January 28, 2012

Pethokoukis: Of Course It’s Fair to Compare the Obama and Reagan Economic Recoveries

Filed under: Economy,Taxes & Government — Tom @ 10:24 am

ReaganVsObamaGDPthru10QtrsJan2012And when you do, as seen at the right, there is no comparison.

James Pethokoukis at the Enterprise Blog elaborates:

Housing is usually a key contributor to GDP growth during the early stages of a recovery. As a 2011 St. Louis Fed analysis points out, “Somewhat surprisingly, the housing component of GDP (more formally known as residential investment) tends to be a solid contributor to GDP growth during a recovery. Historically, residential investment has contributed only about 5 percent of GDP—a small share considering the consumption component is close to 70 percent. Nevertheless … it can contribute substantially to the GDP growth rate for short periods of time.”

According to Commerce Department data, residential investment added 1.33 percentage points to GDP in 1983, 0.64 in 1984. By contrast, residential investment subtracted 0.11 percentage point in 2010 and 0.03 in 2011.

But here’s the thing: Subtract the housing rebound from the Reagan Recovery and GDP still grows twice as fast as during the Obama Recovery.

Reagan also had to get the economy going when the Fed’s prime rate was around 20% (vs. 3.25% now), when inflation was roaring (from December 1979 to December 1980, prices increased by 12.5%), and a decaying employment market (which continued to do so because Congress pushed off the effective date of Reagan’s supply-side tax cuts to October 1981; the 1981 cut of 5% didn’t take effect until October; spread over the full year, it was really only 1.25%, which was not enough to mean anything. The real effect of the cuts didn’t kick in until January 1982).

The best way to look at the lack of meaningful recovery is to do the math on where the economy was when the recession officially ended, and to then look at where we are now compared to where we could and should be:

  • Second-quarter 2009 GDP was $13.85 trillion.
  • Having grown by 6.2% in real terms in the meantime, current GDP in second-quarter 2009 dollars is $14.71 trillion.
  • If the economy had instead grown at the 14.9% rate seen under Reagan (it actually should have done better, because the most recent downturn was deeper), current GDP in second-quarter 2009 dollars would be $15.92 trillion.
  • We could be (really should be) at a place where annual economic output is $1.21 trillion higher ($15.92 minus $14.71). That’s a difference of over $3,900 per year ($75 per week) for each man, woman and child in America, or about $10,000 for every U.S. household. (Figures would be slightly higher in fourth-quarter 2011 dollars.)

We should be mad as hell at this administration for choosing policy prescriptions which failed during the 1930s (and have failed in Old Europe for decades) when it could have chosen the ones which worked in the 1980s (and the 1960s, and to a smaller extent the middle half of the previous decade).

Saturday Off-Topic (Moderated) Open Thread (012812)

Filed under: Lucid Links — Tom @ 8:15 am

Rules are here. Possible comment fodder may follow later. Other topics are also fair game.


Positivity: Dutch girl, 16, becomes youngest to sail around the world on her own

Filed under: Positivity — Tom @ 8:00 am

From the UK Daily Mail:

Last updated at 12:21 PM on 23rd January 2012

  • Laura Dekker, now 16, began her global journey a year and a half ago amidst legal battles
  • Claims to be youngest-ever solo circumnavigator, though record not certified by Guinness World Records
  • Travelled 27,000 nautical miles in 38-ft yacht named Guppy

Dutch teenager Laura Dekker finished her solo sailing journey around the world in good spirits, despite endless debate about the terms under which she is allowed to be at sea.

She completed her 518-day trek today after docking her yacht Guppy in St. Maarten, ending a yearlong expedition that supposedly made her the youngest person ever to sail alone around the globe, though her trip was interrupted at several points.

Ms Dekker, 16, faced several court cases from the time she announced her intentions to travel the world at the age of 14. She said government organisations tried to deter her from her journey, and because of that, she may not return home to the Netherlands.

Dutch authorities tried to block Ms Dekker’s trip, arguing she was too young to risk her life, while school officials complained she should be in a classroom.

She once said she wanted to move to Australia after her voyage was over, the Associated Press reports, though it’s unclear what she’ll do now that she’s finished.

She may sail to New Zealand or Bonaire, Dutch News says. Or perhaps finish her schooling.

The strong-willed teenager made it clear that she didn’t feel like returning to her home country of the Netherlands. ‘Over a period of 11 months, I was constantly afraid that Youth Care would lock me up,’ she wrote on her blog.

‘It was all a frightening and traumatic experience. So often these terrible memories come to me. I can’t ignore them. It is painful.’

She continued: ‘Now, after sailing around the world, with different port approaches, storms, dangerous reefs, and the full responsibility of keeping myself and Guppy safe, I feel that the nightmares the Dutch government organisations put me through, were totally unfair.’

In all, she sailed 27,000 nautical miles, on a trip with stops that sound like a skim through a travel magazine: the Canary Islands, Panama, the Galapagos Islands, Tonga, Fiji, Bora Bora, Australia, South Africa and now, St. Maarten.

Dozens of people jumped and cheered as Ms Dekker waved, wept and then walked across the dock accompanied by her mother, father, sister and grandparents, who had greeted her at sea earlier. …

Go here for the rest of the story.