The shutdown heralds a new economic norm

Slow economic growth now imperils this postwar order. Credit standards have tightened, and more Americans are leery of borrowing. Government spending — boosted by an aging population eligible for Social Security and Medicare — has outrun our willingness to be taxed. The mismatch is the basic cause of “structural” budget deficits and, by extension, today’s strife over the debt ceiling and the government “shutdown.”

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The temptation is to think that stronger economic growth will ultimately rescue us and make choices easier. This is economic growth’s appeal. It provides the extra income to buy more of what we want. We explain the weak economy as the hangover from the financial crisis and the Great Recession. Their legacy of caution and pessimism will, with time, dissipate. The economy will strengthen. This is plausible.

But it’s equally plausible that slow growth will persist. We rebel at the notion. As economist Stephen D. King writes in his book “When the Money Runs Out: The End of Western Affluence”:

“Our societies are not geared for a world of very low growth. Our attachment to the Enlightenment idea of ongoing progress — a reflection of persistent postwar economic success — has left us with little knowledge or understanding of worlds in which rising prosperity is no longer guaranteed.”

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