Behind the Headline: In Shutdown Debate, Focus Should Be on Growth instead of Deficit



By 10/14/2013

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On Top of the News
In Shutdown Debate, Focus Should Be on Growth instead of Deficit
10/13/13 | Washington Post

Behind the Headline
Education and Economic Growth
Spring 2008 | Education Next

In an op-ed in the Washington Post, Larry Summers argues that politicians need to stop arguing about debt limit extensions and budget deals and start focusing on economic growth.  “Projections that there is a major deficit problem are highly uncertain. And policies that indirectly address deficit issues by focusing on growth are sounder in economic terms and more plausible in political terms than the long-term budget deals much of the policy community is obsessed with.”

Education and Economic Growth,” published in Education Next in 2008, looks at the impact of raising education quality (as measured by test scores) on a country’s economic growth.

The topic is explored in more detail in Endangering Prosperity, which demonstrates that if our schools could educate our students to a level of accomplishment achieved by other countries, the returns on our education investment would be so vast that much of the entitlement and legacy costs that now threaten the nation’s well being could be addressed with resources to spare.

-Education Next




Comment on this article
  • Lance Brofman says:

    Lawrence Summers is technically correct that “Data from the CBO imply that an increase of just 0.2 percent in annual growth would entirely eliminate the projected long-term budget gap.” However, he does not correctly give proper credit to those who made the calculation. The CBO document he links to does not specifically indicate that an increase of just 0.2 percent in annual growth would entirely eliminate the projected long-term budget gap. Rather, that figure comes from an article http://seekingalpha.com/article/1746782-a-very-long-term-view-of-government-finances-implications-for-the-s-p-500 published in Seeking Alpha Oct 15 2013, written by Dr. Vincent J. Malanga and Dr. Lance Brofman with sponsorship by BEACH INVESTMENT COUNSEL, INC.

    They used the data from the CBO report and coefficients derived from previous CBO reports to generate that calculation. The exact quote from that article is:

    “…in the absence of major policy changes could occur if economic growth were higher than the approximate 2.5% trend rate assumed by CBO. For example, everything else constant, if growth were 0.2% per year higher than the CBO forecast in every year after 2015, by 2086 the deficit would disappear and the debt-GDP ratio would be a very manageable 45%…”
    http://seekingalpha.com/article/1746782

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