Key to debt problem increasing our GDP

info@islandpacket.comOctober 3, 2012 

Recent polls show increasing support for President Barack Obama on economic issues.

Mitt Romney and Rep. Paul Ryan have made reducing the deficit central in their campaign, but have failed to provide specifics about how they would accomplish it, relying on "trust me" assertions.

The key indicator for gauging the severity of the deficit is a real measure: deficit to gross domestic product. It requires magical powers to reverse the severity of the budget problem if in the course of decreasing the deficit, the policies compromise GDP.

However, this seems to be the very strategy that Romney is proposing: more tax cuts, disproportionately benefiting those at the top; coupled with significantly lower non-defense discretionary spending, which would weaken the economy's growth prospects.

Since 1986, research has uncovered the key importance of social variables in determining economic growth. Such variables include formal education and health care (human capital investment), income inequality and corruption (both have negative effects on growth) and the strength of institutions (which requires regulation and supervision). At the base of this research is the notion that growth does not progress linearly with hard work, but rather accelerates with the successful implementation of new technologies. This implementation depends critically on social factors.

On the other hand, accelerated growth, the result of increasing returns on technologies dominating modern economies, means that nations either board the "growth wagon" and prosper or they dwindle, with the growth rate gap between them and the economic successes forever increasing.

In decreasing the severity of the budget deficit, the priority is unequivocally GDP growth.

Alexandra Lomakin

Hilton Head Island

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