The world economy needs faster U.S. and European growth as populations age and immigration policies restrict movement of labor needed to raise gross domestic product, U.S. Treasury Secretary Jacob J. Lew said.
Lew, speaking at the Clinton Global Initiative America meeting in Chicago today, said population growth could help U.S. GDP advance annually by as much as 4 percent and boost European economic growth beyond 1 percent a year.
“There are policies they could pursue that would help that, but at the core, the demographics are part of it, and we can improve that with immigration reform,” he said. “I’m struck when I meet with my European counterparts at how low their horizons are in terms of what they think their growth can be because of their shrinking population.”
The Obama administration and Congress’s efforts to craft a new immigration law have run into opposition from Senate Republicans demanding more stringent border controls. President Barack Obama also wants Congress to increase the limit on U.S. borrowing, reached earlier this year, and replace the across-the-board spending cuts known as sequestration.
Those reductions, together with tax increases that kicked in at the beginning of the year, will limit U.S. growth to 2 percent in 2013, said Lew. Next year the economy would grow faster, he said. He urged support for an administration plan to increase spending on infrastructure.
The World Bank yesterday lowered its forecast for the euro-area’s economy this year, predicting a 0.6 percent contraction following a 0.5 percent fall in GDP in 2012 and lower than the bank’s January projection for a 0.1 percent drop.
The U.S. economy will advance 2 percent this year compared with a forecast in January for a 1.9 percent expansion and 2.2 percent growth last year, the World Bank said.
“When I look at where we are and where we need to be, I see unfortunately, some self-inflicted wounds that we’ve had to overcome,” Lew said, referring to the months-long debate between the administration and Congress in 2011 over raising the debt limit.
The U.S. is facing a debt limit confrontation again later this year. The nation is currently near the $16.7 trillion threshold and the Treasury has been using extraordinary measures to avoid breaching it.
“We need to take some of this anxiety out of the economy. So there shouldn’t be another fight over the debt limit,” Lew said. “We shouldn’t have a near-shutdown of the federal government when the fiscal year ends. And we frankly should buckle down and do some of the work to do medium- and long-term deficit reduction so we don’t have the burden of kind of senseless across-the-board cuts weighting down the economy.”
To contact the editor responsible for this story: Chris Wellisz at firstname.lastname@example.org