The 4% Solution by the George W. Bush Institute - Excerpt

7/31/2019 The 4% Solution by the George W. Bush Institute - Excerpt

http://slidepdf.com/reader/full/the-4-solution-by-the-george-w-bush-institute-excerpt 1/10

7/31/2019 The 4% Solution by the George W. Bush Institute - Excerpt

http://slidepdf.com/reader/full/the-4-solution-by-the-george-w-bush-institute-excerpt 2/10

7/31/2019 The 4% Solution by the George W. Bush Institute - Excerpt

http://slidepdf.com/reader/full/the-4-solution-by-the-george-w-bush-institute-excerpt 3/10

UNLEASHING THE ECONOMIC GROWTH

AMERICA NEEDS

Foreword by George W. Bush

Introduction by James K. Glassman

Edited by Brendan Miniter

7/31/2019 The 4% Solution by the George W. Bush Institute - Excerpt

http://slidepdf.com/reader/full/the-4-solution-by-the-george-w-bush-institute-excerpt 4/10

Copyright © 2012 by the George W. Bush Foundation

 All rights reserved.

Published in the United States by Crown Business, an imprint of theCrown Publishing Group, a division of Random House, Inc., New York.

 www.crownpublishing.com

CROWN BUSINESS is a trademark and CROWN and the Rising Sun colophonare registered trademarks of Random House, Inc.

Crown Business books are available at special discounts for bulk purchases forsales promotions or corporate use. Special editions, including personalized covers,excerpts of existing books, or books with corporate logos, can be created in large

quantities for special needs. For more information, contact Premium Sales at(212) 572-2232 or e-mail [email protected].

Library of Congress Cataloging-in-Publication Data is available upon request.

ISBN: 978-0-307-98614-6eISBN: 978-0-307-98615-3

Printed in the United States of America 

Book design by Lauren Dong 

10 9 8 7 6 5 4 3 2 1

First Edition

7/31/2019 The 4% Solution by the George W. Bush Institute - Excerpt

http://slidepdf.com/reader/full/the-4-solution-by-the-george-w-bush-institute-excerpt 5/10

Contents

Authors  vii 

ForewordGeorge W. Bush  xi 

Introduction: We Can Do ItJames K. Glassman  xv 

Chapter 1 Why We GrowBrendan Miniter  1

Chapter 2 Incentives

W. Michael Cox and Richard Alm 8Chapter 3 The History and Future of Economic Growth

Robert E. Lucas Jr. 27 

Chapter 4 More Time on the JobEdward C. Prescott 42

Chapter 5  At Home in the Great RecessionSteven Gjerstad and Vernon L. Smith 50

Chapter 6 Spending, Taxes, and Certainty: A Road Map to 4%

Kevin Hassett 80

Chapter 7 Sound Money, Sound Policy David Malpass 94

Chapter 8 Not All Growth Is GoodMyron Scholes 108

Chapter 9 Entrepreneurs and Creative DestructionPeter G. Klein 116

Chapter 10 Baseball’s Answer to Growth

Robert Litan 127 

Chapter 11 The Role of Intangibles

7/31/2019 The 4% Solution by the George W. Bush Institute - Excerpt

http://slidepdf.com/reader/full/the-4-solution-by-the-george-w-bush-institute-excerpt 6/10

vi  Contents

Chapter 12 The Virtuous CycleMaria Minniti 159

Chapter 13 Growth Needs TradeCarlos Gutierrez 174

Chapter 14 Market-Friendly Energy Steven F. Hayward and Kenneth P. Green 189

Chapter 15 Social Security Reform and Economic GrowthCharles Blahous and Jason J. Fichtner  204

Chapter 16 Education Quality and Economic GrowthEric A. Hanushek 226

Chapter 17 When Illegals Stop Crossing the BorderGary S. Becker  240

Chapter 18 Immigration and GrowthPia M. Orrenius and Madeline Zavodny 245

Chapter 19 How Technology Can Lead a BoomFloyd Kvamme 261

Chapter 20 Growth Lessons from Calvin Coolidge Amity Shlaes 279

Chapter 21 The Moral Imperative of a Free Economy Michael Novak 287 

Notes 301

Index 327 

7/31/2019 The 4% Solution by the George W. Bush Institute - Excerpt

http://slidepdf.com/reader/full/the-4-solution-by-the-george-w-bush-institute-excerpt 7/10

Foreword

By George W. Bush

The United States economy has long been characterized by periods of strong and sustained growth, interrupted by brief, periodic recessions

that ultimately give way to renewed economic expansion. Between

1983 and 2008, America enjoyed twenty-five years of nearly continu-

ous and often explosive economic growth, interrupted only by brief 

recessions. The downturn that followed the financial crisis in 2008 was

more sudden and severe than many recessions, but we have every rea-

son to believe that like every other economic disruption in our history,

it can be followed by a return to robust growth.

