That’s the story underscored by the annual government revisions in historical GDP that accompanied the second-quarter report. The news, which most Americans have long felt in slow-growing wages, is that the worst expansion in 70 years has been even weaker than we thought.
The gnomes at the Bureau of Economic Analysis ran the numbers based on new data and analytical methods and downgraded the recovery since 2011 nearly across the board. From 2011 through 2014, the economy grew at a paltry annual rate of 2%, down from the previous estimate of 2.3%. This means the overall U.S. economy is smaller—with GDP slashed by $105 billion in 2013 and $71 billion in 2014 to $17.35 trillion.
Those numbers are abstractions, but another way to put it is that national income, corporate profits and personal income were all revised down. From 2011 through 2014, the average annual growth of real disposable personal income was slashed to 1.5% from 1.8%. That’s a giant cut in the standard of living.
Since the recession ended in June 2009, the economy has grown at an annual rate of about 2.1%. That’s 0.6-percentage points worse than even during the much-maligned George W. Bush expansion. Growth averaged more than 3% from 2003-2006, but the best growth during the Obamayears has been 2.5% in 2010, and in both 2011 and 2013 it nearly slipped back into recession.
The nearby chart compares this expansion to the growth periods in the 1980s and 1990s, showing what might have been. Real GDP growth averaged 4.6% in the first six years of the Reagan expansion, and more than 3.6% a year in the first six years of the George H.W. Bush-Bill Clinton expansion (gaining speed after that). Had the current expansion been as robust as the average expansion since 1960, GDP would be some $1.89 trillion larger today, according to Congress’s Joint Economic Committee.
The slow-growth Obama era has given way to multiple explanations and excuses from the President’s economic advocates. They blame the hangover from the financial crisis (even six years later), foreign economic problems, the failure of government to spend and tax more, an aging population—anything but the policy differences between those previous eras and this one.
Leading lights on the left have even thrown up their hands to suggest we no longer really know what produces faster growth. Larry Summers calls it “secular stagnation,” as if it’s an illness we somehow caught. Others claim 2%-2.5% growth is about as good as we can now do, so get used to it—and keep interest rates at near-zero for as far as the eye can see.
This is a false counsel of despair, much as we heard similar advice in the malaise years of the 1970s. There’s no great mystery about why growth has been so slow. The natural dynamism of the U.S. economy has been swamped by waves of bad policies.
Unprecedented new regulation has hamstrung finance, health care, the coal and power industries, for-profit education, and so much more. Two of the biggest growth exceptions—tech and oil and gas—escaped this maw because drilling is regulated by the states and the FCC only got around to ensnaring the Internet in new rules this year.
Higher taxes—their anticipation and then the reality in 2013—slowed risk-taking and investment. Profits fell in the first quarter of 2013 thanks to the tax cliff, and growth for 2013 was a mere 1.5% after the latest revisions.
The Federal Reserve has tried to overcome all this with near-zero interest rates and bond-buying, and it has succeeded in raising asset prices that have further enriched those lucky enough to hold assets. But it hasn’t succeeded in lifting the economy out of its slow-growth trend, and the Fed’s own growth predictions have been revised down year after year.
***
Maybe it’s time to try something new—or, more precisely, return to the policies we know worked so well in the past. Freeze and roll back stifling regulation. Reform the tax code to unleash investment and raise wages. Modernize America’s creaky 20th-century public institutions, including health care, and K-12 and higher education. Welcome the world’s most talented immigrants to our shores. And restore monetary policy to its appropriate job of maintaining price stability.
Much is being made of the angry middle-class—those supporting Bernie Sanders and Donald Trump—in the waning days of the Obama Administration. But this public frustration is no great mystery. This is what happens after a lost decade of slow growth and stagnant incomes. This is why we can’t afford more of the same policies that have produced this six-year slough.gh: The Worst Recovery In 70 Years Was Even Weaker
The Wall Street Journal
One measure of America’s lowered expectations is that so many economists cheered Thursday’s second quarter growth estimate of 2.3%. It’s a rebound from the first quarter slump! The consumer is resilient, net exports are up, the plow-horse marches on! All true, but those silver linings obscure the larger reality that six long years after the recession ended in June 2009 the American economy has become a slow-growth machine.
