President Obamas Plan To De-develop America Shifts Into High Gear President Obama’s own Administration officially reports that the U.S. economy DECLINED by 1% in the first quarter of this year. That follows 1.9% reported total annual growth for all of 2013. The U.S. economy sustained a real rate of economic growth of 3.3% from 1945 to 1973, and achieved the same 3.3% sustained real growth from 1982 to 2007. Before President Obama, it was only during the stagflation decade of 1973 to 1982, reflecting the deeply misguided reigning intellectual leadership of the time, that real growth fell to only half long term trends. This 3.3% long term economic growth trend line is the minimum standard by which to judge President Obama’s economic performance. That sustained 3.3% real economic growth was the foundation for America’s world leading, post World War II, economic and military dominance, not battlefield victories 70 years ago (ok, those did help for a while too). As Brian Domitrovic explained in Econoclasts: The Rebels Who Sparked the Supply Side Revolution and Restored American Prosperity, “The unique ability of the United States to maintain a historic rate of economic growth over the long term is what has rendered this nation the world’s lone ‘hyperpower.’” But President Obama should have done better than that, precisely because the economy was in recession when he entered office! That is because the American historical record is the deeper the recession the stronger the recovery, as the economy grows faster than average to catch back up to the long term trendline. That observation originally stemmed from Milton Friedman, the greatest economist of the 20th century. So it comes by way of a top pedigree. It certainly worked that way under President Reagan. After the 1981-1982 recession that greeted him soon after entering office, the economy took off on a boom that lasted 92 months without a recession, until July, 1990, when the tax increases of the 1990 budget deal killed it. That set a new record for the longest peacetime expansion ever, the previous high in peacetime being 58 months. During those 7 years, the economy grew by almost one-third, the equivalent of adding the entire economy of West Germany, the third largest in the world at the time, to the U.S. economy. In 1984 alone, real economic growth boomed by 6.8%, the highest in 50 years. President Obama has not had a year of economic growth even half that large. Indeed, in the 11 post-Depression recessions before President Obama, the economy recovered all the GDP lost during the recession within an average of about a year (4.5 quarters) after the recession started. But it took Obama’s recovery 16 quarters, or 4 years, to reach that point. And the economy has bumbled along in slow growth stagnation since then. By sharp contrast, at this point in the Reagan recovery, the economy had boomed by over a fifth. In fact, that Reagan recovery grew into a 25 year boom, from late 1982 until the end of 2007, with just slight interruptions by shallow, short recessions in 1990 and 2001. As Art Laffer and Steve Moore wrote in their book, The End of Prosperity, “We call this period, 1982-2007, the twenty-five year boom – the greatest period of wealth creation in the history of the planet. In 1980, the net worth – assets minus liabilities – of all U.S. households and business…was $25 trillion in today’s dollars. By 2007.…net worth was just shy of $57 trillion. Adjusting for inflation, more wealth was created in America in the twenty-five year boom than in the previous two hundred years.” Similarly, Steve Forbes wrote in Forbes in 2008, “Between the early 1980s and 2007 we lived in an economic Golden Age. Never before have so many people advanced so far economically in so short a period of time as they have during the last 25 years. Until the credit crisis, 70 million people a year [worldwide] were joining the middle class. The U.S. kicked off this long boom with the economic reforms of Ronald Reagan, particularly his enormous income tax cuts. We burst from the economic stagnation of the 1970s into a dynamic, innovative, high tech-oriented economy. Even in recent years the much maligned U.S. did well. Between year-end 2002 and year-end 2007 U.S. growth exceeded the entire size of China’s economy.” In other words, the growth in the U.S. economy from 2002 to 2007 was the equivalent of adding the entire economy of China at the time to the U.S. economy.
Posted on: Tue, 22 Jul 2014 18:43:06 +0000
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