Forbes contributor James Glassman penned a very interesting column on Tuesday. He begins by analyzing the government’s GDP report that came out last Friday. He goes into some details in the report that received little or no attention in the mainstream media, and puts this disappointing recovery into perspective.
Near the end, he offers some real solutions to get our economy growing and creating jobs again. And without saying so directly, the piece makes it clear why we have to vote President Obama out of office in November… Enjoy!
Let’s Be Clear, The U.S.
Economy Is Just Awful
by James Glassman
“The latest GDP numbers tell a terrible story, but it doesn’t have to be this way. The answer is growth. Here’s how to get it.”
It’s hard to put a smiley face on the latest economic numbers, but in a blatantly promotional press release on Friday, the Commerce Department, which is supposed to be the impartial custodian of the nation’s data, did its best.
Our economy “continues to heal,” said the acting secretary, Rebecca Blank. We’ve now had “12 quarters of consecutive GDP growth.” Anyway, if we’re not growing much, it’s not our fault, since the economy faces “headwinds,” namely a decline in state and local spending and those pesky problems in Europe. Therefore, we’ve got to push for President Obama’s policies “by ending tax breaks for companies that ship jobs overseas,” etc., etc.
The acting secretary also trumpeted upward GDP revisions for the last quarter of 2011 and the first quarter of 2012. She didn’t mention downward revisions for the first half of 2010 that brought GDP to a little over 2%. Prior readings were nearly 4%
The truth is that the latest statistics show an economy that is just awful. When President Obama was elected, the unemployment rate was 6.8%. When he took the oath, it was 7.8%. The next month, the rate cracked the 8% mark and has been there ever since.
This is the worst recovery from a recession in at least 30 years – and, according to some, including Stanford’s Edward Lazear, the worst in all American history. While apologists argue that the recovery’s anemia is a function of the recession’s severity, they haven’t read history.
Normally, a sharp, deep recession leads to a sharp, big recovery. The analogy is a rubber band: the more it’s stretched, the more powerfully it snaps back. Shallow recessions breed shallow recoveries. Normally, the economy regains everything it loses in a recession, and then some. If it loses a lot, then it will typically gain a lot. That’s not happening this time around.
The recession officially ended in June 2009. After last week’s revisions, the economy’s decline in 2008 and 2009 has been calculated at 3.1% instead of 3.5%, a bit shallower than before but still devastating. In 2010, the effect of stimulus spending turns out to be even worse than we had thought. Growth in that year was revised down last week to 2.4% from 3% by the Commerce Department (though you’d never know it from Ms. Blank’s press release). Growth in 2011 was revised upward by one-tenth of a point to a miserable 1.8%, and that appears to be the path on which we are stuck. Growth from April to June this year was just 1.5%.
These minuscule numbers would seem to reduce to fantasy the title of the book the Bush Institute has just published, The 4% Solution. The book makes the case that the U.S. can increase its rate of growth from a post-World-War-II average of 3% to a sustainable, real rate of 4%. Can we really do it?
Again, it’s normally not much of a problem for an economy, coming out of a bad recession, to accelerate to 4%. For example, we grew at 5.4% in 1976 after the 1974-75 recession and at 7.2% in 1984 after the 1982 recession. But the best we’ve done so far in a calendar year after this one is 2.4%.
So the United States really has two problems: first, it hasn’t recovered sufficiently to get back aboard the trend line after the 2008-09 recession, and, second, even if we do have a recovery spurt, we don’t have the policies to get us to sustainable 4% — much less 3% — growth. The Congressional Budget Office, whose projections have been way too optimistic over the past few years, has forecast 2% growth for 2012 and 1.1% for 2013
But we could have policies that will get us growing again. Growth of 4% is a blood-quickening aspiration, but it is also a practical goal. [Not if President Obama is re-elected, GDH.]
Those policies begin with two principles:
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