The 1st Quarter GDP growth measurement was reported last Friday and it came in at 2.5% which was well below expectations. 2.5% GDP growth will not give us the recovery we need to get people back to work but if you listen to some economists, they are spinning this as a good report and lowering future expectations of US economic growth.
From American Public Media:
“Michael Goldstein teaches finance at Babson College: “We’re the world’s largest economy. How fast could we possibly grow? When you’re huge, you’re going to grow slower. 2.5 percent is probably what you could reasonably expect. We’re not, I mean, we’re not Bangladesh, nothing against Bangladesh.”
Here’s how University of Michigan Economics professor and huge Obama shill Justin Wolfers put it:
Our current GDP growth rate is ok, not great, a bit below expectations but GDP is a ‘noisy’ measurement anyway. And since we’re the world’s largest economy, we should be happy with average GDP growth rates in the 2.0-2.5% range. We can’t compete with 3rd World countries, like Bangladesh, who are experiencing rapid growth in the 6% range so we should just accept this new normal.
Sorry, I don’t buy that argument at all! I don’t subscribe to the viewpoint that once a country’s economy grows to a particular size that it stops growing and innovating.
We’ve been the world’s largest economy for quite some time and that hasn’t prevented us from seeing GDP growth rates in the 4-8% range and there is no reason we shouldn’t be seeing the same thing right now, especially after coming out of a deep recession. In the past, when the US recovered from a large recession, the GDP growth rate rose in equal proportion but that has not been the case under Obama.
Using the graph below (with data obtained here), compare our GDP growth rates after the Recession in the early 1980’s (left side of the graph) to our recent “recovery” from the 2008 recession (right side of the graph).
Both recessions were very severe and the recovery under Reagan saw GDP growth rates for 4 consecutive quarters at or above 8% but under Obamanomics we’ve only sniffed 4% a couple of times.
The US had the world’s largest economy in the 1980’s and 1990’s but that didn’t stop us from seeing average GDP growth rates of 4% or more over this long period of time. Starting with the year 2000, you can see a step function decrease where the US GDP growth rates went from an average of 4% growth to an average of 2% growth. Granted the tech bubble bursting compounded by 9/11 hurt the first part of this decade but we never recovered from that. Sure China has grown rapidly during that timeframe and more US manufacturing has been shipped overseas but what happened to the Free Market that prevented us from filling this void in our economy?
Here is another chart averaging the quarterly GDP growth rates during the terms of each of the last 5 US Presidents.
If a Leftists or Obama-bot sees this graph their first response will go something like this – “But Obama had to dig us out of the hole Bush put us in!” I’m not going to debate whose fault the 2008 recession was but just for the sake of argument I’ll cut Obama a break here and eliminate his first 2 years of quarterly GDP growth rates from his calculation. That seems fair to give a President 2 years to recover from a deep recession and I did the same thing for Reagan’s average GDP growth rate calculation just to be consistent.
But look how pitiful the economic recovery has been under Obama – An average of 2% GDP growth rate even throwing out the first two years of his presidency. We should also remember that Obama got his 2009 stimulus package that was supposed to stimulate economic growth and keep us from having Unemployment Rates go above 8%. We know how well that worked out! Government spending went through the roof during these first two years and it was a Keynesian dream but as history has proven over and over again, these failed economic policies don’t work!
Still the question remains – What has changed over the last 13 years to cause our economy to be stalled at a 2% average GDP growth rate? I think this is a complex answer but I can’t help but find a correlation to increased Government spending during this same time frame. I touched on this in a previous post and here is the graph to back it up.
I believe in the Free Market and American Exceptionalism so I don’t accept failure as the new normal for the United States. It’s true that some industries (such as textiles and electronics manufacturing) have moved to other countries but I still believe that US industry will continue to grow in new areas in this knowledge based economy. But not when the Free Market is attenuated by massive Government intervention and crony capitalism, as we’ve seen over the past decade.
We have to get back to Free Market principles or the Leftist economists will be right, this is the new normal.
According to the Bureau of Labor and Statistics, jobs classified as “manufacturing” have decreased nearly TWENTY PERCENT from 14,869,000 in January 2003 to 11,965,000. (http://data.bls.gov/timeseries/CES3000000001?data_tool=XGtable). The majority of that loss has occurred since 2008. Over-regulation and one of the world’s highest corporate tax rates have driven manufacturing OUT of the U.S. We produce less, and import more. Combine that with the other data you cite here in your post, and sub 3% growth IS the new norm…
Our GDP is low because of government interference in the economy. It is creating artificial scarcity in many markets by trying to hold down costs and hold up wages instead of allowing free market forces [to the extent that they exist] set prices based upon demand and to produce with non-compromised access to natural and man made resources held back due to politics or schizophrenic fears of man-made global destruction.
Unfortunately, as long as the strongest and most advanced nations are ruled by extremists on either side of the isle, we will never reach the full potential of capitalism in production, growth and economic security or power. These conditions require small government that pays attention to its primary responsibilities and minimal regulations. The extremes want to use government power to pursue their agendas and regulations that require government expansion into the private affairs of business, men and commerce to the detriment of national security, economic power and domestic growth and production.
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Is the chart above on per capita spending in inflation adjusted dollars? A dollar today buys what 19 cents bought in 1970.
Sorry, Just looked at the chart again and saw it is calculated in 2005 dollars.