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How You Should Be Looking At The Candidates


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Blog by Doug Ingersoll | August 25th, 2016


This is direct from Elliott Pollicks Monday Morning Quarterback:

The Monday Morning Quarterback 
A quick analysis of important economic data released over the last week
 
"This week, the summary discussion will be a little broader than normal.  Given that both major party candidates have now staked their ground on economic policy, I thought that deserved a comment.  I will not evaluate the major party candidates' positions.  You can do that.  I will, however, give you some context to help you evaluate what they are saying.
There are reasons why U.S. GDP in this cycle resembles the slow growth economies of Europe after they followed policies that are similar to those we now follow.  The rate of real GDP growth in this upcycle is the slowest in American history.   Why?  Can this be changed? How will the continuation of this affect our standard of living?  

The answer to the first question is relatively simple.  Long term growth is slowed by higher taxes (both personal and corporate), heavy and inconsistent regulation, policies which hurt the level playing field that international free trade should be based upon and policies that hurt credit creation.  It is those policies that got us to where we are and it will be how the winner reacts to these policies in his or her term that will determine if this will change.  

People are not "evil" in the way they act (at least not most of the time).  They are reacting to the economic incentives that they face.  Creating incentives to invest and take risk will create different results than policies that don't.  Also, keep in mind that the government cannot spend anything that it has not taken or borrowed from the private sector.

As far as the standard of living is concerned, the lower rate of growth in real GDP translates into lower rates of growth in productivity.  The slowdown in productivity will most assuredly result in a slower rate of growth in real pay (in this case, pay includes both wages and benefits).  The two (productivity and real growth) are inexorably linked.  If polices lead to slower productivity growth, our standard of living will not grow as rapidly as what it would have.  
This is insidious.  That is because you don't see it being taken away from you.  It becomes something that you would have had but didn't.  If productivity were to grow at 1.5% long term instead of 3%, a lot of people would say that's not a big deal.  But, it means that our standard of living would take 48 years to double instead of 24 years.  That means that we, our children and our children's children would have a considerably different life experience than they otherwise would have.  Consider these issues when you look at the economic plans of the candidates."

Back to Doug. My license plate frame says "My Homeboy is Ronald Reagan." Why? He engineered a 25 year great run for our economy.