September 11, 2011
Gregory Mankiw says that the economy’s big problem is a lack of investment in equipment and software. And, he has some remedies that he suggests for President Obama. He is pushing tax reform, more NAFTA-style trade agreements, reduced regulation and weakening the power of workers.The general story is that we want to be even more business friendly.
Of course we did have a president who tried being business friendly. His name was George W. Bush. Gregory Mankiw should remember him since he was President Bush’s chief economist for several years.
Let’s compare the track record on investment in equipment and software. At its peak before the recession, investment in equipment and software was 8.0 percent of GDP. At 7.4 percent of GDP in the most recent quarter, this category of investment has bounced back from its low in 2009 of 6.4 percent, but still has not made it back to the pre-recession peak.
But this still looks pretty good compared to the record under President Bush. The pre-recession peak share was 9.6 percent in 2000. The share continued to fall through the first three years of the Bush presidency, hitting 7.6 percent in 2003 and then stayed pretty much flat through the rest of the Bush presidency.
Source: Bureau of Economic Analysis.
Given this track record, it seems like Mankiw might be giving advice on how to boost to investment to the wrong president.
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