econscius

Archive for the ‘Economy’ Category

America’s- and the World’s- Baby Bust

In Economy, Immigration on February 3, 2013 at 1:22 am

Jonathan V. Last’s article “America’s Baby Bust” [1] is thought-provoking and echoes points I’ve made myself.  Specifically, the US birthrate has recently dipped below replacement and it already far below replacement in Japan and many European nations.  A surprising number of developing nations, e.g. Mexico, are below replacement rate as well. 

Mexico is a dramatic example, with female lifetime fertility dropping from about 7 in 1970 [1] to 2 today.  One implication is we should expect less immigration from Mexico in the future because there will be less need for the safety valve of El Norte.

The economic implications will be severe.  Think how much of the US economy is geared to market growth.  In sixty years or so, Europe, China and Japan will be shrinking at a fast rate.  The US may be, as well.  Construction will still occur, but for replacement rather than new growth.  Companies will have to take market share from each other or develop wholly new products to grow their revenues.

There will be significant social impacts.  Social Security programs will be challenged worldwide as a shrinking pool of workers is pressed to pay for large cohorts of retirees.  Schools and colleges will need to be closed.  In some places, roads and highways may be abandoned.  Even today, in the growing USA, there are areas that shrunk in population in the 2000’s (e.g. Chicago and Detroit) though they were offset by growth in places like Dallas and Atlanta.  Imagine how severe local depopulation will be if the overall US population is shrinking.  Since many municipal costs are largely fixed (e.g. maintaining sewer systems), a shrinking taxpayer base will challenge many towns in the future.

Mr. Last points out how this future is all but unavoidable.  Raising children is a cost and a major effort.  Even if government tax breaks for children are increased (which he recommends), people marry later, partly due to the high rates of college and post-graduate education, and have fewer children.  One unexpected consequence of national welfare and social security systems has been fewer children.  Baring major medical advances allowing the safe birth of children into later ages, the preference for fewer children is not easily overcome.  Thus, we will all have to plan for a future where the US, and especially Europe, China and Japan are shrinking.

[1] http://online.wsj.com/article/SB10001424127887323375204578270053387770718.html

Pictures from Wikipedia Commons.

Advertisements

Rejoice For The Stimulus Project Called Hurricane Sandy!

In Economy, Job Creation, Obama Administration on November 2, 2012 at 8:06 pm

Do you believe in stimulus programs?  Do you believe jobs are created by the government?  Are you Keynesian?  Are you voting for Barack Obama?

If so, rejoice!  Hurricane Sandy is a massive stimulus program.  Set aside the civilian deaths for a moment and focus on the government and private sector spending.

Think of Sandy as a $60 billion dollar injection of stimulus. [1]

In one watery swoop, Sally sept into millions of tight-fisted consumers’ wallets.  A frugal Congress can’t stop government spending via FEMA.  “Fannie Mae and Freddie Mac said they will offer help to borrowers whose homes were damaged or destroyed.” [1] 

Deductibles and out-of-pocket expenses to fix broken windows will rev up the metropolitan New York economy.  Think of all the drywall and generators sold by Home Depot.  Surely, pump makers like Britain’s Andrew Sykes Group are busy.  Ruined cars must be replaced, employing autoworkers in Japan and the USA. 

NYC looters [2] act as stimuli, forcing small businesses to restock.  Retailers who love a few dozen TVs and smartphones in a robbery have to replace their electronic inventory.   This creates jobs, doesn’t it?  Even if the products are made abroad, Americans are employed in the ports, on the railroads and at the trucking firms that bring in the replacement wide-screen plasmas.  The looters might even be 99%’s, taking from 1% retailers.

The rebuilding money comes from the federal government, consumers and insurance companies.  Isn’t it good to raid greedy insurance companies?

But does Mother Nature’s destruction of a 2011 Impala actually help us?  The 2012 Impala replacement comes from a combination of an insurance company’s settlement plus a consumer’s deductible.  Is that money free? 

The illustrious French economist Frederic Bastiat addressed the Lindsay Lohan-like thinking behind the above “Sandy stimulus” in his classic  “That Which Is Seen, and That Which Is Not Seen.” [3]   Bastiat looked at the example of the shopkeeper, whose window is broken by someone.  The Obama-Krugman view is that broken windows are very good.  The shopkeeper spends six francs to purchase a window; someone is paid to install it.  The window seller and the window installer receive those francs which they then spend elsewhere in the economy, say for beer and fishing rods, employing even more.  The broken window bonanza flows through the economy, creating what the Keynesians call a “multiplier effect”.  A single dollar spent fixing a window broken by a vandal might become $5 as it filters through the world economy.

