“Growth is never by mere chance. It is the result of forces working together.”

– James Cash Penney

In this business we spend a lot of time thinking about problems. What if we could wave a magic wand and make them all go away? Maybe we can.

The wand isn’t made from wood. You don’t need Latin phrases or a special incantation learned at Hogwarts to make it work, either. It’s a simple six-letter word: growth. Get the economy growing at a decent pace again, and most of our problems will get better.

Conversely, they’ll only get worse if we stay in slow-growth mode. And don’t even think about what a recession will do to the markets in this environment.

Fortunately, there are things we can do to bring growth back. We just have to decide to do them.

The Solution to Every Problem

A new reader browsing through my archives might get the impression I am a worrywart. In fact, I’m quite optimistic about our future – but I don’t deny we face serious challenges. My weekly letters are a peek into my ongoing thought process as I wonder how we will tackle those challenges.

Just in the past few months we’ve looked at problems like retirement, energy prices,political chaos, zero interest rates, negative interest rates, China’s economy, terrorism,unemployment, inflation, pensions, healthcare, refugees, and the Federal Reserve. And an overarching theme of many letters has been the very big problem of growing debt. Whew – so many problems.

We can look at each of these challenges individually and come up with possible solutions. Would our solutions work? I don’t know, but I’m confident we would see improvement on all fronts if we got GDP growth back up to 4% for a few years.

In the summer of 2012, a few weeks after House Speaker Newt Gingrich had withdrawn from the presidential race, he and his wife Callista came to visit me at the villa we were renting in a tiny town on a mountain in Tuscany, Italy. In addition to doing the usual tourist stuff, Newt and I spent more than a few evenings talking late into the night about an extraordinarily wide variety of topics and discovering that we had many interests in common.

I remember one late night in particular, when I challenged him a bit on the tax and budget plans he had outlined in his campaign. While I agreed with their general direction (and still do), I was concerned about the growing US debt and wanted to see a return to paying the debt down. His plan simply balanced the budget and held government budget growth below economic growth. “How do we deal with the debt?” was my question. His answer was simple: “With the budget and regulatory changes I outlined, we simply grow our way out of it.”

That had been his experience when he and Rep. John Kasich (to whom he still gives a great deal of credit) worked with then-President Bill Clinton to balance the budget – and the country actually began to run surpluses. We grew our way out of the problem. If the Republicans under President Bush had not squandered the opportunity Clinton, Gingrich, and Kasich left them with, we would have come to the 2008 recession with very little if any debt and a healthy ability to run deficits without damaging the long-term prospects for growth in this country. And if we had actually used those deficits to build the infrastructure that was talked about but never undertaken? We would have something to show for the massive government debt we’re saddled with now.

So, is growing our way out of debt a pipe dream? It shouldn’t be. The US economy grew about 3.5% a year from 1950 through the year 2000. During that period there were many expansions in which the economy grew even faster than that average, and there were recession years when growth was much lower.

This alternation is exactly what economic theory says we should expect – every economy goes through boom-bust cycles. Since the end of World War II, we have had a recession every 5–10 years or so. Our experience was that they always gave way to an expansion that made up the lost ground and then some.

It hasn’t worked that way this time. We entered a recession in late 2007 that officially ended in September 2009. Now it’s 2016. This month will mark 8½ years of economic expansion. So why is no one cheering?

Because the less than 2% average growth we have seen since the end of the recession (and actually, since the year 2000) has added very little real income to most American households. Many of us have seen our job situations end up dramatically changed, with our new positions offering significantly less income. In addition, instead of the reduced healthcare costs we were promised under Obamacare, most of us have seen our costs go up dramatically.

So the great majority of us aren’t feeling like we have recovered. While some are better off now, the growing divide between those who are flush and those who are scraping by has resulted in a groundswell of voters from both parties demanding change.

There is a fascinating quote attributed to Lord Salisbury, who was the Tory prime minister of England during Queen Victoria’s reign. Supposedly, when she said things must change, he said, “Change? Change? Aren’t things bad enough already?” Sometimes, when you wish for change, you’d better be prepared to get what you ask for. Sometimes you get it good and hard. And speaking of change…