The most recent grim US jobs report brought forth calls for more Federal Reserve action on fiscal stimulus. Meanwhile, business leaders call for clarity about long-term policy and the need to return to growth. A recent and intriguing project of the George?W. Bush Institute weighs in on the emphasis of business leaders with a “4 per cent solution.” While a 4 per cent long-term growth rate for the US is aggressive, this discussion is the right road map for policy.

It is right because the nation faces structural impediments to growth. These are akin to carrying too many extra pounds of weight. They don’t seem to slow us down much walking on a flat surface, but are a burden walking upstairs or up a hill. The injuries to our economy since the onset of the financial crisis were made more painful by our failure to make structural adjustments. No single presidential administration deserves the blame for structural problems, but an important lens through which to judge a policy agenda is whether it recognises and mitigates those problems.

While a growth-focused agenda would have many parts, two fiscal policy issues stand out – getting our fiscal house in order and reforming the tax code. The US is on an unsustainable fiscal trajectory, with a debt-to-gross domestic product ratio projected to rise to second world war levels in the coming years. High and rising debt burdens are a structural impediment to growth. They raise expected future tax burdens, discouraging investment and limiting productivity growth. Some recent estimates of this adverse effect suggest our debt-to-GDP levels would reduce expected growth by half a percentage point per year over the next decade. How debt reduction occurs is also important. Recent research by Alberto Alesina of Harvard, and others, has emphasised that reducing transfer spending is more likely to lead to long-lasting decrease in debt and support for growth than raising taxes.