Why not growth?

As the self-described party of the middle class, Democrats' principal concern should be growth.

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Democrats’ intense focus on income inequality is understandable, but why not the same obsession over economic growth?

“As the self-described party of the middle class, Democrats ought to be obsessed with growth because it is vital to solving the economic circumstances of the middle class.”
From 2001 to 2013, a span of thirteen years, average annual growth in the United States came out to a lumbering 1.8 percent. That is half the average annual growth rate we experienced from 1950 to 2000 —a period during which the middle class shined and the poverty rate declined.

Yes, the Great Recession contributed to substandard growth rates, but since 2001, the U.S. economy has exceeded 3 percent growth only twice. In the half century prior, we surpassed 3 percent growth per year 34 times. What was once “normal” growth is now a rarity.

Economists predict that America’s future growth rate will settle somewhere between mediocre and sickly. The Congressional Budget Office projects an average of 2.5 percent annual growth over the next ten years, while PricewaterhouseCoopers projects an average of 2.4 percent growth through 2020. Middling growth like that just won’t make an appreciable difference in the lives of average working people.

As the self-described party of the middle class, Democrats ought to be obsessed with growth because it is vital to solving the economic circumstances of the middle class. Our research shows that voters now believe a middle class job no longer supports a middle class life.

Consider, for example, wages. It’s common knowledge that wage increases have been stingy since 1980, but the real culprit is wage declines since 2000 – the direct result of sub-par growth. At the same time that the nation’s average growth rate was plummeting to 1.8 percent, median family incomes were declining by 7 percent.

Greater growth, however, would reverse those declines. And even as some might argue that growth would not accrue to the middle class and working poor – and that redistribution is the better strategy – growth would, in fact, lift all boats.

According to economist Steve East of Height Analytics, adding one extra percentage point of growth per year through 2022 would create 2 million additional jobs, add $800 billion in new personal income, and increase revenue to the Treasury by $600 billion. Nearly all of these new jobs, and the majority of new personal income, would accrue to people not named LeBron James, Jamie Dimon, or David Koch—though it’s certain they and others like them would benefit.

So why the Democratic reluctance to embrace growth as an overarching narrative and vision?

Part of the problem with a growth narrative is that there is no enemy to slay. No rapacious corporation to vilify. No heartless billionaire to blame. The crisis in growth lacks the easy scapegoat and potential for political theater that has marked so much recent debate.

What remains instead is the hard work of increasing the capacity for America to grow, create jobs, and provide wage increases to the middle and working classes in an incredibly transformational time. It means addressing the twin challenges of globalization and rapid technology change just as our population ages and 10,000 Baby Boomers retire a day. It means figuring out how to entice companies that can choose to hire and expand anywhere to opt for America and Americans. It means positioning the country’s population to benefit from global economic progress, not be bowled over by it. And it means realizing that what worked in the boom times of the 1950s, 1960s, and 1990s has little relevance in today’s unfettered international market.

This involves—pardon the phrase—hard choices. Our schools have to teach for a competitive world. Our exporters have to capture a bigger share of Asia’s massive and growing market, which is set to import $10 trillion in goods alone in 2020. We must find a way to reduce the cost of college—which has increased 307 percent for four-year public colleges from 1989-2010—without sacrificing quality. We need to contain health care costs which depress wages and make it more expensive for businesses to hire. We need to reform our tax code, which is too complex and built for a bygone era. And we need to fix the federal budget so Americans can once again afford to invest in roads and bridges, kids and schools, and world-class research and development. None of this will be easy, which is why an obsession with growth is necessary.

The middle class has been stuck for 13 years. It coincides with a period of historically low annual growth rates in the United States. This is where Democrats must put their undivided attention.

Jim Kessler is Senior Vice President for Policy at Third Way.

RELATED: The 2014 economic message: “Growth”

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