Bob Gordon and I have been friends since I was a graduate student, with a tradition of regular annual dinners. He’s a giant in the field of economics and his book, The Rise and Fall of American Growth is a tour de force. However, we’ve long disagreed about the potential of digital technologies and prospects for growth going forward.
4. The aggressive fiscal and monetary policy that started with the last administration and continues with this one, driving down labor slack, boosting wages, and creating new incentives for productivity gains. For most of the past decade, the government ran the economy with a lot unused labor capacity and inflation often below the Fed’s target level. Congress has begun pushing the accelerator with a series of large tax cuts and stimulus packages, while the Fed kept rates low. As the economy runs hotter, it becomes harder to find workers and more attractive to harvest some of the productivity potential of new technologies.