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The question we should all ask is: What would make this economy grow? What has stopped it from growing much over the last few years - indeed over much of the last decade?

One theory heard a lot these days is that the economy is burdened by excessive government regulation, interference and taxes. Cut them, the Republican candidates all say, and the economy will be unleashed.

It's a compelling picture, but the data simply do not support it.

The Organization for Economic Cooperation and Development (OECD) released a study last week measuring tax revenue as a percentage of GDP. Of the 30 countries studied, the United States came in 27th. Taxes are low in historical terms as well - the lowest since the early 1950s.

The Kauffman Foundation, which looks at the level of U.S. entrepreneurship, found that in 2010, 340 out of every 100,000 Americans started a business each month. That rate hasn’t changed much in the past few years; it is only slightly higher than in 2007, before the recession. Regarding regulations, Bloomberg News has crunched the numbers and found that the Obama administration has not reviewed or issued significantly more rules than its predecessors.

Or look at competitiveness. The World Bank publishes a report that looks at "Doing Business" across the globe. The U.S. ranks 4th in the world. The World Economic Forum does an annual ranking of overall economic competitiveness. The U.S. ranked fifth. In both these rankings, the countries that score higher are tiny places like Singapore and Finland, with populations often at 5% that of the United States.

And these rankings have not slipped much over the last decade. So where has there been change? Where have we slipped?

The answer is pretty clear. Only five years ago, American infrastructure used to be ranked in the top 10 by the World Economic Forum. Now we're 24th. U.S. air infrastructure has gone from 12th in the world to 31st - roads from eighth to 20th.

The drop in human capital is even greater than the drop in physical capital....(Read on or watch the video through the link below)
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It's all in the generational demographics, combined with too much debt leveraging. Read Harry S. Dent's latest book. He lays it all out and backs it up quite nicely.
We were sold the idea that the stimulus package was going to rebuild our infrastructure but it doesn't seem like enough of the package was targeted towards infrastructure .
I´m not an American and I think that your points are valid in general, not only for the US. Day after day, we can hear our politicians talking and talking about the same: "we will take this amount of money, we will move them from here to there and the crisis will go away" or "let´s do this and that with our budget and the crisis will disappear". In other words, they are talking only about technical measures. They believe that the problem is in the system (and just in the details) but it´s not the main point. Either they don´t understand or the are feared to say that Europe is in crisis because of Europeans and problems of America are caused by Americans. When JFK told Americans that "we choose to go to the moon in this decade and do the other things, not because they are easy but because they are hard", he was loved by them and they did their best to achieve their common goal. Today, polician who will say that we should do something because it is not easy but because it is hard will be hated and he will lose the next election. That is the main point.
Excellent points. Right on target. Thank you for posting this and helping to dispel the myth!
Very informative. I wish our political candidates looked for advice from people like yourself. People who are not affiliated as deeply as a politician and can see the a much clearer picture. Thank you.
Great article, +Fareed Zakaria. The answers we should all provide is: progressive taxation -- -- and income equality: (can you believe how much damage that one mistake of Art Okun has wreaked on the world until the IMF caught it three months ago? It's not fixed yet, and we depend on journalists to perform the retraction.)
I agree we also need to focus on repairing and creating more #infrastructure
This spectators' gallery is obviously the place to come for some very heavy tautology and toxic oxymorons: "generational demographics" mixed with "leveraging debt"???
It's just too bad that in our political discourse, ideology has taken over science and evidence-based approaches. Thank you Fareed for doing your part, and for doing it greatly.
It wasn't too ago that a story came out how the Swiss had spent billions boring out a rail tunnel that would cut out the need for haul trucks going over mountain routes with the associated weather risks, etc. Commerce would be more efficient and environmentally cleaner. The key thing was a small country making a huge investment to be more productive and ready to expect a long term repayment on the investment. That is how you stay competitive. Perhaps the biggest drain on theUS economy is terror for taking on risk especially in a litigeous environment. Thats got to be a shot to the GDP that could be done without.
I usually agree with almost every word you utter Mr. Zakaria. However, I disagree with the question. I think the question "how can we make this economy grow?" and "what has stopped it from growing?" are the wrong questions to be asking. I do not think growth is our problem in this country, I believe efficiency and sustainability are our problems. We used to be able to adjust to the times that lie ahead of us, but now we have a hard time making the adjustment into the future. I believe part of the problem stems from those questions that you pose. I believe they are holding us back.
+John Celestin You are so right! Our country's (and world) leaders are directing all of their energies (and our precious resources, both capital and human) toward "getting back to where we were" and continuing the growth. It is a backward-looking approach and unrealistic, and is making the ultimate solution so much harder when precious time is being wasted going in the wrong direction. Leadership is supposed to be forward-looking. Our world today is very different from the 20th century that we've all come to know and love and get fixated/stuck on.
I wish you would start making greater use of Google+. I think that many of the people who really appreciate the intellectual level of your work are evolving to Google+
I concur with +Dan Atkins . I follow on FB but would rather follow on here to discuss with my "Politico" circle. :-)
It's not about a president , a Congress, or a senators ...American school system is fail when u go around American high school, college, and university u will be surprise what's going on ... ... our education system is not fix, it will be another disaster for this country ....
the problem the western world are facing is that in order to get more interest and money they invest more in order country and therefore creating jobs and ventures outside their wold and therefore killing their own economy with no jobs
Its the domestic & foreign policies that incentivise outsourcing of jobs, growth of the financial sector & financial derivatives at the expense of working capital used for real growth & real investment. Why invest in a mature U.S. middle-class, when a global company can pursue & invest working capital in rapid growth of emerging economies, while within the U.S., they can make more, with less risk in the financial sector without expending working capital on real investment of a mature, slow growth U.S. sector.
The real burden on the US economy is politics. Mr. Soros told you that if Republicans get to the White House, they will adopt more or less the line President Obama is following. The ultimate winners will be the questionable corporates. State funding of elections in democracies is probably the best solution but there is no guarantee that this, too, will not get corruputed.
Fareed - no new posts since December 11, 2011? Take time out from Facebook, and talk to us at Google+ too....
How can create a relation between economy and democracy for all the of the world? PLEASE WATCH ISRAEL AND PALESTINE FROM SPACE BEFORE EACH ANSWER. iran
+Fareed Zakaria any chance of the occasional On Air Hangout? That would be something worth seeing! Make sure it's Europe-friendly, please :-)
Regulation has almost nothing to do with holding back the economy. Supply and demand has everything to do with it. Let's not forget, the consumer in America drives 2/3 of the economy....not rich people or businesses. Until we encourage businesses to hire more people, nothing will change. 7 of 10 jobs, I have heard, are created by small business. These are not millionaires in most cases nor people held back by taxes. They are held back by demand. That being said, the Republicans in the House killed Obama's Job's Act that would have cut their taxes.

