I found this article interesting because some economists are suggesting that the United States is reaching its full productive capacity. It is mentioned that just about everyone who wants a job has one, and offices/factories are operating at full speed. GDP is rising and nearing the Budget Office’s estimated point of the highest “potential GPD” that the United States can reach. In order to break the “potential GDP” limit, an economic boom is needed. Without the boom, “higher growth will translate into inflation, not higher output and outcomes.” The article suggests that in order to break the limit the United States needs to focus on reducing its economic slack.

Slack is created from millions of Americans who are “coaxed” into working in the economy, but are not searching for/wanting to work a job. Other evidence of slack in the United States is that “American companies were operating factories at 75.7 percent of their potential in January. That’s roughly the rate they’ve been for the last five years.” If the United States wants to experience this boom, they need to figure out how to eliminate as much slack is possible. It is suggested that before we develop new office space, we need to focus on filling up the vacant spaces in order to become more efficient. The question is how much slack truly exists in the economy and how can we work on reducing it?

Anonymous said...: This is an interesting and timely article. As you mention, there is a lot of discussion about whether we are reaching our steady state. The idea of "slack" is one potential solution to this steady state. It is interesting that this article includes people being coaxed into working as an inefficiency because it seems as though we are constantly being told that unemployment is a huge problem and people are looking for jobs. We'll see if the conversation changes at all or if as a nation we continue to focus on things like unemployment .; February 26, 2017 at 9:50 PM