Co-authored by Jillian McLaughlin
At last month's JFK Jr. Forum, Jason Furman, who served in President Obama's administration eight months before it was formed, talked with Larry Summers, former President of Harvard and U.S. Secretary of the Treasury, in a fireside chat on the current state and future of the U.S. economy.
Not surprisingly, Furman argued that the U.S. has surmounted the crisis, but he emphasized that the economic performance that characterized the last five years is not a good indicator of the next five years. Furman pointed out that trade is a tool to elevate the middle class. Further, the U.S. faces demographic challenges, as our prime working age population is in decline, which may lead to lower growth. "The workforce itself is not a demographic factor that is inscribed in stone. It depends on our choices," Furman said. "And one of the most important choices it depends on is immigration reform."
Furman said that he was "cautiously optimistic" on future U.S. economic growth. The success will depend on the choices we make on investments in infrastructure, the tax system, international trade, and education. But Furman was unequivocally optimistic when it comes to innovation in this country. In particular, he was optimistic on existing technological developments in nanotechnology, personalized medicine, energy sector, cloud computing.
Furman pointed out that expanding trade is a tool to elevate the middle class. A more progressive tax system can raise the incomes of the middle class. For example, certain tax credits can affect how children will do in the next generation. Generally policy has achieved a lot over the past fifty years to address poverty, but more needs to be done, he stressed.
"We don't have any way to raise productivity by 10%," he said, but there are many ways to increase productivity over time. Further access to education is important as a way to battle inequality. Middle class income growth and productivity growth is key for our fiscal future.
Summers described the idealism with which students look to the future, but also the disappointment they have with government as a vehicle for change. Furman agreed that it is hard to get things done in government, and one needs a good amount of stamina to enforce public policy matters. "Nothing happens as fast as you think it should," he said.
When a student asked him why people continue to work more despite incredible productivity increases, Furman suggested that the problem is unrelated to policy. In life he said there is a rat race element. People seek status and compare themselves to others.
Above all, from a policy standpoint, the demographic problem stood out. As Furman suggested, immigration reform is essential to solve that problem. While there is agreement in Washington that reforms are required, little actually gets done. Partially this is because immigrants, as future citizens, are not represented in the political system. Hopefully as the demographic problem intensifies, politicians in Washington will be incentivized to move ahead on immigration reform.