Growth Can Solve the Debt Dilemma

Hitting a 3% target would result in an economy that’s nearly $13 trillion larger in 30 years.

 But consider what happens to the CBO’s numbers assuming 3% annual growth. By 2040 the economy would expand not to $29.9 trillion, but to $38.3 trillion, according to an analysis by Research Affiliates, a California investment firm. That’s an additional output of $8.4 trillion—roughly the entire annual production today of every state west of the Mississippi River.

By 2047, the economy would grow to $47.1 trillion, almost $13 trillion more than the CBO’s baseline estimate. That would spin off new tax revenue to Washington of about $2.5 trillion each year.‎That money ought to be more than enough to pay all the bills and cover most of the unfunded costs of Social Security and Medicare. The old saying is right: The most powerful force in the universe is compound interest.
.. Many blue-chip economists agree with the CBO that a growth rate of about 2% is the best that America can achieve.
.. But the right policies can counter these trends. Productivity should surge with improvements in robotics, artificial intelligence and automation. Self-driving cars could cut transportation costs dramatically in coming years. Washington could facilitate this renaissance by giving companies an incentive to invest.
The Tax Foundation predicted last year that the House Republican tax reform alone would raise wages by 8%, GDP by 9% and capital investment by 28%.
.. at least seven million Americans in their prime working years—18 to 65—would be on the job today if labor-force participation had not dropped since 2000. A strong economy, paired with welfare reforms, could draw millions back to work.
.. And immigration is America’s natural demographic safety valve.