It’s time to get real about US. economic performance

Raymond Keating
Raymond Keating

Various market players expected second quarter real growth in gross domestic product in the United States to come in at less than 1 percent.

But growth wound up registering 1.7 percent. So, for those playing the expectations game, second-quarter growth in the broad measure of goods and services produced in the country turned out to be a positive.

But if you’re dealing with what’s actually going on in the economy — and what should be going on — then 1.7 percent real growth merely adds another bad quarter to one of the worst economic recoveries on record.

In fact, things actually have gotten worse over the past three quarters. Real GDP growth has averaged a mere 0.97 percent over that period.

At the very least, we should be growing at 3.4 percent — actually in the neighborhood of 4.5 percent during a recovery. Yet, GDP growth has averaged a woeful 2.2 percent during this anemic recovery.

There’s no real way to spin these numbers as positive. We keep hearing from some talking heads the economy is going to snap back in the second half of this year. Well, let’s hope that’s the case. But we’ve heard it before in recent years.

And what exactly does a snap back mean? Is growth going to jump up to where it should be during a recovery — that is, topping 4 percent for several quarters?

That’s hard to envision.

Those who argue economic growth is going to leap higher seem to base this prediction on little more than the notion we simply can’t keep growing at this poor pace much longer. For them, it’s just a matter of time.

In reality, though, there are real and significant reasons our economy is under-performing. Namely, tax, regulatory, spending, trade and monetary policies have all been pointing in an anti-business, anti-entrepreneur and anti-investment direction. Federal policies have increased costs and created uncertainty for American businesses and investors. The result, predictably, has been this poor economy.

Looking ahead, we see continuing uncertainty and eventually increased costs coming in a variety of governmental areas, including on taxes given spending and debt levels, on the health care front with ObamaCare being phased in, on the credit front with Dodd-Frank regulations moving ahead, on the inflation and interest rate unknowns resulting from historically loose monetary policies and on an anti-carbon-based-energy agenda pushed by the Barack Obama administration, especially at the Environmental Protection Agency.

The U.S. is unique given its propensity for risk taking, namely, for entrepreneurship. But entrepreneurship has been beaten down — as illustrated in falling levels of self-employment over the past several years — by big government.

Until the policies change, there’s little reason to expect anything better than a continuing under-performing recovery. That, unfortunately, means diminished income and standards of living for all Americans.