Bush’s Crash Test Economics

Fifteen years ago, the United States was in the midst of what you could call its “Age of Diminished Expectations.” Productivity gains had stalled, energy prices were high, the backlog of potential technologies that originated in the Great Depression had been exhausted, and waning benefits from economies of scale led nearly every economist to project that economic growth would be slower in the future than it had been in the past. With productivity growth stagnating for almost two decades, it made sense back then to argue that the US government’s social-insurance commitments (Social Security, Medicare, and Medicaid) were excessive and so had to be scaled back.

That was then, this is now. The intervening years have seen an explosion of technological innovation that has carried America’s general productivity growth back up to its pre-slowdown levels. Indeed, today the US economy is standing on the brink of biotechnological and, perhaps, nanotechnological revolutions of vast scale and scope. Yet the same calls to scale back America’s social commitments are heard.