 While the causes of the 2008 crisis will be debated by scholars for

decades to come, we can all agree that excessive risk-taking by finan-

cial institutions, irresponsible decisions by lenders and borrowers, and

market-distorting government policies all played a role. The question

now is which policies we should adopt to fix the problems, speed the

recovery, and lay the foundation for another long, steady expansion.

That is the topic of this book. In the pages that follow, leading eco-nomic thinkers offer ideas on how to revive the economy. Guiding their

 work is the belief that the solution to today’s problems is sustained and

significant economic growth and that the surest path to that growth is

free markets and free people.

To get ourselves on that path, we first need to recognize the power

and importance of free enterprise. Every economic system has its short-

comings, but free-market capitalism offers the most efficient and just

 way to order an economy. At a fundamental level, such a system allowsindividuals to decide the course of their own lives. By making deci-

7/31/2019 The 4% Solution by the George W. Bush Institute - Excerpt

http://slidepdf.com/reader/full/the-4-solution-by-the-george-w-bush-institute-excerpt 8/10

 xii  Foreword

economy. And as they make decisions about what level of education to

attain, where to work, and the purpose of their lives, they earn the dig-

nity that comes from using their God-given talents and the pride thatcomes from contributing to the productivity of our nation.

In a free-market system, individuals from humble beginnings can

rise to become leaders in their chosen fields. For an example, consider

Vernon Smith, one of the authors in this book. His family moved to

a farm when he was a boy during the Great Depression to ensure that

they would have enough food to eat. From there he worked hard, got

into college, and built a successful career. In 2002 he won the Nobel

Prize in Economics.Looking over the course of history, we can see that free-market cap-

italism has done more than any other economic system to raise living 

standards across the globe. Free-market capitalism rebuilt Japan and

 Western Europe after World War II. It made Hong Kong into a global

economic competitor. And it built the United States into the strongest

economic power in world history.

 At the other end of the spectrum, governments that try to control

their markets often face debilitating shortages, or worse. For example,

Iran is an oil-rich country. But under the rule of a theocratic govern-

ment, it struggles to provide refined gasoline to its people. Similarly,

Cuba is a fertile island that has historically been rich in sugar cane. Yet,

under the rule of the Castro brothers, food—even sugar—is rationed.

In North Korea, a country ruled by a backward Stalinist regime, mil-

lions starve while their neighbors living under a free-market system in

South Korea enjoy the fruits of a thriving, modern economy.The most successful free-market economies trade freely with other

nations. And so the path back to prosperity also requires America to

keep its markets open and remain engaged with the world. Isolation-

ism is shortsighted and dangerous. We learned that lesson the hard way 

during the Great Depression when policy makers imposed the Smoot-

Hawley tariffs. The result was that we weakened our economy at a time

 when events were leading to a world war.

The record is clear. A nation’s prosperity depends on where it fallson the spectrum of economic freedom. Capitalist countries have shown

7/31/2019 The 4% Solution by the George W. Bush Institute - Excerpt

http://slidepdf.com/reader/full/the-4-solution-by-the-george-w-bush-institute-excerpt 9/10

Foreword   xiii

that free markets are the surest path to economic growth, opportunity 

for all, and a just system based on human dignity.

So part of the mission of the George W. Bush Institute, a new policy center in Dallas, is to promote economic growth at home and freedom

abroad. All people desire to be free, to have a voice in picking their

political leaders, and to determine their own destiny. And when we

do well economically, we encourage others to adopt policies that will

lead to their own prosperity and enable them to become strong trading 

partners.

One common theme of The 4% Solution is that with the right poli-

cies America can be robust again, and the United States can continueto be the strongest economic power in the world. I thank the brilliant

economic thinkers who have contributed to this book for providing 

key insights that policy makers can use to revive our economy. As they 

spell out in the pages that follow, innovation is the heart of economic

growth. We’ve led the world in developing new technologies and new 

ideas, and we can continue to do so. Our people are industrious and

creative, our universities are the best in the world, and our markets are

capable of supporting a resurgent economy. We’ve seen the resilience of 

this country before, and we will see it again. Our brightest days reside

not in the fading light of past success, but on the horizon of our future.

7/31/2019 The 4% Solution by the George W. Bush Institute - Excerpt

http://slidepdf.com/reader/full/the-4-solution-by-the-george-w-bush-institute-excerpt 10/10