What Rates of Economic Growth Could Better Economic Policy Produce Over an Eight-Year Presidential Term?

The rate of growth of U.S. economic potential is currently something like 2.4%/year. The 1/e time for the economy’s convergence to its long-run steady-state growth path is roughly twenty years–that is, the economy will close roughly 5% of the gap between its current potential and its long-run steady-state growth path a year. A huge institutional reform–one that was completely successful, and had a much broader impact than an ObamaCare–that raised the long-run productivity of the American economy by 20% would thus raise the growth rate over a president’s tenure in office from 2.4% to 3.4%. And that is far outside what we can expect to follow from any set of even the most far-reaching and successful changes in policy.

For unreasonably optimistic assessments of the benefits of the FAIR tax, I believe the boost to growth is 0.2%-points per year.

Thus over at Twitter, Justin Wolfers and others:

Huckabee asked about how to get Jeb!-style 4% econ growth: "I believe we can get it to 6% or higher with the FAIR Tax."

— daveweigel (@daveweigel) August 13, 2015

@daveweigel Trump: 5% is is fore losers. We'll 10% growth under President Trump.

— Jeet Heer (@HeerJeet) August 13, 2015

It's an auction, not an election! https://t.co/zcdLuN4WtJ

— Justin Wolfers (@JustinWolfers) August 13, 2015

If you can find an economist willing to say that your plan will create 4%, 5% or 6% growth, then you're not talking to an economist.

— Justin Wolfers (@JustinWolfers) August 13, 2015

.@JustinWolfers doesn't @johnhcochrane have a plan for 4%/yr RGDP growth in the United States that does not involve massive immigration? :-)

— J. Bradford DeLong (@delong) August 13, 2015