How Congress can be productive

A theme in Washington’s debates is the need to boost economic productivity. But first Congress must be more efficient itself in agreeing on policies to do just that.

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If a quiet theme can be found in Washington’s debates over taxes, trade, budgets, and regulations, it is the difficulty of settling on actions that will bring back the high productivity that the United States enjoyed just 20 years ago. Productivity growth, or a rising output per worker, has slowed, as it has in much of the world, reducing living standards. What can bring it back?

The first step is for elected leaders to focus on ways to foster innovation, such as investments in education, infrastructure, and research. One model for such a singular political focus is New Zealand. In 2010, it set up a Productivity Commission that reviews government actions on their ability to boost the productivity of people, ideas, and capital.

For the world at large, the International Monetary Fund plays a similar role. In a new report, titled “Gone with the Headwinds: Global Productivity,” the IMF offers up a long list of solutions that should ignite a bipartisan consensus in Congress. With the US economy slowing down in 2017, the report is a must read for lawmakers on ideas. Two examples: better tax incentives for young tech firms and better support to help older workers retrain for jobs in new industries.

In a recent speech, IMF Managing Director Christine Lagarde drove home the point: “If productivity growth had followed its pre-2008 crisis trend, overall GDP [gross domestic product] in advanced economies would be about 5 percent higher today. That would be the equivalent of adding a country with an output larger than Germany to the global economy.”

Today’s economies need more than new technologies, such as robots. Innovation in the workplace also requires more certainty and direction from government – such as on taxes, trade, and regulation. “Leaning back and waiting for artificial intelligence or other technologies to trigger a productivity revival is simply not an option,” says Ms. Lagarde.

The US has long led the world in productivity growth, largely because of its flexibility and openness to new ideas, migrants, and global competition. Today’s American worker needs to work only about 17 weeks to enjoy the real income of the average worker a century ago. That progress need not slow if US leaders practice their innovation by working together on ways to raise productivity.

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