That’s the story underscored by the annual government revisions in historical GDP that accompanied the second-quarter report. The news, which most Americans have long felt in slow-growing wages, is that the worst expansion in 70 years has been even weaker than we thought.
The gnomes at the Bureau of Economic Analysis ran the numbers based on new data and analytical methods and downgraded the recovery since 2011 nearly across the board. From 2011 through 2014, the economy grew at a paltry annual rate of 2%, down from the previous estimate of 2.3%. This means the overall U.S. economy is smaller—with GDP slashed by $105 billion in 2013 and $71 billion in 2014 to $17.35 trillion.
Those numbers are abstractions, but another way to put it is that national income, corporate profits and personal income were all revised down. From 2011 through 2014, the average annual growth of real disposable personal income was slashed to 1.5% from 1.8%. That’s a giant cut in the standard of living.
Since the recession ended in June 2009, the economy has grown at an annual rate of about 2.1%. That’s 0.6-percentage points worse than even during the much-maligned George W. Bush expansion. Growth averaged more than 3% from 2003-2006, but the best growth during the Obamayears has been 2.5% in 2010, and in both 2011 and 2013 it nearly slipped back into recession.
The nearby chart compares this expansion to the growth periods in the 1980s and 1990s, showing what might have been. Real GDP growth averaged 4.6% in the first six years of the Reagan expansion, and more than 3.6% a year in the first six years of the George H.W. Bush-Bill Clinton expansion (gaining speed after that). Had the current expansion been as robust as the average expansion since 1960, GDP would be some $1.89 trillion larger today, according to Congress’s Joint Economic Committee.
The slow-growth Obama era has given way to multiple explanations and excuses from the President’s economic advocates. They blame the hangover from the financial crisis (even six years later), foreign economic problems, the failure of government to spend and tax more, an aging population—anything but the policy differences between those previous eras and this one.
Leading lights on the left have even thrown up their hands to suggest we no longer really know what produces faster growth. Larry Summers calls it “secular stagnation,” as if it’s an illness we somehow caught. Others claim 2%-2.5% growth is about as good as we can now do, so get used to it—and keep interest rates at near-zero for as far as the eye can see.
This is a false counsel of despair, much as we heard similar advice in the malaise years of the 1970s. There’s no great mystery about why growth has been so slow. The natural dynamism of the U.S. economy has been swamped by waves of bad policies.
Unprecedented new regulation has hamstrung finance, health care, the coal and power industries, for-profit education, and so much more. Two of the biggest growth exceptions—tech and oil and gas—escaped this maw because drilling is regulated by the states and the FCC only got around to ensnaring the Internet in new rules this year.
Higher taxes—their anticipation and then the reality in 2013—slowed risk-taking and investment. Profits fell in the first quarter of 2013 thanks to the tax cliff, and growth for 2013 was a mere 1.5% after the latest revisions.
The Federal Reserve has tried to overcome all this with near-zero interest rates and bond-buying, and it has succeeded in raising asset prices that have further enriched those lucky enough to hold assets. But it hasn’t succeeded in lifting the economy out of its slow-growth trend, and the Fed’s own growth predictions have been revised down year after year.
***
Maybe it’s time to try something new—or, more precisely, return to the policies we know worked so well in the past. Freeze and roll back stifling regulation. Reform the tax code to unleash investment and raise wages. Modernize America’s creaky 20th-century public institutions, including health care, and K-12 and higher education. Welcome the world’s most talented immigrants to our shores. And restore monetary policy to its appropriate job of maintaining price stability.
Much is being made of the angry middle-class—those supporting Bernie Sanders and Donald Trump—in the waning days of the Obama Administration. But this public frustration is no great mystery. This is what happens after a lost decade of slow growth and stagnant incomes. This is why we can’t afford more of the same policies that have produced this six-year slough.
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