• November 28, 2023

A Future of Secular Stagnation

President Joe Biden speaks at Tidewater Community College in Portsmouth, Virginia on May 3.


Evan Vucci / Associated Press

One criticism of President Biden’s historic loss of spending is that it is stealing future economic growth in exchange for a temporary surge over the next two years. Imagine our surprise that the White House confirms this criticism in its own budget proposal.

That’s the not-so-fine print in the President’s 2022 budget draft, which conveniently came out on the Friday before Memorial Day weekend when most of the press was leaving town. We have already checked that $ 6 trillion spending weaknessbut almost as striking is the budget forecast for the US economy for the next decade.

In one sentence, the president’s economists predict the return of “secular stagnation”. Readers may recall this unfortunate term from the Obama presidency when leftist economists tried to explain why growth appeared to be stuck at around 2% despite unprecedented monetary stimulus. The mistake, they said, was in our stars and not in their politics.

The Biden household says that after the Keynesian spate of spending in 2021 and 2022, we will likely stagnate again – albeit at even lower growth rates than in the slow-growing Obama years. The White House forecasts a two-year growth boom of 5.2% in 2021 and 4.3% in 2022 as the country returns to normal after the pandemic and record amounts of government spending flood the economy to fuel consumer demand.

But the White House says growth will drop to 2.2% in 2023 and then average below 1.9% over the next eight years. This is noticeable for several reasons.

One is that the White House, in essence, admits that all of its unprecedented monetary and fiscal stimulus is truly lived for today, regardless of the future. It implicitly admits that the growth it has now spurred will have to be repaid later in the form of higher taxes or tighter monetary policy, which could slow growth. This is the definition of a “sugar high”.

This is in contrast to a truly growth-oriented policy that aims to create the conditions for long-term prosperity. They create permanently better work and investment incentives. They reduce political distortions that lead to bad investments. That was the point of the 2017 tax reform and Trump deregulation that showed promising early returns until the pandemic was so roughly interrupted.

With his business slogan “Build Back Better”, Mr. Biden has also promised better long-term growth. But, as our contributor Donald Luskin asks, where is the “better” thing in Biden’s economic forecast?


The White House economic analysis boils down to the claim that slow growth is inevitable. It is believed that the US economy cannot grow faster than 1.9% in the long term because the US population is aging and demographics are a destiny. Productivity growth is destined to slow down, and tax and regulatory policies don’t matter.

Some leftists even praise the Biden White House for the “honesty” of its slow growth forecasts. For the sake of income equality, taxes need to rise and regulations need to multiply to solve the climate crisis as if the latter were possible. If it results in slower growth, so be it. Get over it America.

But if that is our destiny, the effects will be as depressing as the numbers. It means Americans are destined to endure the economic malaise that has plagued Japan and much of Western Europe over the past few decades. It means a less dynamic economy, which means fewer opportunities for advancement. And it means slower income growth – especially for young people and those who don’t yet have wealth.

For the government, an economy of 1.9% means a widening gap between the rising costs of the Biden claims state and a decreased ability to fund it. There is no way that a slow-growing economy can afford both a robust defense budget and Biden’s social policy.

To be clear, this is a budget that anticipates America’s economic and political decline. The question is whether the American people will be satisfied with that.

Wunderland: Negotiations with the opposition, so the left’s conclusion, only hinder the achievement of their political goals. Pictures: AP / Bloomberg News / Getty Images Composite: Mark Kelly

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Published in the print edition of June 2, 2021.

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