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Growth Fact #6 of 10: Investing in the Future

April 6, 2012 by STRATeCOMM - We Got Web

The editors of the 4% Growth Project asked Bush Growth Fellow Ike Brannon to look into 10 things that would happen if the U.S. economy grew at 4% each year in real terms for 10 years. We will unveil one growth fact each week. To read all previous growth facts, click here. Growth Fact #6 of 10: If the economy grew at 4% per year, there would be a 1.2 percentage point increase in the aggregate savings rate, making $300 billion available[i] for investment in plant, equipment, and new technology, and laying the groundwork for future economic growth. This is roughly twice what the U.S. spends each year maintaining and expanding its roads.[ii]



[i] A higher savings rate means more money available for investment by companies in plant, equipment, and technology, laying the groundwork for future economic growth — creating a positive feedback loop. People would save more and have more money for their retirement; interest rates for their retirement houses might be lower, too. See Deaton, Angus & Christina Paxson, “Growth and Saving Among Individuals and Households,” Review of Economics and Statistics 82(2), 2000.
[ii] Shirley, Chad, “Spending and Funding for Highways.” Congressional Budget Office, January 2011.