Can A Modern Economy Generate Jeb Bush’s Real 4% GDP Growth? Yes, but not with tight money

A Benjamin Cole post

GOP presidential hopeful Jeb Bush has generated some blog-blabbing on his pronouncement that the U.S. GDP could and should grow at 4% real annually.

No doubt Bush has some good and some GOP ideas on how to get to 4% real growth, starting with cutting taxes on the rich and specific regulations disliked by GOP campaign contributors, although eliminating federal ethanol diktats or economically parasitical defense spending will never be mentioned.

But Bush has another, even larger hurdle than partisan impediments to clear on his race to 4%: The Federal Reserve Board.

Forgotten today is that the U.S. economy did expand by 20% in four years in recent history—the four years following the 1976 recession. Arthur “Print More Money” Burns was Fed Chief, and he thought U.S. inflation was baked into the cake, and so all he could do was promote growth. Burns got inflation too.


It is easy to dismiss Burns, but in fact he faced an economy far more inflation-prone than today. Unions were huge, international trade was small, banking was rate-regulated, transportation was rate-regulated, telecommunications was rate-regulated. Even stockbroker commissions were regulated. Big Steel, Big Autos, Big Aluminum, Big Labor defined the economy. USDA dictated crop prices. The minimum wage was higher than today in real terms, top marginal tax rates were at 90%, and there was no Internet and its price-searching or market-making.

So, when Burns stepped on the pedal, yes he pushed real growth north of 4% annually, but he did obtain double-digit inflation also.

But as the intervening years have shown repeatedly, today the U.S. economy is not inflation-prone. Indeed, the Fed can print up $4 trillion in QE, and still fall below its too-tight 2% PCE target—a target less than half the rate of inflation Volcker called low enough.

Jeb Bush: If you really want real 4% growth, think very, very carefully about who you appoint to the Federal Reserve Board. Monetary suffocation and 4% real GDP growth might happen, but it is doubtful.

5 thoughts on “Can A Modern Economy Generate Jeb Bush’s Real 4% GDP Growth? Yes, but not with tight money

  1. I’m telling you, it can be done. Loosen up on namby pamby left liberal anti-free market, freedom-hating laws such as the anti-slavery and anti no-questions-asked for-profit organ-harvesting / child labor / child organ harvesting market laws, and it can be done. Moreover, that *should* serve as a inspiring guidepost to the way forward for badly needed Greek structural reforms.

    • Greece: back in the good old days (the 6th century BCE), when a man got in over his head in debt, he could do the right thing and sell his wife and kids into slavery to make it right with his creditors. But now that the freedom-and-market-hating social justice warriors have blocked this sensible (and honorable) path forward with their poorly thought out statist social engineering legislation and incessant limp-wristed high pitched histrionics about “empathy” and other non-sense, the unintended consequences of their ill adviced do-goodery is coming home to roost!

  2. Is the Sumner critique bi-directional? For instance, all the supply side reforms in the world could happen, but if the central bank is targeting inflation or NGDP, it would have limited millage? If so, then even the “good” Bush ideas are, in themselves, good for other things besides doubling growth. There isn’t any way around getting more NGDP out of the Fed, and J. Bush isn’t going to accomplish that or any other economic goal by bagging on people to work more.

  3. All-

    I went on vacation, and just now saw your comments. Thanks for reading.

    For the record I support many “conservative” supply-side policies—but also blowing the Fed doors wide open, and shooting for “labor shortages.”

    And I also support cutting defense spending and wiping out ethanol, favorite Red States social welfare or patronage programs.

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