April 15, 2011

Phil Gramm on the Obama Economy: Trailing Reagan by 15+ Million Jobs and $4,100+ in Per-Capita GDP

Filed under: Economy,Taxes & Government — Tom @ 8:01 am

I’m glad to see that somebody besides yours truly is referencing the booming Reagan post-recession economy and noting how it makes the pathetic “Rebound? What Rebound?” experience we’re currently enduring courtesy of the Obama administration — which all began as the POR (Pelosi-Obama-Reid) Economy three years ago — pale embarrassingly in comparison.

Phil Gramm does just that today in a Wall Street Journal op-ed, and ominously notes that while Reagan’s policies put American on a long-term higher trajectory, the pain the Obama administration is inflicting on the economy and the national economic psyche threaten to do the opposite:

Had the U.S. economy recovered from the current recession the way it bounced back from the other 10 recessions since World War II, our per-capita gross domestic product (GDP) would be $3,553 higher than it is today, and 11.9 million more Americans would be employed.

Those startling figures are based on the average recovery rate of real GDP and jobs three years after the beginning of each postwar recession. Some apologists suggest that the current recovery is so weak because the recession was so deep. But the totality of our experience in the postwar period is exactly the opposite—the bigger the bust, the bigger the boom that follows.

On average, three years after the four deepest previous recessions started, real GDP was 7.6% higher than the pre-recession level. During the Obama recovery, real GDP is up only 0.1%. Forty months after the start of the 1953, 1957, 1973 and 1981 recessions, total employment was on average 4.7% higher than the pre-recession peaks, while total employment today is still down 4.7%—that’s a total employment gap of 13.9 million jobs.

The problem is not just the weak recovery but increasing evidence that the economy is now on a growth path far different from the previous quarter century.

If we had matched the 1982 recovery rate, today annual per-capita income would be $4,154 higher than before the recession—that’s an extra $16,600 for a family of four—and some 15.7 million more Americans would have jobs.

… A compelling case can be made that Reagan’s tax cuts, Social Security reforms, regulatory reforms, and limits on the growth and power of the federal government not only helped the economy shake off the malaise of the 1970s but generated an economic growth premium that bore dividends for Americans until 2007. (In my opinion, “compelling” should be replaced with “airtight” — Ed.)

And if the Reagan policies of the 1980s were sufficiently different from those of the previous decade to generate a growth premium, cannot a case be made that the policies of the Obama administration are sufficiently different from those of the previous quarter-century to alter the growth trend and impose a growth discount?

The recovery is being stifled by the unprecedented policy changes undertaken by this administration and the previous Congress. Whether in absolute or relative terms, whether in comparison to our own experience or the performance of our competitors, America’s wealth-producing ability has been diminished.

… Big government costs more than higher taxes. It is paid for with diminished freedom and less opportunity. You can’t have unlimited opportunity and unlimited government.

Read the whole thing.

Another indicator that our economic trajectory may be changing for the worse on a longer-term basis is that what jobs have been added since the recession ended have been entirely in the area of temporary help services — and then some:

TotalAndTempJobsThru0311

In 21 post-recession months, 263,000 non-temporary jobs have lost (+245K overall less 508K temps), on top of the millions of jobs lost during the recession itself.

Heckuva job, Nancy, Barry, and Harry.

The Obama administration-induced negative economic orientation could not have have come at a worse time. If its current trajectory become the news normal, we may not be able to avoid hitting the 90%-of-GDP tipping point for the level of federal debt held by the public, no matter what eleventh-hour steps Washington takes to rearrange the deck chairs on the federal Titanic.

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6 Comments

  1. [...] – Tom Blumer, who has some further stats worth [...]

    Pingback by No Runny Eggs » Blog Archive » Friday Hot Read: Phil Gramm’s “The Obama Growth Discount” — April 15, 2011 @ 8:57 am

  2. I have often argued that GDP is misleading as it contains both private & government expenditures. A more proper measure might be what I call a Net Domestic Product. NDP is the remainder when the portion of the domestic product attributable to the government is subtracted from the private domestic product. I suspect the NDP is currently negative.

    Comment by Jerry in Detroit — April 15, 2011 @ 11:17 am

  3. And this is what the Great Depression looked like. Thanks Barry, Nancy and Harry for giving us the history lesson to experience first hand.

    Comment by dscott — April 15, 2011 @ 11:21 am

  4. #2, I did a post on this thanks to your nudge.

    I prefer the term Private Domestic Product (PDP), and yes, since the recession as normal people define it began, it’s negative.

    Comment by TBlumer — April 15, 2011 @ 12:49 pm

  5. #2, I agree and have stated myself that counting government spending is actually a subtraction from the GDP not a positive due to the source of the funds.

    Comment by dscott — April 16, 2011 @ 9:29 am

  6. [...] Phil Gramm on the Obama Economy: Trailing Reagan by 15+ Million Jobs and $4,100+ in Per-Capita GDP Heckuva job, Nancy, Barry, and Harry. [...]

    Pingback by Daily Dive 16 April 11 | adeliemanchot — April 16, 2011 @ 12:24 pm

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