The Gospel of Growth

It has been hard to turn on the local news or open a newspaper lately without hearing talk of the "looming recession" or the "forthcoming economic downturn." Talk show hosts and news anchors have been having a field day whipping fear into the hearts of American consumers by talking about crashing economic indicators.

But all the rhetoric being spouted off by reporters and politicians does not jive with the majority opinion of people who actually know what they are talking about.

For example, after the highly touted fiscal stimulus package was announced in January, Secretary of the Treasury Henry Paulson was forced to repeat three times that he did not believe there would be a recession in an interview with a very insistent Diane Sawyer.

A great deal of terribly smart and informed people agree with Paulson that there will not be any recession. While Federal Reserve Chairman Ben Bernanke admitted last week that growth in the coming months will be "sluggish," he reaffirmed his belief that the economy will continue to expand.

The technical definition of a recession is two consecutive quarters of negative economic growth. The Congressional Budget Office and the blue chip consensus of private forecasters both predicted growth for 2008 at 1.6 percent. In case you are not a math major, 1.6 is a positive number. And for those of you non-economics majors, that means no recession.

Question: If we are not actually headed for economic doom and gloom, why the fiscal stimulus package? Answer: It is an election year. Some politicians on both sides have even been screaming about how the package does not do enough. The truth is, these politicians (including John McCain, Hillary Clinton and Barack Obama) are lying to you, and will say anything to get your vote.

The package will require the U.S. government to borrow $170 billion. If there is not going to be a recession, that is a tremendous waste. If a recession is in fact on the horizon, the $600 checks families will receive will probably not be in their hands until well after the economy has recovered.

Giving cash to consumers might marginally increase consumption in the economy, but consumption has not been the source of recent economic problems. Plus, more recent consumption issues due to flagging consumer confidence likely have much to do with endless TV talk about the "imminent recession."

New York City Mayor Michael Bloomberg called the stimulus package a politically easy solution to a serious and complicated problem, and likened it to "giving a drink to an alcoholic."

I love tax cuts as much as you. In fact, as a consumer, investor, taxpayer and advocate for small government, I probably love them more. But the tax rebates you might be getting this summer are not real. Because they are funded through deficit spending, somebody is going to have to pay for them later. It might be you in 20 years, it might be your children, it might be your grandchildren. But whoever it is, they will be paying for an almost meaningless tax cut passed due to pure politicking. And don't forget the interest.

The obsession with economic growth among politicians, commentators and voters is truthfully very frightening. Instead of viewing growth as the capacity for an economy to create more wealth, give people more things, and hopefully increase their happiness, growth is often encouraged simply for its own sake. Instead of an economy with a clear purpose, many support a bizarre religion of domestic growth, and international competition for growth.

In two separate classes of mine last week, students argued for U.S. action to halt rapid growth in China. These students are disciples of the religion of growth. As Americans, they believe, we must have the fastest growing economy and need to do all we can to maintain our dominance.

In reality, we are all in this together. Booming Asian economies are helping literally billions of people acquire previously unavailable health care and clean water. To want to slow their growth to maintain U.S. dominance in the world economy is reprehensible.

When other economies do well, Americans should be excited and happy. Not only do people all over the world have access to more products, but Americans can get better and cheaper things due to other nations' productivity increases. Do not drink the growth Kool-Aid. Slow growth is not the end of the world.

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