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The Romney Program for Economic Recovery, Growth, and Jobs

R. Glenn Hubbard (Columbia University), N. Gregory Mankiw (Harvard University), John B. Taylor (Stanford University), and Kevin A. Hassett (AEI)

The U.S. economy has the talent, ideas, energy, and capital for the robust economic growth that has characterized much of America’s postwar experience. Our living standards going forward, and the nation’s standing as a world power, depend on restoring that growth and broadly shared prosperity. We are presently in the most anemic economic recovery in the memory of most Americans, with significant joblessness and long-term unemployment, as well as lost income an d savings. We are stuck in a low-growth trap following the 2007-200 9 recession and financial crisis. The anemic job growth and tragically high unemployment are a consequence of that low-growth trap. The recent second quarter 2012 Gross Domestic Product (GDP) growth estimate of 1.5 percent, following 2 percent growth in the first quarter, makes a stark fact clear:

The economy is not getting stronger, it’s getting weaker.

The Obama administration says that the economy’s awful performance reflects the reality of the aftermath of a financial crisis and that the administration’s policies generated what little recovery we have seen from the severe 2007-2009 recession – Americans should stay the course. But the historical record is clear: Our economy usually recovers quickly from recessions, and the more severe the recession, the faster the subsequent catch-up growth. For example, recent research by Michael Bordo of Rutgers University and Joseph Haubrich of the Federal Reserve Bank of Cleveland makes c lear from historical data that a slow growth recovery is no t inevitable. In fact, each year, the administration has forecast just such robust growth for the year ahead, and each time these hopes have been dashed. These repeated forecasts contradict the administration’s excuse that slow growth is the inevitable result of the recession and financial crisis. If a slow recovery were the predictable aftermath of a financial crisis, why has the administration continued to forecast a robust recovery? America took a wrong turn in economic policy in the past three years. The United States underperformed the historical norm shown in the administration’s own forecasts, and its policies are to blame. To see why, we will explore the administration’s economic errors and poor choices. Understanding why the administration’s policies have stuck the e conomy in a slow-growth trap, we can explain how different economic ideas and choices can move us forward. The Romney economic program will change the direction of policy to focus on e conomic growth. Its pro- growth effects will work in two basic ways: It will speed up the recovery in the

short run

, and it will create stronger sustainable growth in the

long run