To The Daily Sun,
Paul Krugman wrote an article about 20 years ago titled, "The Myth of Asia's Miracle". In it he made some observations that are still valid. Growth in any economy is the result of increases in labor force participation and productivity. The main drivers in labor force expansion are demographics and education. The main drivers for productivity are capital and technology. Without those factors an economy cannot expand.
The population of New Hampshire is growing at 0.35 percent per year based on the information from 2014. The growth is made up of 0.11 percent from natural change (births less deaths) and 0.24 percent per year net migration (comings less goings). About 47.75 percent of the residents of the state are currently employed. The population under 18 is 20.4 percent of the total which decreased 5.6 percent in 2014. The population age 65 and older is 15.4 percent of the total which increased 11.2 percent in 2014. New Hampshire's working age-population — those aged 18 to 64 — is the remaining 64.2 percent of the total which decreased by 1.4 percent in 2014.
What these statistics tell us is that our working-age population is getting smaller. Our population is getting older fast. The working-age population is being eroded from both ends, meaning fewer young people are entering the works force here and more older people are exiting the workforce. The number of people working to pay for promised governmental benefits is declining. Productivity must rise to avoid the need for decreasing benefits levels or raising taxes.
Our governor wants tax receipts to rise so that she can be seen to be giving us more, which is why she vetoed the state budget. The problem with her economic approach is New Hampshire's economy has structurally limited expansion capacity. We know we have declining labor participation. The governor wants to add tax payment which decreases investment and leads to erosion of productivity. Her vision for New Hampshire amounts to a guarantee of more and deeper levels of poverty. It is unsustainable. It may make for an opportunity for demagoguery when running for office, but it is bad economics and worse policy.
- Category: Letters
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