This week, we learned that the U.S. had negative economic growth for the first quarter of 2015. The economy just can’t seem to get over the hump.
For all of 2014 GDP growth was a modest 2.4%. This kind of growth is in-line with what we have experienced since the turn of the century. Since 2000, the U.S. has only had two years of growth of 3% or higher. Most policymakers consider 3% as a minimum goal for growth, and an indicator of a healthy economy.
The slow growth of the past 15 years makes one yearn for the good old days of mostly solid growth. From 1940-1999, we were pretty spoiled. Each of those six decades averaged annual GDP growth of over 3%. The average annual growth of 1.8% in the first decade of this century was the worst since the Depression decade of the 1930s. The first half of the current decade is second worst at 2.2% average annual growth.
In contrast, things couldn’t have been better at the end of the last century. Growth was over 4%, unemployment was 4%, there was a budget surplus, and inflation was low. What happened? Well, mainly bad fiscal policy and even worse leadership.
The past decade and a half is a case study for what not to do. Thanks mostly to both political parties that have adopted a zero-sum game approach to fiscal policy, and communicate economic propaganda not seen since the Soviet Union. These practices have led to a poisonous political environment, and a dysfunctional Congress. Add in two administrations that did little to engender cooperation, and it’s no wonder that we have political polarization and economic stagnation.
It’s this leaderless and divisive political climate that has led to poor fiscal policy. Except for a brief time after the economy imploded in 2008, and fear was so high that it forced cooperation, our elected officials mostly fought and muddled their way through the great recession. It’s a testament to the strength of the U.S. economy that the recession wasn’t worse.
Some political zealots say they are waiting for the magic moment when their party gains control of the White House and both houses of Congress. Then they’ll be able to implement their pure economic policies and get this country back on the right course! This kind of thinking is not only wishful, it’s misguided. The only way to craft effective fiscal policy is in a bi-partisan fashion.
Only with bi-partisan support can meaningful and enduring fiscal policy get adopted. Any partisan economic policy that gets shoved down the other party’s throat would not be sustainable, and make the gridlock and dysfunction even worse.
This summer, I plan to write several blogs about U.S. fiscal policy. I hope my readers will follow along as I lay out what I think could be an effective bi-partisan comprehensive plan. As a backdrop to these blogs, I’d like to start with some observations.
First, we live in interesting times. In the last 35-40 years our economy has undergone a significant transformation. Since the coming of personal computers and the beginnings of the Information Age starting in the late 1970s, the whole economy and business looks astonishingly different.
The past twenty years have been even more dynamic. The Internet, a growing global economy, and huge advances in medicine have made the lives of most people better. And the last decade has been amazing – despite the great recession. Stop and think about all of the advances in technology, science, communications, etc. We truly live in incredible times.
Who knows what untold innovations lie ahead? When I think about how advances come so quickly and in droves these days, it gives me great hope.
I believe there are more opportunities now than ever. Those with the right skills, a good attitude, and a solid work ethic should have little trouble making a good career. Anyone who has all of these attributes, and some imagination, ingenuity, and guts, can write their own ticket.
Sure, we still have lots of challenges as a country. However, I believe we have far more to be optimistic about than not.
That doesn’t mean the economic road ahead will be smooth or without detours. But with some repairs to our fiscal policy, we can make the journey a long and enjoyable one, instead of a series of short bumpy road-trips. We have the tools and the know-how to make the needed adjustments, provided we can summon the political will to do so.
Here are some links to past blogs that are related to this blog:
Fiscal Policy: http://www.commonsensecentrist.com/leadership-not-misleadership/
Deficit reduction: http://www.commonsensecentrist.com/passing-the-buck-really-big-bucks-2/