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 But what started as a casual suggestion during a 2010 conference
call with advisers to the George W. Bush Institute, a public policy
center in Dallas, has now become the central economic idea of Bush's
developing run for the White House. Details of the call were
recounted by one of the participants to Reuters.
The goal is ambitious: 4 percent growth is well beyond the U.S.
average since World War Two and nearly double what many economists
regard as the country's current potential. Nevertheless, the idea
has become the frame for a series of Bush proposals, ranging from
bread-and-butter tax reform to a wholesale rewrite of immigration
law.
Asked by Reuters during a campaign-style stop in New Hampshire on
Thursday how he had arrived at the figure, Bush said: "It's a nice
round number. It's double the growth that we are growing at. It's
not just an aspiration. It's doable."
Bush faces a crowded field of Republican presidential hopefuls whose
economic ideas range from Kentucky Senator Rand Paul's
crack-down-on-the-Fed monetary policies to Wisconsin Governor Scott
Walker's tough line against unions. New Jersey Governor Chris
Christie echoes Bush's 4 percent goal.
 If, as widely expected, Bush runs for the White House he will have
to position himself as the best candidate, Republican or Democrat,
to restore lagging wage growth for middle- and lower-income
families.
"Fixing how we tax and how we regulate, and embracing an
economically driven immigration system rather than a family-oriented
immigration system," are key steps towards achieving that economic
growth goal, Bush said on Thursday. "Dealing with the fiscal
challenges of Washington that create uncertainty and embracing the
energy revolution," would also help the economy achieve 4 percent
growth.
"A rising young aspirational population combined with continued
productivity could get you to 4 percent,” he said.
CONFERENCE CALL
That ambitious goal was first raised as Bush and other advisers to
the George W. Bush Institute discussed a distinctive economic
program the organization could promote, recalled James Glassman,
then the institute's executive director.
"Even if we don’t make 4 percent it would be nice to grow at 3 or
3.5,” said Glassman, now a visiting fellow at the American
Enterprise Institute. In that conference call, “we were looking for
a niche and Jeb in that very laconic way said, 'four percent
growth.' It was obvious to everybody that this was a very good
idea."
The goal, embraced by the institute, quickly took on a life of its
own. By April 2011 there was a conference in Dallas and subsequent
book of essays, "The 4% Solution," in which Nobel economists like
Robert Lucas and Edward Prescott dissected what it might take.
They mapped out the pitfalls of high taxes and how that seemed to
discourage work in Europe, while others like economist Peter Klein
criticized the U.S. Federal Reserve's easy money policies for
creating an uncertain world for entrepreneurs.
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Still, Prescott acknowledged, while 4 percent growth was
"reasonable, even modest" for an economy recovering from a deep
recession, 3 percent was the country's "maintainable" rate of
growth.
MAKING THE PIE BIGGER
Bush's focus on 4 percent is an attempt to "focus away from more
divisive issues to something everyone can agree with ... Don't argue
over dividing the pie, make the pie bigger," said Barry Bosworth, an
economist and senior fellow at the Brookings Institution.
The problem, Bosworth said, is that the goal is "disconnected to
reality," with productivity lagging and the rush of baby boomers to
the pension rolls leaving comparatively fewer workers behind to
expand the economy.
Four percent growth is not unheard of in the United States. It has
happened in 27 of the years since 1947. The last such period of
growth was during the Clinton administration in the 1990s when there
was controlled inflation, high productivity and strong investment
surrounding the expansion of the Internet.(Graphic:
http://link.reuters.com/quv74w)
But it is not the norm. The average since World War Two has been
just over 3 percent. Current models of the U.S. economy used at the
Fed, for example, see long-term trend growth even lower, at just
over 2 percent as pension rolls swell, productivity lags, and U.S.
businesses and workers compete in a more fully globalized world.
Stanford University economist John Taylor, known for his
contributions to monetary policy and central banking theory and
considered a possible high-level appointee in a Republican
administration, said 4 percent growth was possible if one melded the
best of the Reagan and Clinton years – a combination of
deregulation, tax and entitlement reform, and shrinking federal
deficits.
In both of those administrations, the economy was at or above 4
percent at least half the time, and “that is evidence that things
could be like that again,” Taylor said in an interview.
(Reporting by Howard Schneider and Steve Holland, editing by Ross
Colvin)
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