I’ve explained before that one of the most damning pieces of evidence against Obamanomics is that the economy is suffering from sub-par growth, something that is particularly damning since normally one expects to see faster-than-average growth following an economic downturn.
In a recent presentation, Robert Lucas of the University of Chicago included a couple of graphs that illustrate this phenomenon. This first chart shows the history of U.S. economic growth over the past 140 years. As you can see, the growth rate was remarkably constant over time, and there were always periods of rapid growth following economic downturns.
Lucas, who won the Nobel Prize in economics in 1995, then looks at the data for the recent downturn and recovery. As you can see, we have been struggling to get back to average growth rates and we have not enjoyed any of the above-average growth that normally follows a recession.
The key question, of course, is why growth has been anemic, resulting in (what seems to be) a permanent loss of output. In his presentation, Lucas warns that bad government policy is playing a big role. He says that “the problem is government is doing too much,” and he specifically highlights the “likelihood of much higher taxes, focused on ‘the rich'” and a “large increase in the role of government” in the healthcare sector.
In his conclusion, Professor Lucas is not overly optimistic about recovering lost output. He doesn’t make any flamboyant claims, but he does note that “European economies have larger government role and 20-30% lower income level than US.”
The obvious connection, as I’ve pointed out on many occasions, is that America is becoming a European-style welfare state and it is unavoidable that we will suffer from European-style economic malaise.
P.S. It should be noted that America’s anemic economic performance in recent years is not solely Obama’s fault. As the White House repeatedly points out, he inherited a downturn. That is completely accurate. My complaint, however, is that Obama promised hope and change but instead has exacerbated the big government policies of his predecessor.
[…] And does the economy then stabilize at the long-run trend of 3 percent growth (as illustrated by this chart showing U.S. growth from […]
[…] ago, when we became rich countries. Copying our policies today, on the other hand, is a recipe for tepid growth in the short run and Greek-style fiscal chaos in the long […]
[…] that America’s economy is sputtering. During the 138 years between 1870 and 2008, our economy expanded by an average of about 3 percent per year, but now it seems like 2 percent growth is the “new […]
[…] that America’s economy is sputtering. During the 138 years between 1870 and 2008, our economy expanded by an average of about 3 percent per year, but now it seems like 2 percent growth is the “new […]
[…] This crime of capitalism is ignored by mainstream economics. For example, Robert Lucas is a Nobel prize winner and leading exponent of the view that modern capitalism is an efficient manager of human resources and the output of labour. He is infamously quoted as saying in 2003, that the problem of depressions had been solved by modern mainstream economics (http://thenextrecession.wordpress.com/2010/05/28/vulgar-economics-in-despond/). In 2010, he argued that there can be ‘shocks’ to the steady equilibrium growth path of capital investment, but they would usually be temporary. Very quickly, growth would return to its previous trend (https://danieljmitchell.wordpress.com/2011/06/16/nobel-prize-winner-analyzes-the-obama-growth-gap/). […]
[…] But allow me to atone for my slowness by adding a very important point about growth. The country in the video became successful because it enjoyed a very long period of decent growth. But that has recently changed for the worse. […]
[…] the economy has not recovered the lost output from the recession, which is a point made by Nobel laureate Robert Lucas. That’s bad […]
[…] But allow me to atone for my slowness by adding a very important point about growth. The country in the video became successful because it enjoyed a very long period of decent growth. But that has recently changed for the worse. […]
[…] But allow me to atone for my slowness by adding a very important point about growth. The country in the video became successful because it enjoyed a very long period of decent growth. But that has recently changed for the worse. […]
[…] economy hasn’t enjoyed the bounce of above-average growth that normally follows a recession (and we have more than 130 years of data showing this is the normal pattern). As a result, instead of recovering all the lost output associated with the downturn, we’re […]
[…] the economy hasn’t enjoyed the bounce of above-average growth that normally follows a recession (and we have more than 130 years of data showing this is the normal pattern). As a result, instead of recovering all the lost output associated with the downturn, we’re […]
[…] economy hasn’t enjoyed the bounce of above-average growth that normally follows a recession (and we have more than 130 years of data showing this is the normal pattern). As a result, instead of recovering all the lost output associated with the downturn, we’re […]
It was the biggest economic down-turn since the Great Depression, frankly a relatively slight deviation from the charts seems like it would be expected in my opinion.
[…] the economy has not recovered the lost output from the recession, which is a point made by Nobel laureate Robert Lucas. That’s bad […]
[…] I made this point several months ago when analyzing some work by Nobel laureate Robert Lucas. And it’s been highlighted more recently by James Pethokoukis of the American Enterprise […]
[…] I made this point several months ago when analyzing some work by Nobel laureate Robert Lucas. And it’s been highlighted more recently by James Pethokoukis of the American Enterprise […]
[…] United States has not been growing as fast as Hong Kong and Singapore. Indeed, last year I shared some data from a Nobel Prize winner, which showed that America may have suffered a permanent loss in economic output because of the […]
[…] I made this point several months ago when analyzing some work by Nobel laureate Robert Lucas. And it’s been highlighted more recently by James Pethokoukis of the American Enterprise […]
[…] I made this point several months ago when analyzing some work by Nobel laureate Robert Lucas. And it’s been highlighted more recently by James Pethokoukis of the American Enterprise […]
[…] I made this point several months ago when analyzing some work by Nobel laureate Robert Lucas. And it’s been highlighted more recently by James Pethokoukis of the American Enterprise […]
[…] I made this point several months ago when analyzing some work by Nobel laureate Robert Lucas. And it’s been highlighted more recently by James Pethokoukis of the American Enterprise […]
[…] This is why the Obama Administration can’t rely of a falling unemployment rate. As I’ve explained elsewhere, the American economy appears to have suffered a permanent loss of output in recent years. […]
[…] This is why the Obama Administration can’t rely of a falling unemployment rate. As I’ve explained elsewhere, the American economy appears to have suffered a permanent loss of output in recent years. […]
[…] issues. Obama squandered about $800 billion, supposedly to “jolt” the economy, but growth has been anemic and the employment situation has been […]
[…] ago, when we became rich countries. Copying our policies today, on the other hand, is a recipe for tepid growth in the short run and Greek-style fiscal chaos in the long run. Rate this: Share […]
[…] make a big difference right away, but the cumulative impact would restore normal growth. And the most damning indictment of Obamanomics is not that we suffered a downturn, but that we haven’t bounced […]
Wasn’t it Thomas Jefferson who said something like “A little revolution now and again is a good thing?” Well boys and girls, I think the government of the present is done. It is time to start over!
Americans are now clinging to one last hope: That they will be the only country in the world which adopts a European style Social Democratic Welfare State model without falling into the perpetual 1-2% growth trendline that the inherent work incentives of such systems create and the economic extinction they entail. The second central hope is that they can somehow revert back to the core founding American principles of individualism and self reliance if it all does not work out.
In that respect, Americans are proving themselves worthy of the one attribute by which they are best known to the rest of the world: Naiveté.
Yes, Obama inherited a downturn. What kind of downturn? Since the Dems took control of the Congress in the 2006 election, those Dems took office in 2007. It is the Dems who then made the budgets and laws that turned our economy around from the usual ups and downs into a drive into the ground economy. This is clearly demonstrated by the drop through 2008 shown in the second graph.
Note that the previous 2007 Repub federal budget had a $150 billion deficit. The Dems were able to jack the deficit pass $450 billion for 2008. The Dem Congress has been an utter disaster for this country. Now that there has been no leadership from the Executive position (with President Present) it just keeps getting worse.