First, Investor’s Business Daily:
Obama’s Tax Hikes Are Killing Growth
Between ObamaCare and the fiscal cliff deal, President Obama has raised taxes nearly $2 trillion — most of which kicked in this year. Yet he and the press keep blaming minuscule spending cuts for the flat economy.
The only good thing to say about the second-quarter GDP growth number released on Wednesday is that, at 1.7%, it was better than most economists had expected. But even that comes with a caveat, since the Commerce Dept. downgraded reported growth in several previous quarters.
As a result, GDP growth has now been below 1.8% for three straight quarters. Naturally, the left rushed in to blame “austerity” for these lukewarm results.
… Just one problem. The automatic cuts imposed by sequestration didn’t start until March, and in the first year are minuscule compared to the size of the overall economy, and tiny as a share of the federal budget itself. So it’s hard to fathom how they could have had any impact on growth so far.
The Congressional Budget Office projects federal outlays will total $3.5 trillion this year — 16% above spending in 2008. Plus, at 21.5% of GDP, spending remains far higher than the post-World War II average. And the CBO expects spending to climb 4% next year.
Few families would call such spending rises austere.
Now, the Wall Street Journal, which notes that the government’s comprehensive revision should lead to some revisions to the historical economic narrative:
Data of Prosperity Past
The latest GDP revisions underscore how subpar the current recovery is.
… Wednesday’s second quarter report is especially interesting because it includes economic revisions based on new assumptions that re-measure the size of the U.S. economy going back to 1929. The Bureau of Economic Analysis does this every five years or so, and the crucial change this time is the recognition of intellectual property.
The long-overdue idea is to better measure the contribution of intellectual capital in our modern information economy. The Commerce gnomes will from now on include research and development spending, and even such artistic creations as movies, as part of U.S. economic output. This appropriately broader definition of GDP increased the size of the current U.S. economy by $551 billion—to $16.6 trillion in goods and services.
In other words, the U.S. is more prosperous and productive than we had previously been told. This is a tribute to the powerful engine of private American ingenuity that has powered growth for so many decades.
… We also learn from the revisions that the stagflationary 1970s—in particular the Nixon years—generated even less growth than originally recorded. This was an era of the 70% top marginal tax rate made worse by inflation that hit 13% and a huge expansion of the welfare and regulatory state.
By contrast, growth in the 1980s was even faster than we thought, averaging 4.4% a year from 1983-1989. This was the era by and large of tax cuts, deregulation, disinflation and government spending restraint. The recession of 1990, portrayed as a catastrophe at the time, turns out to have been minuscule, as the Reagan boom flowed into the prosperity of the 1990s. The Clinton tax increase of 1993 slowed growth from the robust recovery of late 1992 (3.6% for the year), but the Clinton-Gingrich policy mix and stalemate let the private information economy expand.
… the economy grew faster in the five years following the 2003 investment tax cut than previously measured. The five-year average was 3%, and over 2004-2005 growth averaged a robust 3.6%. The housing bust and financial panic ruined what was otherwise an economy growing at close to post-1929 norms.
… The tragic difference is how poorly the economy has emerged from this last recession.
… The data suggest that a major cause of the recent slowdown has been the Obama tax increase. The uncertainty about whether and how much taxes would rise caused business to seize up in 2012′s fourth quarter, and the arrival of the increase in January has slammed business investment.
… Without business investment, wages and incomes won’t rise.
… One reason to be more upbeat about the prospects for the second half of 2013 is Mr. Obama’s inability to pass major new growth inhibitors.
… by any measure the Obama years and policies ought to make Americans nostalgic for the good old days.
… as seen in the table at the top right of this post.