The strange conclusion becomes that the economy really needs more broken windows.  Vandals are heroes.  Bastiat saw through that twisted logic, writing about the unseen effects, namely the things the shopkeeper would have spent the six francs on something else, which would have the same multiplicative effect on the economy.  The difference would be a net increase in the economy.  Instead of ending with a replacement window no different from the previous pane, at a cost of six francs, the shopkeeper would have bought something else.

As our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented. [3]

Let us take a view of industry in general, as affected by this circumstance. The window being broken, the glazier’s trade is encouraged to the amount of six francs: this is that which is seen.

If the window had not been broken, the shoemaker’s trade (or some other) would have been encouraged to the amount of six francs: this is that which is not seen.

And if that which is not seen is taken into consideration, because it is a negative fact, as well as that which is seen, because it is a positive fact, it will be understood that neither industry in general, nor the sum total of national labor, is affected, whether windows are broken or not.

The Keynesian fallacy rests on an idea of huge amounts of savings, selfishly unspent, that could be employing someone.  In the USA of 2012, most everyone is leveraged.  The US government is $16 Trillion in debt, with no hope of repayment.  Consumers are struggling to make ends meet, many deep in debt.  Tens of millions of homeowners’ mortgages are as underwater as the Queens-Midtown Tunnel.  Insurance money is not free, it comes from somewhere.  Property insurers will liquidate their stock and bond holdings to pay Sandy claims, slicing money from the economic system.  They will replenish those reserves by reducing dividends, which takes money out of the economy, and by raising insurance premiums, which also grabs cash from the economy.

Sandy is not really a Stimulus project for the US economy.  It’s an economic calamity just as it’s a humanitarian crisis.

[1] http://business.time.com/2012/10/31/hurricane-sandy-estimated-to-cost-60-billion/

[2] http://news.yahoo.com/blogs/abc-blogs/looters-arrested-post-superstorm-spree-182401079–abc-news-savings-and-investment.html

[3] http://mises.org/daily/3804/The-Broken-Window

###

Obama Presidency 2009-2012: Weakest Economic Recovery On Record

In 2012 Elections, Economy, Obama Administration on October 19, 2012 at 7:34 pm

When deciding who to vote for President, the footnoted piece provides a sense of perspective about the exceptionally weak economic recovery of the Obama presidency.   This recovery is just one-third as large as the “Reagan” recovery from the 1980-2 recession.  The recession ended more than three years ago, but people feel it has not ended because the recovery is so tepid.  The Wall Street Journal said:

It’s important to understand how unusual this kind of weak recovery is. Deep recessions like the one from December 2007 to June 2009 are typically followed by stronger recoveries, as there is more lost ground to make up.

The most recent comparable recession occurred in 1981-1982. Yet as the nearby chart shows, the Reagan expansion exploded with a 9.3% quarter and kept up a robust pace for years. By the 12th quarter of expansion, growth popped up to 6.4.%. At this stage of the Reagan expansion, overall GDP was 18.5% higher versus 6.7% for the Obama recovery, according to Congress’s Joint Economic Committee.

Even comparing this recovery with the average since the end of World War II, the Obama growth rate is well below the norm of 15.2%. The U.S. is running about $1.5 trillion of economic output behind where it should be.

This may sound like an abstraction, but it is the difference between a robust job market and lost opportunity for millions of Americans. It is the difference between a small federal budget deficit and more than $1 trillion for four straight years. It is the difference between a rising or falling poverty rate. [1]

[1] http://online.wsj.com/article/SB10000872396390443477104577553211912280818.html

Job fair picture from Wikipedia Commons.

Rising Wages in China Make Mexico More Competitive But Challenges Remain

In China, Economy, Mexico on September 17, 2012 at 11:51 pm

Mexico’s favorable geography

Rising wages in China make Mexico more competitive by comparison.  From a Wall Street Journal article by David Luhnow and Bob Davis [1], highlights follow:

Mexican wages, including benefits, average $3.50 an hour, compared to $2.50 an hour in China, after wage pressures there.  Given Mexico’s proximity to the United States, especially for border cities like Juarez, the slightly higher Mexican wages are often a better deal on account of quick time to the US market as well as lower shipping costs.

Because most parts are sourced locally, Mexican production is better for US suppliers than Chinese.  Most manufacturing inputs in China are made either there or in nearby countries like Malaysia or Thailand, whereas many inputs for Mexican production are made in the US.But, Mexico has disadvantages.  One factor going for China is its own gigantic domestic market of over one billion consumers.  Factories in China can ship to the local market as well as for export to the US.  The Mexican homicide rate (18.2 people per 1000,000 people) is higher than five in the US and 1.1 in China.

