What will be Chris Christie’s presidential economic agenda? Here’s a possible sneak peek

Robert Grady is a managing director at private-equity firm Cheyenne Capital Fund. He is also chairman of the New Jersey State Investment Council and chief economic adviser to New Jersey Gov. Chris Christie, a fellow who possibly — even likely — will run for the Republican Party’s 2016 presidential nomination. Now Christie hasn’t spoken a whole lot on national economic issues. So anyone looking for clues for what Christienomics might look like should read carefully Grady’s commentary in The Wall Street Journal today.

In the piece Grady completely rejects the economic thesis at the core of Obamanomics and today’s Democratic Party: that the three-decade, pro-market tilt in US economy policy (a) benefited only a sliver of American families and (b) the resulting inequality and wage stagnation is a corrosive force in American society. Grady does not buy President Obama’s claim that “a dangerous and growing inequality and lack of upward mobility” is “the defining challenge of our time.”

As one bit of evidence, Grady cites a 2011 study, “The Mismeasure of Inequality,” by Kip Hagopian and Lee Ohanian that points out how oft-cited measures of inequality often ignore how America’s progressive tax code and government safety net affect income growth and distribution. In the study, Hagopian and Ohanian claim that using a more comprehensive income definition shows income inequality, as measured by the Gini coefficient, actually declined a bit from 1993 and 2009. In addition, Grady also points to a US Treasury study showing “considerable income mobility” over recent decades.

Going forward, Grady argues, America needs faster growth through greater business investment. And he says one way to get that is through entitlement reform:

The president claims to be concerned about spurring private investment. But investors at home and abroad can readily see that his steadfast refusal to reform the country’s entitlement programs threatens spending on physical infrastructure, education, university research and other items that will contribute to the future productivity of the United States. That same unrestrained entitlement growth, and the debt that comes with it, will ultimately compromise the value of dollar-denominated assets. Public companies have trillions of dollars of cash to invest sitting on their balance sheets, but the Obama economy’s growth record is weak, and insufficient to attract capital investment. …

If the goal is to deliver higher incomes and a better standard of living for the majority of Americans, then generating economic growth—not income inequality or the redistribution of wealth—is the defining challenge of our time.

Thoughts and observations:

1.) Grady is certainly correct that in regard to income inequality/stagnation/mobility data, Obama has been giving a distorted view of what’s been happening in the American economy since the late 1970s. While high-end inequality has likely risen, the middle has made gains, too. CBO pegs the increase in middle-class, after-tax income at 40% since 1979. And  inequality researcher Scott Winship of the Manhattan Institute finds, “Most of the evidence on earnings and income mobility suggests only small changes over recent decades.”

2.) Grady might have also mentioned that America’s pro-market turn some three decades ago reversed what then seemed like unstoppable national decline. Nations that didn’t make that choice, such as Japan and France, have not fared so well.

3.) Grady is also correct that America needs to boost the rate of GDP growth, which since the Great Recession has risen at less than half the pace of previous recoveries. Or look at it this way: from 1981 though 1990, the economy registered 18 quarters of 4% growth or higher. From 1991 through 2000, another 18% quarters of 4% growth or higher. But since 2001, just 4 quarters of 4% growth or higher. Faster, please! Would greater business investment help? Undoubtedly.

4.) Unlike Grady,however, I am not sure that uncertainly over the coming deluge of debt and Obamacare is a big reason why the recovery has been abnormally slow, both in terms of GDP and job growth. I would place both the nature of the recession and the Fed’s inadequate response  higher on my blame list. The tax hikes of 2013 have also been unhelpful both in the short-term and in reducing the economy’s long-term growth potential. I wonder what Team Christie thinks of Larry Summers’ “secular stagnation” thesis.

5.) I would also not assume that boosting GDP and reducing future debt is enough. I am concerned that automation means inequality and mobility could be major problems going forward, particularly if our education system keeps failing so many students. And even as it is, US mobility up from the bottom is not good.  Also, while globalization and technology have been the big drivers in high-end inequality, crony capitalist bank subsidies, via Too big To Fail, may play a role as well.

Yes, the US needs tax and entitlement reform — but also a more specific, targeted agenda to reduce cronyism, strengthen the middle-class, and lift people from poverty and dependency into work that provides a decent standard of living: expanding the child tax credit, wage subsidies, unemployment insurance reform would be all good starts. If one assumes that what Grady is talking about would inform a Christie presidential run, it sounds a bit like the Romney message, at least on first take. Faster growth and less future debt and spending is necessary but not sufficient. Of course, this is just one op-ed. Hopefully, greater and deeper exploration of these issues to come.

Follow James Pethokoukis on Twitter at @JimPethokoukis, and AEIdeas at @AEIdeas.