The Hidden Taxes of Low Economic Growth
We all know that our own economic circumstances improve if we land a higher-paying job or get a raise. But what difference does it make to you how quickly the rest of “the economy” grows? If
The Hidden Taxes of Low Economic Growth
We all know that our own economic circumstances improve if we land a higher-paying job or get a raise. But what difference does it make to you how quickly the rest of “the economy” grows? If you have a good job today, should it matter how Nebraska performs in the creation of other new jobs or population growth?
Unemployment is low in Nebraska and is increasingly lower across the country. Still, in the first quarter of 2016, U.S. economic growth slowed to 0.5 percent, down substantially from the last quarter of 2015 and below previous projections. People may wonder why we aren’t growing more now that fewer people are on unemployment, or if there really isn’t much of a difference between a couple percentage points of growth.
Though it sounds mysterious, economic growth is essentially a measurement of our work becoming more valuable. Through efficiency and productivity, or population growth, our economic output can grow. Investments drive these improvements and attract people to new opportunities.
You can observe this process in a place as average as a local big box store. Trucks, forklifts, pallet jacks, fixtures, refrigerators, freezers, and computerized cash registers all help stores profitably sell you plenty of goods, often 24 hours a day.
But what would happen if these investments were not allowed to be made? Maybe they could transport groceries by covered wagon, stock inventories by hand, and individually price each order. More people would definitely need to be employed to get the job done. But without labor-saving technology, the value an individual worker could produce for the store would be much less, meaning less profit for the store and lower wages for the workers.
It would certainly take a person working in that poorly-equipped store many more years to reach their personal financial goals than in the one that exists in reality. While it may be less obvious, economic growth is encouraged or prevented in the same way. Often, unnecessary regulation and taxation is the culprit in reduced investment and innovation.
The Competitive Enterprise Institute calculates that compliance and economic costs of federal regulation reaches $1.88 trillion a year. A newly released working paper by the Mercatus Center at George Mason University bolsters this claim, finding the cumulative cost is 0.8 percent less GDP growth annually.
That may seem small, but years of robust economic growth multiply. If the federal government had frozen regulations starting in 1980, Mercatus’ e