Economic growth is the lifeblood of a nation. A growth rate of 3% in annual Gross Domestic Product (GDP) is considered healthy. America hasn’t seen 3% since 2007. Last quarter’s rate was 1.10%. The 2016 Democratic platform proposes “feel good” economic actions that will further weaken an already seriously ailing economy.
GDP, in simplest terms, is the total value of all goods and services produced in a nation in a given period, usually a year. That amount, last year about $18 trillion, must increase reasonably each year to ensure a thriving economy. Economic growth means more purchasing options, better products, higher real wages, improved quality of life, more conveniences, and faster and more dependable services. Growth is also crucial in keeping us competitive with other growing countries.
If you are buying the misconception that the economy is getting healthier because employment is up and the market is booming, consider this analogy. When you get blood pressure and cholesterol under control, the conclusion might be that you are getting healthier. But, if your heart remains weak, good blood pressure and cholesterol numbers aren’t going to better your health. Growth is the driver of economic health and well-being of a nation. Other economic factors just reflect the growth or stagnation of the economy. If measures of other factors are improving while growth is lagging, the improvements are artificial and misleading. The Democratic platform advocates increases in certain popular elements of the economy while stifling the fundamental elements required for economic growth.
One of the most economically devastating planks in the platform is the call for a minimum wage increase to $15.00 per hour. The federal minimum wage is currently $7.25 per hour. We could debate the efficacy of increasing minimum wage for hours. That may be a topic for a later post. However, the fact is that more than doubling the minimum wage would bring growth to a standstill and possibly shrink the economy. Artificially increasing wages, especially to this proposed level, would skyrocket inflation and virtually bring industrial capital investment to zero. It might lift some people out of poverty, but only at the economic peril of the entire population. A healthy economy will naturally increase wages through labor supply and demand.
Then there is that plank that will guarantee free community college for everyone. One of the first principles I teach in my economics courses is that nothing is free. Anything that is free to one person is paid for by another person. Free college would cost many billions of dollars in taxes. The Democrats’ answer to that is to tax wealthier people their “fair share.” The top 50% of all tax payers already pay 90% of all taxes. The top 5% already pay 57% of all taxes. The top 1% already pay 35% of all taxes. These happen to be the people responsible for most of the nations production. More taxation would lead to less productivity because of less ability to invest in capital growth.
I have only highlighted two economic killers in the Democratic platform. There are more. In fact, most of the platform is about more services and more taxes to pay for them. The much better way to elevate the quality of life of every citizen is to generate economic growth of at least 3% which is accomplished with less government intervention and lower taxes. As the saying goes, a rising tide lifts all boats.
I urge you to compare both parties’ platforms. We have two presidential candidates that most voters don’t like. So it’s even more important in this election that we focus on the values and principles of the parties. That is what will impact our lives.