America Needs a Bigger Pie, Not Just Bigger Slices

America’s labor force is barely growing, and it’s about to nearly stop. The Congressional Budget Office (CBO) projects potential labor-force growth will fall from 0.9 percent a year over the past three decades to 0.4 percent over the next 10 and just 0.1 percent by midcentury. JPMorgan estimates in a recent note that breakeven employment—the job gains needed merely to stabilize the unemployment rate—may already be near zero. From the bank: “Labor supply growth is historically low, and this will be common in the future absent a rebound in participation. The consequence is that negative payroll readings in any given month will become more common.”  This new economic reality is usually framed as a labor-market story. But it’s also a story about the American economy’s ability to pay its bills, fund its military, and underwrite the dollar. Also: Our ability to do big things, which is something to remember as Artemis II returns from deep space today. GDP growth is just workers times output per worker. When the first variable flatlines, the second has to do nearly everything. CBO’s projections make this math explicit: real potential GDP growth drops from 2.4 percent historically to under two percent this decade and toward 1.5 percent by the 2050s, with almost the entire decline driven by the evaporation of labor-force growth. Productivity is no longer a tailwind. It is the engine. This CBO chart is a few years old, but it clearly makes the point: All this matters because the federal government’s obligations are denominated in aggregate dollars, not per-capita dollars. Social Security, debt service, and defense are all billed to the whole economy. Federal revenues have averaged roughly 17 to 18 percent of GDP for decades. A bigger economy can mean more revenue at the same tax rates. A stagnant one can mean less—and harder choices. Defense makes the same point in starker terms, especially given recent events in the Middle East. Military budgets are benchmarked against GDP because total economic size determines what a country can sustainably spend on national security and power projection. The IMF finds that major defense buildups can push public debt up by seven percentage points of GDP within three years. A larger, faster-growing economy absorbs that. A moribund one cannot—regardless of how productive each remaining worker is. The dollar amplifies the stakes further. The Federal Reserve ties its global dominance to the “size and strength” of the US economy and the depth of American capital markets. Foreign investors hold roughly $9 trillion in Treasuries. That privilege—cheap borrowing, sanctions leverage, financial gravity—scales with aggregate GDP, not income per head. Per-capita GDP matters for tracking living standards. But you cannot service the national debt, equip a military, or anchor the global financial system—not to mention build colonies on the Moon, Mars, and beyond—with averages. When the workforce has stopped growing, productivity is the whole game. That’s a fact Washington could keep front of mind as we experience the unexpected blessing of the emerging AI revolution The post America Needs a Bigger Pie, Not Just Bigger Slices appeared first on American Enterprise Institute - AEI .