« Visualizing Texas' Job Dominance Since Before The Recession | WILLisms.com | Recoveries: Obama vs. Bush vs. Reagan »

"Revised Down" (The Story of the Obama Economy)

Trivia Tidbit of the Day: Part 958 -- America's GDP Figures Generally Revised Downward After The Fact Since 2008-

I've been doing some genealogy research in recent weeks, and as I trace my ancestry back to the 15th Century and earlier, it's incredible just how short many lives were. Indeed, while people often romanticize the past, life was generally "nasty, brutish, and short" (in Hobbesian parlance) until the modern era. People would have smelled. You would have eaten gruel every day, with some occasional (rotten, gamey) meat thrown in on special occasions. Maybe you would get some fresh fruit or vegetables for fleeting periods throughout the year. The water was bad, so you would have sipped on curdled barley wine or ale with the consistency of a warm, cottage cheesey, pulpy smoothie throughout the day so as not to die from cholera. And people still died from cholera. Constantly. Life was nasty. Imagine the worst poverty you have ever seen. That's how essentially everyone on the planet lived hundreds of years ago.

It's not difficult to imagine our descendants hundreds of years from now looking back similarly on 2012 and thinking, "what a miserable existence they lived!" Heck, I look back on photos, films, and facts from the late 1970s and think the same thing-- and that was just 35-ish years ago.

But here's the thing. Life over time got a little bit better, often very slowly and occasionally in fits and starts. Over the past couple hundred years or so, though, our post-Adam Smith world has improved in miraculous ways. And over the past few decades, specifically, rapid economic growth powered by free enterprise has eliminated nearly all of the worst sort of soul-crippling poverty throughout the world (<-- click on that link to get directly to the point, or speed ahead to the 5:56 mark):

If you aren't a video kind of person, here's what Arthur Brooks says:

"Since 1970, the worst poverty in the world (which is to say, the percentage of the population that lives on a dollar a day or less) has declined by 80%. 80%! There's been no achievement like that in human history. Billions of people have been lifted out of poverty. It's the most amazing thing that humanity has ever accomplished."

And here's the thing. While we don't know absolutely everything about what makes growth happen, we do generally know what works. The big stuff is pretty obvious. We also know what doesn't work. We have repressive and poor North Korea versus free and wealthy South Korea. We had repressive and poor East Germany versus free and wealthy West Germany. For many decades, we had a repressive and poor China versus a free and wealthy Hong Kong. We have repressive and failing American states like California and Michigan (once-free and once-wealthy) versus free, wealthy, and growing states like Texas.

We have data galore showing that when economic freedom is your input, higher life expectancy, higher income, higher GDP, lower poverty, better health, cleaner environment, and so forth and so on are your outputs. Most of the graphs look something like this:

So, what's going on these days? Why are we in such a weird rut?

Well, probably because economic freedom has been falling in the United States. And policies have consequences. The consequences of diminished economic freedom (think Dodd-Frank; think Obamacare; think TARP and the stimulus) have been pretty clear.

Today, the United States Bureau of Economic Analysis (BEA) released a slew of new data on the American economy. GDP growth for the second quarter of this year was just 1.5%. One-point-five percent. That's just sad.

Current U.S. GDP, for your reference anchor, is about $15 trillion annually:

Future GDP, if America has 1.5% GDP growth over the next thirty years:

So, yeah, that's at least better than our current wealth. But it's not great. And it's not what America is capable of achieving.

Future GDP, if America has 3.0% GDP growth over the next thirty years:

While 3% sounds exotic these days, America's economy averaged 3.6% growth from 1950 to 2000.

Imagine if we really pushed the pedal to the metal, achieving growth three times what we had in the second quarter of this year. Future GDP, if America has 4.5% GDP growth over the next thirty years:

Or, if you're having trouble relating the boxes to one another, here they are, scaled down proportionally in miniature form:

So we're talking about eliminating trillions of dollars in wealth if we settle into 1.5% as some kind of acceptable growth target. The Reagan recovery ushered in 5.7% annual growth, for example, compared to Obama's overall sickly 2.2% annual growth:

Again, one-point-five percent growth should not be something for Americans to celebrate. We're robbing human civilization itself of great future wealth, innovation, health, life expectancy, comfort, leisure, happiness, and basically everything else that is good in this world. Coolness itself depends on economic growth.

Moreover, while there are sometimes upward revisions (good news), the BEA data have more (and more substantial) downward revisions (bad news) like these:

* For 2008–2011, real GDP increased at an average annual rate of 0.3 percent; in the previously published estimates, real GDP had increased at an average annual rate of 0.4 percent....

*The percent change in real GDP was revised up 0.4 percentage point for 2009, was revised down 0.6 percentage point for 2010, and was revised up 0.1 percentage point for 2011....

* For 2008–2011, the average annual rate of growth of real disposable personal income was revised down 0.1 percentage point, from 0.2 percent to 0.1 percent....

* The percent change in real gross domestic income (GDI) was revised up 0.1 percentage point for 2009, was revised down 0.5 percentage point for 2010, and was revised down 0.2 percentage point for 2011.

* National income was revised down for all 3 years: 0.1 percent for 2009, 0.2 percent for 2010, and 0.5 percent for 2011.

* Corporate profits was revised down for all 3 years: 1.4 percent for 2009, 5.4 percent for 2010, and 6.0 percent for 2011.

Why does it seem that, under this President, the bad news typically happens "unexpectedly" and the good news-- we later come to learn-- is typically not as good as was reported initially? It's a very real phenomenon with very real political consequences.

Indeed, the Congressional Budget Office (CBO) has twice revised down the "good" parts of Obamacare and revised up the bad parts

Today, the CBO believes that Obamacare will spend more money, raise more tax revenue, and reduce the deficit less than the agency thought in 2010.

Spending projections for 2013-2019 have increased by $124 billion.

In 2010, the CBO estimated that Obamacare’s spending on new programs would amount to $929 billion from 2013-2019, and a ten-year cost of $944 billion. Those figures increased to $956 billion and $1,442 billion respectively in 2011, and $1,053 billion and $1,856 billion in 2012.

Avik Roy has the full breakdown of the CBO revisions, which are startling, over at Forbes.

Startling.

And kind of a big deal.

We know the Obama economy isn't good. We can feel it in our very guts. We can see it in the data. But when this is all said and done, when all of the downward revisions are finalized, it will likely be even worse than we realize today. That's frightening to think about.

And in many ways, the downward revisions of the Obama economy are emblematic of the downward revisions even his most ardent supporters have been forced to make regarding expectations of his entire presidency. Obama came into office promising post-partisan, post-racial hope and change. He came into office promising to fix not just the economy and provide jobs but to heal the oceans. His supporters were promising a hip 21st-century Camelot. This man won the Nobel Peace Prize immediately after taking office not for anything he had actually done but for that which he might do.

As Americans head into the final 100 days or so of the seemingly endless 2012 political season, they'll have to ask themselves not just whether Barack Obama has delivered on his promises but whether he could have ever delivered on those promises when his solutions run counter to every single thing we know about job creation and economic growth. Americans will look at the facts, yes...
(like these):

... but they'll more likely search their hearts, and one can only hope that they conclude what is and has been abundantly clear to some of us for quite some time. America cannot live up to its potential-- America cannot truly recover economically-- until Barack Obama is not the President of the United States. Sure, it will take a lot more than just that to get things back on track, but if Barack Obama wins this November, the long-term outlook for America's future must inevitably be revised down.

Previous Trivia Tidbit: Texas Economy Outperforming National Economy.

Tweet

Posted by Will Franklin · 27 July 2012 04:15 PM

Comments