Yesterday I argued that the US was not growing faster than the UK because it was enjoying a larger fiscal stimulus. Most of you agreed, but some were extremely sceptical of the quality and sustainability of US growth. Today I wish to look at the factors that are assisting the US growth rate. I understand that there is still too much unemployment in the USA, and that some people’s living standards have been badly squeezed. However, the official figures drawn up under international public sector accounting conventions do show faster growth in the USA last year and this, than in troubled Europe.
Some have rightly observed that the USA now has very cheap energy in the form of low priced gas, thanks to its enthusiastic embrace of shale gas. Mr Obama was dismissive of Sarah Palin’s “Drill baby, drill” remark when asked about energy policy, yet his administration seems to be adopting it as a practical means of cutting energy bills and providing a big stimulus to industry. The Uk needs to pursue cheaper energy policies, as I have often argued here.
The USA is riding the digital revolution well. The US still has that energy and dtermination which produces huge corporations from new technology and new market opportunities. The USA has moved on from the Microsoft generation to the Facebook and Google generations. Large US corporates lead the field. There is in the USA a zest for enterprise and success which is often lacking in Europe.
Government helps reinforce this with lower income and capital gains tax rates than in much of the EU. The top rate of income tax is 35%. The top 1% in the USA pay an even bigger proportion of total income tax than in the UK. The US has a no nonsense regime over out of work benefits and availability to work, which makes the US labour market more dynamic and successful.
The USA fixed their banks more quickly than the Europeans after the Credit Crunch. Businesses and consumers can now get access to credit more readily than in Europe. They allowed house prices to fall further and faster,and wrote off the losses more rapidly.