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September 2012 Brief: Volume 19, Number 26

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The Solution to Economic Growth


by John Hendrickson



The George W. Bush Institute, which is a policy research organization associated with the Bush Presidential Center in Dallas, Texas, has recently put forth a pro-growth economic agenda that has the goal of achieving a 4 percent growth of the American economy.[1] The economic policy blueprint to achieve 4 percent growth is outlined in the recently published book The 4% Solution: Unleashing the Economic Growth America Needs. The 4% Solution is part of the Bush Institute’s 4% Growth Project, which is directed by Amity Shlaes, who also serves as a Senior Fellow and author of a forthcoming biography of President Calvin Coolidge.[2] This landmark book provides fundamental economic ideas that will bring an end to the Great Recession and create economic growth in the economy.


The United States economy is in critical condition in the aftermath of the Great Recession. The economy is growing at a very anemic rate of 1.5 percent. Unemployment continues to remain high at 8.3 percent and “if the millions who have stopped looking for work because they can’t find any were still counted, the real unemployment number would be closer to 17 percent.”[3] The massive level of government spending during President Barack Obama’s administration not only has failed to restore the economy, but also places the nation’s economic future in jeopardy. The federal government is currently spending over $3 trillion and operating without a budget. The national debt is over $16 trillion, the government is running annual trillion-dollar deficits, and entitlement programs continue to threaten the fiscal future of the nation.


This also includes the many regulatory policies such as Dodd-Frank and the Patient Protection and Affordable Care Act, which is causing much uncertainty over the economy. In addition to the massive increase in regulations and the impact of the Affordable Care Act, the economy is also facing tax uncertainty as the nation approaches the “fiscal cliff” in January 2013. In January 2013 a number of tax increases will take place, including the expiration of the Bush-era tax cuts, which will impose a $500 billion tax increase on the economy. The fiscal cliff is causing much uncertainty in the economy as individuals and businesses are not sure what will occur in regard to tax rates and other economic policies. This tax increase would not only lead to continual slow economic growth, but even lead the economy back into recession.


The 4% Solution offers ideas to not only avoid falling back into recession, but to create an economy based upon growth and prosperity. Historically the economy has experienced the ups and downs of the business cycle as symbolized in the 20th century with the depression of 1920-1921, the Great Depression, and the small and large recessions of post-World War II America. “Since the end of World War II, the United States has grown at an average rate of 3 percent annually,” noted James K. Glassman, Executive Director of the George W. Bush Institute.[4]


The 4% Solution argues that not only can the national economy grow over 3 percent, but actually with the right policies can grow by 4 percent. The distinguished authors of the book, which include several notable economists, argue that the values of the United States, including its political and economic heritage centered on the Constitution and capitalism, is a source for economic growth. As an example, noted economist Robert Lucas writes that “over the entire 1870-2008 period shown here, living standards have multiplied by 13, from $2,500 per person in 1870 to more than $32,000 today.”[5]


Although The 4% Solution offers a number of solutions dealing with the numerous economic troubles as a result of the Great Recession, the book argues that tax reform, spending reductions, paying down the debt, and a stable and strong dollar are key policies to achieve 4 percent growth. Kevin Hassett, a Senior Fellow at the American Enterprise Institute, argues that in order to establish certainty in the economy policymakers must start initiating debt reduction and tax reform.[6] It is policy uncertainty that is causing the economy to be hesitant in regard to investing and job creation, which means that individuals are also cautious in the economy.[7]


David Malpass, President of Encima Global LLC, argues that economic growth is initiated by not only a strong dollar, but also by “low tax rates, sensible trade and regulatory policies, a market-based allocation of labor, and limited government in terms of spending, debt, and federal control of the economy.”[8] Amity Shlaes provides historical evidence from Presidents Warren G. Harding and Calvin Coolidge, who followed policies rooted in limited government and achieved fundamental economic growth with low unemployment.


Shlaes argues that the policies of Harding and Coolidge led to a period of economic expansion with a 3.48 percent growth rate.[9] Both Harding and Coolidge also pushed for significant tax and spending reductions, which turned the economy from a severe depression in 1920-1921 to a period of economic expansion. “In the United States, we can build on our strong traditions and principles — the rule of law, the Constitution, a history of fast growth, a confident culture,” wrote Malpass. These were the principles that guided both Harding and Coolidge, and later President Ronald Reagan, who utilized constitutional policies to create economic prosperity.


The 4% Solution is a landmark book that is filled with ideas by leading experts to guide policymakers in forming policies to restore a strong national economy. The ideas outlined in The 4% Solution all formulate around constitutional principles, which is important to restoring the United States. “The solution is a four percent growth renaissance based on ageless American principles of sound money, low tax rates, limited federal government…,” wrote Malpass.[10] The United States cannot afford to backslide further from constitutional principles, and it is time to repent and return back to the doctrines of constitutionalism.


[1] The 4% Solution: Unleashing the Economic Growth America Needs, edited by Brendan Miniter, New York, Crown Business, 2012.
[2] Ibid.
[3] Editorial, “Obama says his plan has worked, but the data say no,” Investor’s Business Daily, July 26, 2012, <> accessed on July 27, 2012.
[4] James K. Glassman, “Introduction: We Can Do It,” The 4% Solution: Unleashing the Economic Growth America Needs, p. xv.
[5] Robert E. Lucas, Jr., “The History and Future of Economic Growth,” The 4% Solution: Unleashing the Economic Growth America Needs, p. 29.
[6] Kevin Hassett, “Spending, Taxes, and Certainty: A Road Map to 4%,” The 4% Solution: Unleashing the Economic Growth America Needs, pp. 81-91.
[7] Ibid., p. 91.
[8] David Malpass, “Sound Money, Sound Policy,” The 4% Solution: Unleashing the Economic Growth America Needs, p. 94.
[9] Amity Shlaes, “Growth Lessons from Calvin Coolidge,” The 4% Solution: Unleashing the Economic Growth America Needs, p. 281.
[10] Malpass, p. 107.


John Hendrickson is a Research Analyst with Public Interest Institute, Mount Pleasant, Iowa. Contact him at


Permission to reprint or copy in whole or part is granted, provided a version of this credit line is used:"Reprinted by permission from INSTITUTE BRIEF, a publication of Public Interest Institute." The views expressed in this publication are those of the author and not necessarily those of Public Interest Institute. They are brought to you in the interest of a better-informed citizenry.




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