Economic Policy—Short-Term vs. Long-Term

Economic Policy—Short-Term vs. Long-Term ¢ Economic theory + experience of the Great Depression suggest government can use fiscal policy (increase direct spending + investment) to offset near-term shortfalls in private demand. ¢ In the long term, USA Inc. cannot sustain higher levels of direct spending / investment without crowding out private consumption / investment. ¢ Therefore, USA Inc. should prioritize and allocate available resources to stimulate growth in productivity + employment, which drive long-term GDP growth. www.kpcb.com USA Inc. | What Might a Turnaround Expert Consider? 363 Improving Employment, Productivity, & Hours Worked Are Source of Sustainable Long-Term GDP Growth USA Long-Term GDP Growth' (1970-2009) 2.83% Hours Worked Per Worker -0.22% Has Been Consistent At ~39-40 Hours per Week Note: 1) all growth numbers are rounded average annual growth rates and are adjusted for inflation. 2.83% is the average annual GDP growth rate from 1970 to 2009, per BEA. Labor force growth of 1.53% is the average annual growth rate from 1970 to 2009, per BLS. Hours worked per worker per OECD. Productivity growth of 1.53% is calculated by subtracting employment growth and hours worked per worker growth from real GDP growth. Average annual growth rate of 1.53% is roughly in line with other estimates such as Dale W. Jorgenson, Mun S. Ho, Kevin J. Stiroh, “Growth of U.S. Industries and Investments in Information Technology and Higher Education” <hitp:/Avww.nber.org/chapters/c1 0627> (@ www.kpcb.com USA Inc. | What Might a Turnaround Expert Consider? 364 HOUSE_OVERSIGHT_021023