of Business Economics in Washington, D.C. The theme of the conference was the dual considerations of promoting global economic growth and domestic economic security. So, it should come as little surprise that discussions of short-run economic projections, trade wars, tax cuts and the underlying factors that cause economic growth dominated the agenda.
I’m not a business economist, but I was heartened by how much focus on the longer-term growth seemed to worry most of the crowd. American business seems to suffer perennial critiques of its focus on short-run profits, but the talk among business economists was almost wholly about the absence of solid of long-run economic growth. I could not visit all the talks, but found two elements very intriguing, and worth sharing in this column.
There was a lot of discussion about the debt, the deficit and recent tax cuts. Nearly all the speakers warned about continued deficit spending, but were split on how much deficit reduction should come from tax cuts and entitlement reforms. Nearly all favored some of both.
Paul Krugman argued that the current very low interest rates made case for more borrowing on some key items like infrastructure improvement. He pointed out that Japan’s debt-to-GDP ratio was more than twice ours. He noted that as long as we borrowed in our own currency the drag of debt repayment was less than the benefit of infrastructure spending. He did acknowledge the political difficulty of this point, along with dismissing Modern Monetary Theory, which has been used to argue a ‘free lunch’ in deficit spending.
Nearly all the macroeconomic discussion centered around the current very slow economic growth, which has averaged just 2.2 percent since the end of the Great Recession. The very real puzzle over slow wage growth also lacks a consensus opinion. At least two speakers, including Alan Greenspan, attributed the current rise of populism on the left and right to the astonishingly slow economic growth that has gripped us for more than a decade.
The trouble with these macroeconomic musings is the lack of data from which to draw robust conclusions. Theory is important, but not conclusive. That is far less a problem in microeconomics, and I thought the discussions of economic growth most interesting when micro economists outlined their research.
The condition of state budgets was an interesting session. Many states are struggling with revenues after nine years of growth. While a small share of states face deep structural problems with pension debt, nearly everyone struggles to add money to education or healthcare. That is uniformly disappointing after nine years in economic recovery.
A session on manufacturing outlined how slow productivity growth has been in the post-recession years. This has caused employment to grow in the short run, but makes sustained employment growth in factories highly unlikely. That should be cause for concern across the Midwest.
My favorite session was the one from which I learned the most. It featured Susan Dynarski and Susan Helper, two well-known economics professors who research human capital. They spoke mostly about post-secondary educational outcomes. Dynarksi rebutted much of the current belief in a ‘college bubble.’ She explained how and why college attendance and graduation levels were too low, and that the U.S. failed to make college access sufficiently available to lower income students. It was a very refreshing antidote to many of the popular, but data starved arguments that the US has too many college graduates.
I continue to argue that since nearly all wage and employment growth is accruing to college graduates, that should be an obvious point. Dynarksi framed the discussion differently, pointing out how much human capital was left on the table through unequal college access. It was a strong point, clearly supported by her research and others. Susan Helper added a helpful rebuttal to the falsity of “too much education.”
Explaining that nearly every job benefits from more formal education, she used the agriculture example. Today, the majority of farmers in the world are barely literate, often producing only a few hundreds of dollars of food each year. In the most agriculturally productive country on earth, most farmers have a bachelor’s degree, and master’s degrees are common. Education can improve productivity in any profession. My hour spent listening to these women made the trip well worth my time.
I left the conference believing that there was much agreement among economists on the concerns of the day, and surprising consensus on remedies. I’m equally convinced that there’s no political agreement on the problems, much less the solutions. That has me expecting much more of the same in the years to come.
