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I've heard it said on a number of occasions that the economy is doing well. I suppose that depends on the definition of 'well', and the metric used for economic performance. Real GDP is growing and the unemployement rate is moderate, while the deficit has come down from record highs - are good things. On the other hand, GDP growth lags an period since WWII, the employment participation rate is at an all-time low, and the deficit is on a projection to become unmanageable as baby-boomers retire - all areas of considerable concern.
I've argued that the last eight years have been an economic disaster, and the chart below shows why I hold that opinion.
Notice that every post-recession period since WWII except the most recent period has shown a rapid expansion that puts real GDP back on the expansion trendline of slightly over 3% annually. Had our economy done this in the most recent recovery, it would be larger by $5-6 trillion, nominally. Using trendline, it would be $5 trillion larger, while using average growth from 1947 to 1999 it would be $6 trillion larger.
This $5 trillion difference is important for a number of reasons. First, based on tax collections of 17% of GDP, the federal coffers would be collection $880 billion more in revenue, eliminating much of the need for discussions about tax increases to fund future liabilities. Second, interest rates would almost surely be higher, which would reward people for saving and stop robbing pensioners of important fixed income. Finally, companies would need more employees, and increase wages to pull people back into the job market. Since most of GDP is consumption, this means that small and large businesses alike would benefit from larger household disposable incomes.
The reasons for a somewhat stagnant GDP (at least by my measure) are debatable. I believe major regulation resulting from legislation shoulders a big part of the blame. Sarbanse-Oxley, Dodd-Frank, and the ACA have all had unintended adverse consequences. Anecdotally, I had a discussion in an airport with the leadership team of a small firm based in Oregon, and the HR director (who loved Obama) made no bones about the fact that they were not going to hire the 25th employee that would trigger mandatory employer health insurance. I also think Obama has done a terrible job encouraging growth. For much of his first and part of his second term, he talked down the economy and vilified corporations in an attempt to get people to blame their problems on Bush and the GOP. I believe this was a colossal mistake, as it discouraged businesses from investing in growth if they were going to have a target on their back. It also made small businesses think twice about any investment when they were always hearing how deep the recession had been and how we should expect slow recovery and more regulation.
Obviously, these are just my opinions, but my underlying premise at least is data driven. I hope that a thread dedicated to the economy will encourage discussion and debate. I may not always agree with an opinion, but as long as it's not just a regurgitated talking point from Mother Jones or Brietbart, I'm happy to discuss. I love economics and hope there are enough interested posters to give this thread some legs.
I've argued that the last eight years have been an economic disaster, and the chart below shows why I hold that opinion.
Notice that every post-recession period since WWII except the most recent period has shown a rapid expansion that puts real GDP back on the expansion trendline of slightly over 3% annually. Had our economy done this in the most recent recovery, it would be larger by $5-6 trillion, nominally. Using trendline, it would be $5 trillion larger, while using average growth from 1947 to 1999 it would be $6 trillion larger.
This $5 trillion difference is important for a number of reasons. First, based on tax collections of 17% of GDP, the federal coffers would be collection $880 billion more in revenue, eliminating much of the need for discussions about tax increases to fund future liabilities. Second, interest rates would almost surely be higher, which would reward people for saving and stop robbing pensioners of important fixed income. Finally, companies would need more employees, and increase wages to pull people back into the job market. Since most of GDP is consumption, this means that small and large businesses alike would benefit from larger household disposable incomes.
The reasons for a somewhat stagnant GDP (at least by my measure) are debatable. I believe major regulation resulting from legislation shoulders a big part of the blame. Sarbanse-Oxley, Dodd-Frank, and the ACA have all had unintended adverse consequences. Anecdotally, I had a discussion in an airport with the leadership team of a small firm based in Oregon, and the HR director (who loved Obama) made no bones about the fact that they were not going to hire the 25th employee that would trigger mandatory employer health insurance. I also think Obama has done a terrible job encouraging growth. For much of his first and part of his second term, he talked down the economy and vilified corporations in an attempt to get people to blame their problems on Bush and the GOP. I believe this was a colossal mistake, as it discouraged businesses from investing in growth if they were going to have a target on their back. It also made small businesses think twice about any investment when they were always hearing how deep the recession had been and how we should expect slow recovery and more regulation.
Obviously, these are just my opinions, but my underlying premise at least is data driven. I hope that a thread dedicated to the economy will encourage discussion and debate. I may not always agree with an opinion, but as long as it's not just a regurgitated talking point from Mother Jones or Brietbart, I'm happy to discuss. I love economics and hope there are enough interested posters to give this thread some legs.
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