U.S. Post-Recession Economic Growth at 70-Year Low
President Barack Obama has spent much of 2016 making sure his legacy on immigration, health care, LGBT priorities and the economy will be remembered. The first three history will remember, though possibly not for the reasons he hopes. But his legacy on the economy may not be quite what he was hoping it would be.
According to an analysis from the Congressional Research Service (CRS), America’s economy is growing at the slowest post-recession rate since just after World War II. Congress’ research arm noted that “Although this expansion is already the fourth longest since the 1850s (34 quarters to date), the slow pace of economic growth means the overall gains have been relatively small. … Real GDP has grown at an average pace of 2.0% per year during the current recovery, compared with an average rate of 4.3% during the previous 10 expansions.”
The Slow-Growing Economy
CRS compared economic growth under Obama to that which happened under President Ronald Reagan, both who came into office under tough economic conditions. “[T]he recession beginning in 1980 was also particularly long and severe and the economy grew very quickly after entering its recovery.” After the same amount of time, real GDP has grown by only 10%, while it grew over 30% under Reagan.
Where blame lies for the slow-growing economy is less clear, according to CRS. The non-partisan research arm of Congress pointed to several popular theories. Among them:
- Financial-caused recessions may lead to slower recoveries than other recessions
- The Great Recession’s high unemployment and high rates of long periods of unemployment may have atrophied the skills of workers
- The Federal Reserve’s extremely low interest rates have discouraged investment
- America’s recoveries may be slowing, overall — each of the last four economic growth periods has been smaller than the one before it. Blame under this theory has been laid at the feet of “an aging population, a slowdown in educational attainment, increased inequality, and a high debt to GDP ratio,” says CRS
Hedge fund manager and Euro Pacific Capital CEO Peter Schiff believes Federal Reserve policy bears responsibility for the slow growth, reports The Washington Free Beacon. “This ‘recovery,’ if you want to call it that, is far weaker than prior recoveries because it is wholly artificial,” Schiff said. “It has been manufactured by Federal Reserve stimulus in the form of quantitative easing and zero percent interest rates.”
“I expect that we will have very low growth, or even negative growth as long as the Fed continues to ‘stimulate’ the economy,” he continued. “Frankly, I do not believe we have achieved even 2 percent growth over the last five or six years. The only reason we can even get GDP at that level is because the Fed has used extremely low inflation estimates, far below 1 percent. If they admitted inflation was higher, growth would have been reported even lower.”
Obama’s Victory Lap, And Bad News
For his part, Obama took a victory lap in Elkhart, Indiana, in late spring, praising the policies of his administration for economic improvements since 2009 in the local and national economies. However, economist Veronique de Rugy says blame for slow growth falls on some of those same policies.
“[T]he last eight years have been really awful for the labor market, whether it’s through Obamacare, the increase in the minimum wage, uncertainty in the market,” said de Rugy. “Uncertainty means paralysis. Making the cost of low-income labor more expensive isn’t helping.”
The CRS report is just the latest bad economic news in recent months. In June, Federal Reserve Chairperson Janet Yellen told Congress that the unemployment is artificially low because people are not looking for work.
“The unemployment rate fell to 4.7 percent in May, but that decline mainly occurred because fewer people reported that they were actively seeking work,” Yellen told Senators on the Banking, House, and Urban Affairs Committee. “A broader measure of labor market slack that includes workers marginally attached to the workforce and those working part-time who would prefer full-time work was unchanged in May and remains above its level prior to the recession.”
Additionally, an analysis of economic data from the federal Bureau of Labor & Statistics (BLS) found that U.S. productivity growth is at its lowest five-year rate since 1947.