|Asian giant's economic expansion reveals need for pro-growth policies|
6:18 p.m., Friday, June 3, 2011
The International Monetary Fund (IMF) predicted in its latest World Economic Outlook that China will overtake the United States as the world's largest economy as early as 2016. IMF economists believe the Chinese economy would by then reach $19 trillion, compared to a
It's a bad idea to draw such an expansive conclusion from a single number. Long-term economic forecasts, especially linear predictions such as the IMF's, are notoriously inaccurate. Five years is a long time, and there are indications that
The IMF's gross domestic product (GDP) numbers are in purchasing power parity (PPP) terms, which compare what people spend in real terms at home, rather than in nominal exchange rate terms - the rate at which currency is exchanged in the market. To talk about GDP in the aggregate without talking about how well off the people are is to risk making grave errors. On a per capita basis,
How well the
In recent years, however, our economic freedom ranking has slipped from third place in 2004 to sixth in 2010. This is largely a result of bad economic policy such as our outrageous 39.2 percent corporate tax rate, now the highest among developed nations. The budget deficit has also spun out of control, and the Federal Reserve is about to open the monetary spigot with quantitative easing for the third time since 2008. The federal government's intrusion into markets is increasing at an alarming pace, from automobiles to health care. There are currently three free trade agreements being held hostage.
Continuing these reckless policies, as championed by the Obama administration and congressional Democrats, will help make the IMF's prediction come true. As long as we return to the pro-market, limited government, lower tax principles of our founding, we won't have to worry about any other country knocking us down a peg.