Make America Grow Again
The economy barely dodges recession, and Washington yawns.
April 28, 2016 7:27 p.m. ET
When did Americans decide that 1% or 2% economic growth is acceptable, that puny wage increases are inevitable, and that we should all merely shrug and get used to the country’s diminished expectations? Those questions come to mind watching the desultory reactions to Thursday’s report that the
U.S. economy grew by a meager 0.5% in the first quarter of 2016.
No worries, mate. Isn’t the first quarter always lousy? We’re told the job market is strong enough, growth will perk up the rest of the year, and the Federal Reserve is on hold. The White House issued its typically upbeat GDP analysis, with the only discouraging word being that “even with the solid growth in recent years, there is room for further expansion.”
President Obama didn’t comment on the first quarter, but the New York Times rolled out an interview with him Thursday, part of a larger apologia for his economic record, in which he offered this beauty: “I actually compare our economic performance to how, historically, countries that have wrenching financial crises perform. By that measure, we probably managed this better than any large economy on Earth in modern history.”
Mr. Obama has already compared himself favorably to every President except Lyndon Johnson, FDR and Lincoln, so why fake humility in his home stretch?
The reality is that the first quarter is further evidence of what has been the weakest economic expansion in the postwar era. The 0.5% growth is subject to revision but it follows 1.4% in the fourth quarter. Growth over the last six months has averaged about 1%, and under 2% over the last 12 months. The usual definition of recession is two consecutive quarters of negative growth, which we barely ducked.
The first-quarter growth details aren’t any more reassuring. Private investment chopped 0.6% off GDP, falling 25.5% from the fourth quarter. Consumer spending slowed, despite falling gasoline prices. Both declines reflect a lack of confidence in future growth. If it weren’t for housing (up 19.3%) and state and local government spending (up 12.6%), GDP in the quarter would have been negative.
The second quarter is looking a little better but hardly gangbusters if corporate profits are a guide. Business surveys are anticipating that profits will fall for the third quarter in a row, the longest streak since the end of the financial panic. When even Apple Inc. reports a sales decline, you know the outlook is difficult.
All of this continues the slow-or-slower pace of this entire expansion that began nearly seven years ago. Each year has had a similar GDP dip, and growth has never exceeded 2.5% (2010).
The American economy hasn’t grown by more than 3% since 2005 (3.3%), the longest such stretch of malaise that we can find in the Bureau of Economic analysis tables going back to 1930. Even the Great Depression saw a snap back to rapid growth from 1934-1936.
Yet Americans are supposed to accept this as the new abnormal that no one can do much about. As Kevin Warsh notes nearby, the latest excuse is to blame slow growth on the rest of world. So America would be booming if not for China, which would be booming if not for Europe, which blames Japan, which blames America.
This is more convenient than questioning their economic policies, which with few exceptions have been similar since 2008. First blowout government spending, followed by record-low interest rates and unprecedented central-bank bond purchases, along with
ever-tightening regulation across the private economy. The result has been what even Bernie Sanders and Bill and Hillary Clinton have conceded on the campaign trail are declining economic prospects for millions of Americans.
As for Mr. Obama’s financial-crisis excuse, how many more years can he dine out on that one? The U.S. economy has recovered faster from other deep recessions, including the savings and loan collapse of the early 1990s. The difference is that the government pursued supply-side policies, and in the case of S&Ls rapidly cleaned up the bad assets and didn’t layer on a new wave of regulation.
Faster growth is possible, but it will take better policies. The reason even Donald Trump may have a chance in November is because most Americans don’t want to accept a 1% or 2% growth future.
http://www.wsj.com/articles/make-ame...ain-1461886055
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