The National Economy
This chapter will examine the economic implications of the assumptions and scenarios developed in the previous chapter. First, it will trace how the economy unfolds over time. The general range of projections is reviewed, but the focus is on the base case (scenario EL). The chapter then turns to the differences that are introduced in future years by applying different scenarios.
Given the assumptions common to most of our scenarios--in particular, that the U.S. economy returns to an unemployment rate of 4 to 4.5 percent and is able to maintain it from about 1980 onwards and that resource supplies are not interrupted in any major way by such events as wars, embargoes, or self-imposed limitations--the average annual rate of growth in GNP is likely to fall within the range of 2.5 and 3.5 percent. The rate should be more than 3 percent during the first half of the fifty- year period under investigation and less than 3 percent during the second half. This range brackets historic rates of growth--specifically, 3.1 percent from 1925 to 1975 and 3.3 percent from 1950 to 1975--but it is substantially less than the 4 percent rate that was considered the norm during the fifties and sixties or even the 3.6 percent rate estimated to be the potential growth rate between 1965 and 1977 ( CEA, 1977, and Rasche and Tatom, 1977). The expected slowdown from recent decades results from the combined impacts of changes in the rate of growth of the population, and hence the labor force; changes in labor productivity arising from shifts in the composition of the labor force and of output; and a