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An explanation for the Great Stagnation.


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Jim Lacey

Over the next 50 years, I will double everyone’s life expectancy. And not only will most of you live to be 160, but 120 will be the new 30, and 150 will be the new 55. The last ten years of your life will resemble old age today, and I will have to double health-care costs — but still, this is quite a deal, no?

The great deals do not end there. For a mere doubling of the cost of education, I will ensure that every child receives an education that will prepare him or her to work in the future economy, so that virtually all of them will attain a standard of living only billionaires can aspire to today.

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Want more? How about I keep government revenues — that is, taxes — under 20 percent of GDP? In return, I will guarantee a century of unprecedented economic growth, leading to America’s quintupling the size of its economy within a lifetime.

Although no one told them at the time, all of the above is basically the deal anyone living at the turn of the 20th century received: Average life expectancies doubled, everyone who desired to could receive an education that the great scholars of the past would envy, and even the poor often lived better than King Louis XIV. Meanwhile, the government went about its affairs at a fraction of the percentage of GDP it confiscates today.

All of which goes a long way toward explaining the dissatisfaction that many Americans are currently feeling. Today, we get skyrocketing health-care and education costs, without any of the massive gains our grandparents received. Does anyone believe that the next trillion dollars of health-care spending will do more than budge current life expectancies? A 70-year-old in reasonably good health today cannot expect to live any significant amount longer than a 70-year-old in the same condition a generation ago would have. At most, medical science can extend her life for a few months at phenomenal cost. When my grandfather was born, his life expectancy was between 45 and 50. Thanks to advances in medical science and nutrition, he didn’t depart this world until he passed 90. I feel a bit cheated that the best medical science can offer now is that when a substantial number of us get to 90, we may be able to linger a few months longer.

The same for education. When my grandfather was born, only a small fraction of students finished secondary school; he never passed fifth grade. Moreover, college graduates barely qualified as a statistical ripple in our growing population. A major investment in education made secondary-school graduation the norm, and well over half of all Americans have at least some college education. Who would resent spending more money when you get results like the above?

The problem today is that Americans continue spending ever-greater sums on education although the numbers started stagnating over two generations ago. No matter how much money we throw at education, we cannot seem to get high-school graduation rates to 90 percent or college-graduation rates much above 30 percent. Moreover, many who do graduate are getting an education inferior to what their parents received. We are spending more and more for ever-diminishing returns.

Meanwhile, the government continues to collect an increasing portion of the American economy for its own uses. In the past, one could argue that Americans gained from government spending. Huge dams were built, an Interstate Highway System was constructed, and going to the moon was good for national morale. Today, the federal government collects over 25 percent of the nation’s GDP, but we get little of economic consequence in return.

No major new dams are planned. In fact, the cost-efficient energy produced by dams is frowned upon. Rather, government wastes tens of billions on inefficient alternative sources, such as wind and solar. It seems not to matter that every job created by these sources of energy destroys between two and four jobs elsewhere in the economy. Moreover, far from building something as useful as the Interstate Highway System, the government is maintaining our existing infrastructure so badly that the History Channel is turning a profit on a show about it.

Rather than using our money in ways that might propel America forward, the government has been holding the country back. Besides subsidizing job-killing alternative-energy schemes, it has busily created dozens of agencies that act as roadblocks to progress. For if there is one thing agencies are good at — besides extending their own existence — it is creating regulations for everyone else to live by.



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