Ramstad: Economic growth is becoming harder to achieve, but the U.S. has been managing it

The International Monetary Fund last Tuesday lowered its forecast for 2025 global economic growth more than it did after Russia invaded Ukraine, and the muted reaction to the news underscored something I’ve suspected for a while.

No one cares about growth anymore.

OK, obviously that’s not true, but it feels that way. There’s a defocusing, or downplaying, of the importance of economic growth that’s happening for three reasons.

First, growth has become harder to achieve due to demographics and other structural changes. While strong business or political leaders remain focused on hard goals, some aren’t like that and will instead diminish the tough stuff.

Second, many people believe the negative outcomes of economic growth outweigh the positives. This has long been evident on the political left, where growth is blamed for climate change and other problems.

I suspect one reason Democrats haven’t come up with a cohesive challenge to President Trump’s economy-damaging policies is because they can’t balance the importance of growth with their drive to restrain growth’s harms.

And third is envy. Some people are envious when growth happens faster for others, perhaps from different places, or of different ages or races. It’s a dark element of human nature. People at times sacrifice the greater good if it’s more positive to someone else than for themselves, like when homeowners push back on new residences in their communities.

The federal government on Wednesday will give the first reading on the nation’s economic growth for the January-through-March period. In late February, one prominent real-time model from the Federal Reserve Bank of Atlanta turned negative, and Wednesday’s announcement will show how close that model came.

Trump hasn’t publicly discussed the IMF’s reduced outlook, which was heavily influenced by the fund’s assessment of the effects of the trade war he started. I suspect, however, it’ll be hard for him to overlook a decline in U.S. growth if that’s what the quarterly report shows.

Regular readers of this column know I’m very interested in growth because Minnesota’s history of exceptional economic performance is at risk due to slow population growth.

The addition of people is one of the three ways an economy can grow, along with resource development and productivity improvement. With fewer new people, an economy must rely more on gains in productivity and resources to maintain growth.

Around the world, population growth is slowing down significantly, particularly in the wealthiest nations.

The U.S. has remained a relative exception to this development, due chiefly to immigration flows. However, about a dozen states, mainly in the northern tier of the country and including Minnesota and our neighbors, show ultra-low population increases. Some show actual decline.

Aaron Benanav, an economic historian at Cornell University writing in the New York Times last week, said a long-term slowdown in economic growth that began in the 1970s is the hidden influence behind political and social conflicts around the world.

“Stuck with low growth, waning productivity and an aging workforce, the world economy is in a rut,” Benanav wrote.

His piece discussed the population slowdown and why the rise of service industries in advanced economies means that productivity gains come more slowly. While robots and machines can help people more produce more goods in a factory, a hospital has a relatively unchanging ratio of doctors and nurses to patients.

On Tuesday, Federal Reserve Gov. Adriana Kugler gave a speech at the University of Minnesota that reminded me and others in the audience that, for all the uncertainty being felt because of Trump’s tariff policies, the U.S. economy has not been exhibiting the signs of stagnation that Benanav described and that I keep watching for in Minnesota.

She noted that the U.S. economy grew 2.4% last year (Minnesota’s grew 1.1%) and that it was growing around 1.5% in the late 2010s.

“I don’t call that stagnation,” Kugler said. “The economy is growing. It’s growing at a healthy pace. We are the envy of the world. Here in the U.S., we had a lot of productivity growth that is really helping us.”

She said there are many explanations for that, starting with business formation and entrepreneurship.

“We know when new businesses come in, they become more productive. They create competition for existing businesses. That raises productivity of those businesses as well. It becomes a virtuous circle. It’s a good thing,” she said.

Though she didn’t mention Trump directly, Kugler suggested there is a risk the trade war will damage the country’s productivity achievements by reducing the competitive friction that forces businesses to innovate.

“I do think if you now protect the economy so much that you don’t let those new businesses come in, then you are creating a bit of reversal on that,” Kugler said. “I have been one of those productivity optimists and I will be paying a lot of attention to see if those business dynamics start to change.”