Lastly, an accompanying chart shows the woeful problem of the Mexican public education system.  Whereas China rates #54 for overall quality of eduction system (and #5  for tertiary education enrollment, #33 for availability of scientists and engineers), Mexico rates #107 for education (#79 tertiary enrollment, #86 for availability of scientists and engineers).Geography and hard-working people have Mexico in a favorable economic place.  But, decades of underperforming education, especially in math and science, hurt its competitiveness.  Furthermore, the legacy of local Mexican police corruption and spillover from demand for illicit drugs in the United States have led to horrific violence from cartels and criminal gangs. 

Mexican Maquiladora

[1] http://timesofnews.co/2012/09/17/for-mexico-an-edge-on-china

How Does Utah Get 6.0% Unemployment?

In Economy, Job Creation, Unemployment, Utah on August 19, 2012 at 1:09 pm

In this time of economic stagnation and perpetual high unemployment, it is useful to look at the handful of states adding jobs and providing lower-than-average jobless rates.  Utah continues to be successful.

Utah’s 6.0% unemployment rate compares to California 10.7%, tourism-dependent Nevada’s 12.0% and Illinois 8.9% [1]  Utah was the third-fastest growing state in the decade ended 2010. [2]

The state offers good jobs.  Utah has the 14th highest median household income of the 50 states, ranking ahead of New York State and Illinois. [5]

Employers like Utah.  Its 5% corporate income tax is 1.6 points below the national average.  The Wall Street Journal points out that tax rate has been unchanged over the past 15 years, whereas New Jersey has revamped its tax code four times since 2000. [3]  Employers prefer planning with confidence in steady regulations and tax rates. 

The state is considered business friendly.  “Barriers to business creation are minimal,” as Utah ranked fourth amongst states in Pacific Research Institute’s most recent US Economic Freedom Index (from 2008). [3]

The economic growth and state-level fiscal sanity is even more impressive given Utah is the nation’s youngest state with the nation’s highest fertility rate. [4]  One quarter of youth are minority. [3]  Large numbers of young children cost the schools and require other infrastructure but are future taxpayers.

Did Utah embark on a spending binge to battle the economic turn-down in 2008?  No.  Utah cut its budget with state-agency budgets sliced an average 19%, totaling $2 billion cut in the first two years of the downturn. [3]  The economy buzzed along.

[1] http://bls.gov/lau/ July 2012 data, retrieved 8/19/12.

[2] http://www.utah.gov/governor/news_media/article.html?article=3963

[3] A nice full-length Utah story is behind the pay-wall at the WSJ: http://online.wsj.com/article/SB10000872396390444405804577559582223445656.html

[4] http://www.ksl.com/?nid=148&sid=13186729

[5] http://en.wikipedia.org/wiki/Household_income_in_the_United_States, 2009 data, retrieved 8/19/12. 

Pictures from Wikipedia Commons.

You Built Your Business, President Obama Did Not

In Economy, Political Rhetoric, President Obama on July 16, 2012 at 9:23 pm

Sorry, Mr. President, but you’re wrong. 

If you have a business, you built it.  It’s yours, not Barrack Obama’s.  You’re the one who quit your comfortable day job to take on a dream.  It was your 401(k) savings you dipped into for the start-up.  It was your credit card that purchased office supplies.  You’re the one who had trouble sleeping at night when you signed for the lease, knowing you needed to sell like crazy to justify the risk.   You’re the one who sped to the bank before it closed to deposit a receivable check you personally picked up.  It is you who sent a check to the state to incorporate. 

It is you who learned QuickBooks and how to do payroll.  You learned about liability insurance and key man policies and a million other tidbits of business you never imagined you’d have to.  You’re the one who reassured your spouse you weren’t insane when the economy took a downward trend or you lost your big customer.

You’re the one who gets up at 4AM and leaves last in the evening.  You’re the one who signs personally for your bank loans.  You’re the one who signs the tax returns.  It is you who negotiates with salespeople of your vendors.  You work so hard because your day seems to be filled with meetings, meetings and more meetings.  You’re the one who deals with the angriest customers when things go wrong.  You’re the one who does the thankless jobs – like interviewing or firing people when times are tough.  It’s your drive and vision that pushed each new product.

You’re the one who has to be a rock.  When customers or employees scream and swear, you’re the one who has to settle things down.  You’ll get sued if you don’t, after all, you’re the supposed ‘deep pocket’.  When times are tough, you cheer up the staff.  When times are good, you dampen overenthusiasm, lest it put the firm in a bad spot later.

You’re the one who had trouble sleeping at night when you contemplated adding a second location or moving to a larger facility.  There were no guarantees.  You’re the one who had to testify in court about the frivolous lawsuit.  Even though the judge tossed it, your insurance rates went up, anyway. 

