The soft bigotry of low expectations
2Q GDP is a sad 2.3 percent; media think that’s good
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If you didn’t know better, you’d think the government had just announced a really robust quarter of growth. But by now you know better than to trust the Obama Administration or the media, so you look at the actual growth number and what you see is that GDP in the second quarter of 2015 grew by a mere 2.3 percent.
That’s it. And no, that’s not good. It’s better than the 0.2 percent drop we saw in the first quarter, but if that’s your measure of economic strength, you really have surrendered to what George W. Bush in a different context called the “soft bigotry of low expectations.”
Worse: What little growth we have is almost entirely being driven by consumer spending and not by production. The problem with that is that it’s very volatile and not at all value-added.Lindsey Piegza of Stifel Economics expands on that thought in the Wall Street Journal:
The most concerning factor in the morning’s report was not necessarily the modest headline increase, but the lack of widespread support for growth in the second quarter. Personal spending accounted for two percent of the 2.3% headline increase. Spending, however, needs to be supported by other areas of activity in the economy, particularly business development and job creation. At this point, however, business development and expansion remains markedly weak.Going forward, without widespread improvement in business activity, there is very little to suggest stability, let alone momentum in the economy, as we look further into the second half of the year.
Over on the Journal’s editorial page, they note that this continues a sad six-year pattern that has given us the weakest “recovery” from a recession in 70 years:
Since the recession ended in June 2009, the economy has grown at an annual rate of about 2.1%. That’s 0.6-percentage points worse than even during the much-maligned George W. Bush expansion. Growth averaged more than 3% from 2003-2006, but the best growth during the Obamayears has been 2.5% in 2010, and in both 2011 and 2013 it nearly slipped back into recession.
The nearby chart compares this expansion to the growth periods in the 1980s and 1990s, showing what might have been. Real GDP growth averaged 4.6% in the first six years of the Reagan expansion, and more than 3.6% a year in the first six years of the George H.W. Bush-Bill Clinton expansion (gaining speed after that). Had the current expansion been as robust as the average expansion since 1960, GDP would be some $1.89 trillion larger today, according to Congress’s Joint Economic Committee.
The slow-growth Obama era has given way to multiple explanations and excuses from the President’s economic advocates. They blame the hangover from the financial crisis (even six years later), foreign economic problems, the failure of government to spend and tax more, an aging population—anything but the policy differences between those previous eras and this one.
Leading lights on the left have even thrown up their hands to suggest we no longer really know what produces faster growth.Larry Summers calls it “secular stagnation,” as if it’s an illness we somehow caught. Others claim 2%-2.5% growth is about as good as we can now do, so get used to it—and keep interest rates at near-zero for as far as the eye can see.
Of course, if they really wanted to see robust growth, they could try the low-tax, low-regulation policies that worked in the 1980s rather than simply coming to the conclusion that there’s nothing we can do and we should just be satisfied with this morass. But the truth is that central control and political manipulation of the economy is much more important to this administration than growth. They’re not there to give us growth. They’re there to regulate, tax and redistribute wealth - and they’ll take that over growth any day if they have to chose. Which they do, of course, because policies like these are the quintessential killer of growth. We’ve seen it for six years and I don’t know why anyone would fail to understand that at this point until they’re simply so deep in their ideological hole that they no longer want to understand why things are going wrong.
Apparently that applies to the headline writers in the media as well.