We now have a new paper from economist Robert J. Gordon of Northwestern University that seeks to answer a great puzzle of our time: "Why has economic growth slowed when innovation appears to be accelerating?" In the process, Gordon illuminates a dispute between the Trump administration (which thinks growth can be increased) and its critics (who are dubious).
The "real" economy that we experience directly and the one defined by statistics are strikingly different. The first seems awash with innovation, from smartphones to driverless cars. And yet, the statistical economy is lackluster. From 1970 to 2006, U.S. economic growth averaged 3.2 percent a year; from 2006 and 2016, growth averaged 1.4 percent, reports Gordon.
That's a huge decline. It matters, as Gordon says, because faster growth generates more tax revenues to "address the nation's problems, including faltering education, aging infrastructure, and the looming shortfall in funding for Social Security and Medicare." Not to mention immense budget deficits.