It’s probably a case of too little, too late.
When Joe Biden spoke Wednesday at the annual World Economic Forum in Davos, much of the headlines were about his comments on Russia. Biden thinks Russia has meddled not just in America, but is also looking to influence elections around the world.
But also tucked into Biden’s speech was a plan that could boost American productivity at a time when that one-time engine of economic growth has stagnated. Indeed, weak productivity growth has been a problem not just for the U.S. economy, but everywhere. That slump has stumped economists, especially at a time when there have been big advances in the types of technology, like artificial intelligence, that seem designed to boost productivity. That’s led some economists to ask whether we are measuring productivity correctly.
Surprisingly, the productivity question doesn’t get much airtime at Davos. Perhaps that’s because there is a strong belief here that technology is improving the world, and the lack of productivity results goes against that narrative. There is one panel on Friday focused on productivity, featuring Nobel prize-winning economist Robert Shiller, but it’s not a featured panel.
Biden’s view is that productivity is a problem, and the solution is an improvement in workforce training, namely through formal education. Biden’s plan is for the U.S. to pay for a free 2-year community college education for any American who wants it. Biden says the move could improve U.S. productivity by 0.2% through improved skills. That would be a meaningful increase from where we are now. In the U.S., year-over-year productivity growth fell below 1% in the middle of 2016, the first time that has happened since the mid-1980s.
Biden says the plan would cost $6 billion. How would he pay for it? By closing a loophole in the estate tax that allows capital gains to flow to descendants tax free. Biden says the loophole costs the government $17 billion a year.
Of course, this is unlikely to happen now. As Biden noted yesterday, he only had 48 hours left on the job. Donald Trump wants to eliminate the estate tax completely, not raise it. What’s more, the only candidate talking about free higher education was Bernie Sanders.
But, hey, at least someone among the global elite is talking about a plan to somewhat fix the productivity problem. That’s a start.