James Glassman

The 4% Solution. Setting the Stage: Between World War II and 2008, the U.S. economy grew at between 3.5% and 4% on average. If you add inflation, that means growth of nearly 7% in the output of goods and services each year. This gain has not been consistent, of course. There were recessions and booms. But, overall, the increase has meant the greatest period of economic and social progress in human history. Roughly every generation, the standard of living for the average American has doubled. So, in terms of material things, we live four times as well as our grandfathers in the 1960s.

The Trouble Today: But the prospect of further growth along these lines has dimmed. Forget the current recession for a second. The Congressional Budget Office predicts that, after the sluggishness has run its course and after a recovery has occurred, the U.S. will settle down to its sustainable growth rate. That rate -- shockingly -- is just 2.2 to 2.3 percent. An economy puttering along at that rate, will double living standards, not in 30 years, but in about 50 or 60.

The Reasons for Decline: Why is U.S. growth declining? There are four major reasons, 1) Demographics. 2) A Legacy Welfare State. 3) Fallout from the 2008-09 Recession. 4) Decadence. This may be the most crippling reason of all. Like Europe, the U.S. reached a wealth level in the late 20th century that has led us to choose leisure, comfort, risk aversion, and a more active and protective state over the opportunity-responsibility society, founded on entrepreneurial risk-taking, that was at that heart of American success. Other nations -- such as China, India, and Brazil -- are, in effect, becoming more American than America, while we are moving closer to stagnant Europe and Japan in our approach to economics and society.

The 4% Solution: So what can we do? First and foremost, we need a clear strategy to bring the U.S. GDP growth rate (the best measure of economic success) up to 4%. That is, double it from what is currently expected. GDP growth comes from two sources: an increase in the workforce and an increase in productivity (that is, the output per worker). On the workforce side, we need policies that bring more people into the job market (education that points toward a job-oriented credential, for instance, a later retirement age for Social Security and benefits that rise at a slower pace, and rational immigration policies aimed at luring smart young people to the U.S.). On the productivity side, we need policies that encourage investment in human and physical capital and innovation (lower corporate tax rates and a permanent R&D credit, regulatory policies that give incentives for start-up businesses and venture capital investment, more government involvement in basic research and less in the economy itself). These policies -- targeted dead-on at growth -- will have the effect of lowering the unemployment rate, reducing the nation's debt, and putting us on a much sounder financial footing.

The 4% Solution speech has relevance to practically every trade association in America, and the timing could not be better.

What's Ahead for the Economy? There is no more topic more urgent today than the fate of the global economy. With experience in business, media, and government, James K. Glassman speaks on "What's Ahead for the Economy?".

Ambassador Glassman is a former CNN talk show moderator, Washington Post financial columnist, and Under Secretary of State. His special expertise is explaining complex economic issues in plain, clear language. He is adept at Q & A sessions.

His speech answers these questions:

• One of the worst recessions in 100 years has begun. How long will it last? How deep will it get?
• What can government do through actions like the stimulus package, tax cuts or increases, and measures to shore up financial institutions to reduce the damage and turn the economy around?
• What are the effects on global trade?
• What are the effects on special industries and businesses -- focusing on the group being addressed -- and what can these industries do?
• For investors, what are the best strategies? Stocks, bonds, cash, gold, real estate?

Ambassador Glassman makes a sober, realistic assessment of the situation, but his outlook is generally upbeat. His experience in government tells him that its effect the economy is more limited than most expect, and his faith in American entrepreneurship encourages a belief that a recovery may come sooner than the pundits are predicting.

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