An Obamanomics Recovery

The Federal Reserve Board (the FED) recently released their estimates for GDP growth for the next three years and the summary chart is shown below.

Even though we have come out of one of the worst recessions in recent memory, the GDP growth rate is predicted to be a puny 2 to 3 percent.  Why do I say puny?  To see how the US economy has recovered in the past from previous recessions, I went to the Bureau of Economic Analysis to obtain the US GDP historic GDP growth rates.  I added the predicted GDP growth rates that the FED gave today and used the middle of their ranges to estimate yearly GDP growth rates for 2012 through 2014 and the graph is shown below.

As you can see from the chart above, the magnitude of the recession (or depression) is in direct proportion to the magnitude of the recovery that follows (see the recovery from the 1930’s and mid 1940’s).  We see larger recoveries from deeper recessions and smaller recoveries from smaller recessions.

When we zoom into modern history (starting at 1960), we see that the economy recovered very well after the major recession of the early 1980’s and since the recession of 2009 was much worse, we should’ve seen a higher GDP growth rate as we recovered.

But that didn’t happen and according to the FED, it never will.  Welcome to Obamanomics!

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14 Responses to An Obamanomics Recovery

  1. blaine says:

    The US has never had $16 trillion in debt, growing at $1 trillion a year. Medicare and Social Security will grow faster than revenue now because of our aging population. That hasn’t been a problem historically. World War II had something to do with coming out of the Great Depression.

    The unfunded state and municipal pension liabilities are problems almost as large as the federal debt, maybe worse, because just like Greece can’t print Euros, states can’t print dollars.

    Circumstances have changed, looking at the past as a predictor of what will happen in coming years is not enough; too much has changed. We are now sailing in uncharted territory.

    The only thing that has a chance of getting us out of this mess is dramatic growth in GDP and curtailing the growth in entitlement spending. A simplified tax system, a reduction in unnecessary regulations and opening up the energy sector would be good first steps. None of that will happen if Obama is reelected. It probably won’t happen if Romney is elected but at least he may be able to slow the speed of decent.

    The one wild card is a dramatic new invention that would decrease dependence on oil. Don’t hold your breath waiting for that one.

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