“The truth is, those looking overseas for growth opportunities are the smart ones, because if we have another four years like President Barack Obama’s past eight, you’d have to be an idiot to invest in America with this assault on growth by Washington, D.C.”
That was Americans for Limited Government President Rick Manning’s shooting-from-the-hip response to the latest revision to the gross domestic product by the Bureau of Economic Analysis in the second quarter. The number was revised downward from a tepid, inflation-adjusted 1.2 percent annualized to 1.1 percent.
Basically put, that stinks. As Manning noted, “Combined with the really bad 0.8 percent in the first quarter, that means just to get to 2 percent for the year, the economy will need to grow above an annualized 3 percent for each of the last two quarters. To get to 3 percent for the year, it will need to grow at more than 5 percent for each of the last two quarters. Not going to happen.”
That’s bad, because the economy has not grown above 4 percent since 2000, and not above 3 percent since 2005.
For the record, from 1947 to 2004, the economy averaged 3.45 percent growth each year.
But from 2006 to 2015, it averaged just 1.41 percent.
That makes this the slowest 10-year period of economic growth since 1930 to 1939, which only grew at an average annual 1.33 percent growth rate.
Right now, we’re averaging less than 1 percent for the year. If 2016 comes in at its current 0.9 percent level for the year, that would make 2007 to 2016 even worse than the Great Depression at 1.23 percent average growth a year.
Don’t think growth matters? Unfortunately for the U.S., it is not a benign indicator. It feeds directly into other areas of the economy that hit the American people right in the pocketbook.
For example, job growth per Bureau of Labor Statistics data from 1948 to 2006 averaged nearly 1.7 percent annually. Since 2006, it’s been 0.5 percent growth a year.
Nominal household median income growth as measured by the U.S. Census Bureau from 1976 to 2006 — that’s as far back as the data goes — averaged 4.6 percent a year. Since then, it’s averaged a little less than 1.4 percent growth.
In the meantime, the costs of tuition, energy and electricity, health care and food — you know, things we more or less really, really need — have outpaced the growth of incomes. To be fair, they were outpacing incomes even before the slowdown, too.
For investors, the lack of growth here has meant a shifting of capital overseas, where all the production is. See how that works? The profit motive and the search for yield will always direct resources via the market’s invisible hand. Here in the U.S. we’re much better at buying things right now than selling them, and even then, the slowdown hurts as it restricts the resources available to consumers to spend.
So, what to do?
Fortunately for those who have had enough, it’s an election year. We could keep doing what we’ve been doing, which is not working. Or if you prefer a change, there’s always Donald Trump and Republicans.
For voters worried about what Hillary Clinton and another four years of Democrats in the White House might mean for growth, these terrible numbers reinforce the perception that things are actually getting worse. Which is hard, because from a growth perspective, things could not get much worse.
Robert Romano is the senior editor of Americans for Limited Government.