Writing in the New York Times over the weekend, Harvard Professor of Economics Greg Mankiw correctly points out that investment outlays have been weak in the recent recovery, and this has been a reason for lack of robust economic growth and, in turn, job creation the last few years. Mr. Mankiw, an advisor to the Romney Presidential campaign, points out that
…from the economy’s peak in the fourth quarter of 2007 to the recession’s official end, G.D.P. fell by only 5.1 percent, while investment spending fell by a whopping 34 percent. ….. The subpar recovery has coincided with a historically weak investment recovery. Compare our recent experience with that of the early 1980s, when the nation last experienced a deep economic downturn in which unemployment topped 10 percent. That recession ended in the fourth quarter of 1982. In the subsequent two years, investment spending grew by a total of 54 percent. By contrast, in the first two years of this recovery, it grew by half that amount.
In addition to a greater volume of capital investment, Mr. Mankiw also cites the need for better trade and regulatory policies: he says the free trade agreement with South Korea, for example, after languishing for four years over Democrat constituency concerns (viz., organized labor, or environmental issues), should be passed immediately, as it would be accretive to growth and job creation right away. And he points out that the National Labor Relations Board’s objection to Boeing’s billion-dollar plant in South Carolina, thanks to it being non-union, is harmful to all such plans for job-creating investment.
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