'Growth Gap' Can Be Closed Only With More Investment

IBD Editorials ^ | December 13, 2011 | JAMES S. GILMORE III

[Kaslin]

Last week's European Summit shows how difficult it is for the European Union to confront its fundamental economic problems. Since 2007, many European Union countries have suffered loss of their rates of growth and high unemployment. Yet the European Summit offers no plan for growth. More trouble lies ahead for Europe.

America's economic condition is not yet as dire as Europe's, but it soon will be if we do not correct the root cause of the problems that we face in our own country.

Since 2006 America's growth rate has also declined. America now has 15.5% less GDP than it otherwise would have had if we had continued to grow at our post-World War II historic rates. Growth estimates for 2012 have been reduced. Unemployment remains nearly 9%.

Joblessness is a waste for our country, and an emergency for millions of our citizens and their families.

We at the Free Congress Foundation have examined several economic standards of measurement, including consumption by the public, exports, government spending and investment from when the recession began in 2006 until now.

A look at these major components of GDP shows that the only category falling relative to GDP is investment. Net investment was down 80.5% during the recession, and is still down 66.9% during the so-called recovery.

We are now five years into what may be the American equivalent of Japan's "lost decade." Unlike Europe, America is positioned to reverse that trend, restore investment and economic growth and sustain it for years to come.

[DManA]

Truth #1: ‘Growth Gap’ Can Be Closed Only With More Investment

Truth #2: Government spending is NOT an investment.

[Kaslin]

Very well said