What we need is two things: global confidence and supply and demand. We need Europe to continue on its positive course, and the US to open up more trading partners and continue to push for fair trade. We have businesses sitting on over $2 trillion in cash and Wall Street has made record profits since 2009. We are in a great position, in terms of business. If corporations like Google paid only 2.4% in taxes in 2010, or GE who paid zero taxes, how is lowering taxes and regulation going to increase business or hire more Americans? Its not. We do need to push business to hire Americans by keeping in place the regulations and tax breaks that encourage jobs because its that group and trade that will drive our economy. But that falls on us getting more business through trade and trading with countries that play fair, not just tax breaks.
In other words, regulation, no matter the size of its role, has something to do with the economy. Self-regulation is best but given the fear of losing control, it does not work. An outside agency---never the government---is best provided the integrity of that agency is unquestionable.
Hey Fareed! Do you seen the more of 50.000 fans of Corinthians in Yokohama today??? Our SECOND FIFA Club World Championship (2000 and 2012)... Corinthians still a small club ?? Corinthians is the bigger club from Brazil!!! It is right! xD
American Investment

Conservative Efforts to "starve the beast" mean less money going to and through the government, which in turn means less investment in America's Infrastructure and its People.

What do people think the government does with our tax money? They spend it. Where? On Americans! I'll take the possibility of government waste over corporate oligarchy any day. I at least get to vote for my government, but have no say on corporate behaviour.

Bottom line: We must invest in our future if we expect to have a future we want to live in.

#economics #investment #America #domesticpolicy #taxes
Hope he updates here as often as Facebook profile...
Just "Unfollowed" Mr. Zakaria on Facebook with the intention to only have friends I actually know there. I'm slowly Unliking all fan pages also. Simplify.
I think he gave up long ago. But he changed his mind about the war, he might change it about G+.
Over taxation and regulation is certainly not the cause of the slow/no growth.  Under investment in infrastructure and people is the problem.  But how to accomplish that?  No suggestion was given here.  I suggest the sound and well proven in practice concept of shifting taxation from earned incomes to unearned incomes/values especially private ownership of land and natural resources.  This first will remove the clear disincentive of destructive taxation on earned incomes from labor (this would call the conservative/Republican bluff regarding lowering of taxation) and real capital invested in the real economy and second could  provide more than enough non-incentive destroying public revenue to pay for public infrastructure and development of human capital.  
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