GDP Maximizing Policies

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"GDP Maximizing Policies"

The thread of the Great Manzi Europe debate that wound up getting lost, I think, is that if you’re interested in a measure of power like aggregate GDP, rather than a measure of living standards, the main reason the US has outpaced Europe in recent decades is clearly higher population growth. We have both more immigration and a higher birth rate. And if your goal for the United States is to try to maximize future GDP, then your policy efforts should focus on increasing the population growth rate.

How to do this? Well, again, the most obvious way is through the immigration lever. We could offer current undocumented immigrants a relatively easy path to citizenship, and also increase the level of legal immigration to the United States. According to Gallup, there are about 165 million people who want to immigrate to the United States. The other major policy lever that I think we have is the tax code. Right now, if you take a childless single person who earns $60,000 a year, he pays a lower proportion of his income in taxes than does a two-parent, two-child family earning $240,000 a year. You could assess taxes on a per capita basis and dramatically shift the incentive structure.

Now those things wouldn’t be my policy priorities. But certainly if maximizing aggregate GDP is your interest these seem like the things to look at.

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