I had the privilege of listening to Dr. Barry Asmus address a business group in Alexandria, Minnesota a couple of weeks ago. Asmus is a senior economist at the National Center for Policy Analysis. He is a patriotic, free-market advocate who is not afraid to mix his rhetoric with references to God. In his speech at the Arrowwood Resort on Lake Darling, Asmus described six, what he called “unstoppable,” trends in our culture and economy.
Demographics is the first trend. The United States has a population of 75 million people between the ages of 40 and 65 years old. These are people at the peak of their productive years and their consumptive years. Our country is unique in this regard around the world. In most other developed places, the population is shrinking, including places like Western Europe, which is suffering a population implosion Asmus likened to the black plague of the 14th century. Japan and Russia also are not replacing their populations.
Stable prices is the second trend. Inflation has not been a factor for 25 years, Asmus said. While some commodities, such as gasoline, have seen price volatility, for the most part, prices for goods across the board have been predictable, rising at only a modest rate. The impact of technology has actually been to drive prices down on many of the most popular consumer goods. With competition increasing from places around the world, access to low-priced goods is greater than ever. More people in the United States have access to products such as tv sets and other electronics, house wares and quality sporting goods, nice clothes and small power tools than ever before.
Asmus acknowledged three inflationary blips in the last two and a half decades – Oct. 1987 when the stock market crashed, a mild recession in 1991, and a post-9/11 recession in 2001/2002 – but the country bounced back quickly in each case.
Taxes is the third trend. Asmus noted little economic growth in our country between 1930 and 1980, when marginal tax rates were as high as 70 percent. He noted that President Kennedy lowered taxes slightly to provide a little relief, but it wasn’t until President Reagan lowered taxes that the country’s economic environment began to improve. Reagan reduced the marginal tax rate to 50 percent, then to 28 percent. The result was unprecedented business expansion. “Even the fairest and lowest tax causes less work effort,” Asmus summarized. Reagan was the first president in decades who seemed to understand that. Since then, the first President Bush increased the marginal tax rate to 33 percent and President Clinton increased it to 39.5 percent. The current President Bush has lowered it back to 35 percent and he lowered the capital gains tax to 15 percent. For the previous 40 years it had averaged 27 percent.
Governments in many other countries understand the impact of taxes. Eleven of the 15 former communist Eastern European countries, Asmus said, have adopted a 15 percent flat tax. Ireland has made the most dramatic progress on taxes, going from the highest taxed country in Europe to the lowest with a dramatic positive impact on its economy. Ireland lowered its corporate tax to 15 percent from 35 percent. (Thomas Friedman writes about the Irish renaissance in his book, The World is Flat.)
“When you reward economic activity, you get more of it,” Asmus said. “When you penalize it, you get less of it.”
Productivity is the fourth trend. From 1900 to 1995, productivity in the United States grew about 1.5 percent per year, but since 1995, productivity has been growing at a rate of about 3 percent per year. “We have doubled the productivity of the American labor force,” he said.
In 1990, there was a real question about which country would be the productivity growth leader of the world: Japan, Germany or the United States? Since then, Japan’s productivity is remained exactly flat, Germany’s productivity has declined, and productivity in the United States has doubled. In 1990, the U.S. gross domestic product was $6 trillion; in 2007 it is expected to come in at $13 trillion. The gross world product this year is expected to be about $37 trillion; a third of that is coming from the United States, even though we have less than 5 percent of the world’s population here.
Entrepreneurship is the fifth trend Asmus discussed. As he has traveled around the world, Asmus said he has seen places where kids at age 18 or 20 are smarter than typical American kids, but by age 30, the typical American kid is better off than that person in the other country. Why? Asmus attributed the difference to entrepreneurship. In many other countries, the bureaucratic barriers to economic prosperity are simply insurmountable.
Asmus said it is almost as if Americans have entrepreneurship in their genes, because they excel in a way that people in other countries do not. Asmus cited the example of his own father who was a dirt-poor farmer most of the first half of his life. He left the farm, moved to town and got involved with a nursing home. Eventually he bought it. Then he bought another one, and by the end of his life, he owned and operated more than 50 nursing homes. Asmus shared many other success stories, including that of an ambitious taxi driver in Pittsburgh who offered such good service that he typically got $20 tips, and he shared the story of a day care provider who figured how to offer parents other services like dry cleaning pick-up/delivery and meal preparation. The ancillary services turned the child care business into a thriving, comprehensive service for “busy parents.”
Globalization is the final trend he discussed. The United States, with no tariffs between states, is a model of free trade that the rest of the world is emulating, Asmus said. A quarter of a century ago, he said, 17 countries around the world could be considered to engage in and promote free trade. Today the number is 80 countries. Free trade is bringing economic prosperity to more places on the globe than ever in history.
Asmus clearly sees a bright future for the United States and the entire world, barring any jihadist action that could bring it all to a halt. Asmus noted that as the world closed the 20th century, most of the world’s population was poor. “Three billion people had never used a telephone and half the world’s population makes less than $2 per day,” Asmus said. As we move into the 21st century, the prospects for worldwide prosperity are greater than ever, he said. He called property rights, rule of law, capitalism, markets, free trade, and stable price levels the ingredients in the recipe for prosperity.
tMichaelB is the web site for Tom Bengtson, who writes about business, religion, family and politics.
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