You’re the one who gave back to your community as you succeeded.  You sponsored a little league team, you organized fundraisers and gave more and more to local charities.  You volunteered for Junior Achievement and you offered leftover food from your restaurant to a homeless shelter.  As your company grew, more and more people in your community asked for your advice.  They started recommending you get involved.  You didn’t have the time, but you ran for school board or village board, anyway.  You paid a fortune in taxes, not only income but real estate and sales taxes for your business.

No matter what politicians say, you are the bedrock of the American economy and society, too. 

President Obama revealed perhaps more than intended of his feelings toward entreprenuers and successful people in general.  Ironically, most successful people are quick to extend credit to people who’ve helped them along the way, be it parents, mentors, teachers, spouses and the like. 

But, Apple and Hewlett-Packard didn’t become great companies because of the workmen who build the garages they started in. [1]  They became industry leaders by the endless hard work, drive and brilliance of Steve Wozniak, Steve Jobs, Bill Hewlett and David Packard.  Millions of American business owners toil away in far less glamorous surroundings, though the dry cleaner, cleaning service and local restaurant are all crucial to local economies.

I reprint Obama’s remarks at length below, sourced from whitehouse.gov:

They know they didn’t — look, if you’ve been successful, you didn’t get there on your own.  You didn’t get there on your own.  I’m always struck by people who think, well, it must be because I was just so smart.  There are a lot of smart people out there.  It must be because I worked harder than everybody else.  Let me tell you something — there are a whole bunch of hardworking people out there.  (Applause.)

If you were successful, somebody along the line gave you some help.  There was a great teacher somewhere in your life.  Somebody helped to create this unbelievable American system that we have that allowed you to thrive.  Somebody invested in roads and bridges.  If you’ve got a business — you didn’t build that.  Somebody else made that happen.  The Internet didn’t get invented on its own.  Government research created the Internet so that all the companies could make money off the Internet. [2]

[1] Early Apple computers really were made in Steve Job’s parent’s garage in Los Altos, CA.   http://cicorp.com/apple/garage/index.htm

[2] Note he is even wrong about the internet, which was created by the Defense Dept. for national security purposes, not “so companies… could make money”.  The internet is nothing without private telecomm, too (phone lines, switches, routers, etc.)  Many years after the invention of the internet, smart entrepreneurs figured out ways to make the internet useful to consumers and thus, make money. http://www.whitehouse.gov/the-press-office/2012/07/13/remarks-president-campaign-event-roanoke-virginia?utm_source=wh.gov&utm_medium=shorturl&utm_campaign=shorturl

Pictures (Steve Jobs’ parent’s garage and early HP & Apple logos) from Wikipedia Commons.

Joel Kotkin on the Decline of California

In Economy on July 9, 2012 at 1:09 am

Flag of California

An interview about the sad decline of once great California with demographer Joel Kotkin is linked below. [1]  Excerpts follow:

‘California is God’s best moment,” says Joel Kotkin. “It’s the best place in the world to live.” Or at least it used to be.

Mr. Kotkin, one of the nation’s premier demographers, left his native New York City in 1971 to enroll at the University of California, Berkeley. The state was a far-out paradise for hipsters who had grown up listening to the Mamas & the Papas’ iconic “California Dreamin'” and the Beach Boys’ “California Girls.” But it also attracted young, ambitious people “who had a lot of dreams, wanted to build big companies.” Think Intel, Apple and Hewlett-Packard.

Now, however, the Golden State’s fastest-growing entity is government and its biggest product is red tape. The first thing that comes to many American minds when you mention California isn’t Hollywood or tanned girls on a beach, but Greece. Many progressives in California take that as a compliment since Greeks are ostensibly happier. But as Mr. Kotkin notes, Californians are increasingly pursuing happiness elsewhere.

Nearly four million more people have left the Golden State in the last two decades than have come from other states. This is a sharp reversal from the 1980s, when 100,000 more Americans were settling in California each year than were leaving. According to Mr. Kotkin, most of those leaving are between the ages of 5 and 14 or 34 to 45. In other words, young families.

….

Mr. Kotkin describes himself as an old-fashioned Truman Democrat. In fact, he voted for Mr. Brown—who previously served as governor, secretary of state and attorney general—because he believed Mr. Brown “was interesting and thought outside the box.”

But “Jerry’s been a big disappointment,” Mr. Kotkin says. “I’ve known Jerry for 35 years, and he’s smart, but he just can’t seem to be a paradigm breaker. And of course, it’s because he really believes in this green stuff.”

In the governor’s dreams, green jobs will replace all of the “tangible jobs” that the state’s losing in agriculture, manufacturing, warehousing and construction. But “green energy doesn’t create enough energy!” Mr. Kotkin exclaims. “And it drives up the price of energy, which then drives out other things.” Notwithstanding all of the subsidies the state lavishes on renewables, green jobs only make up about 2% of California’s private-sector work force—no more than they do in Texas.

 ….

California used to be more like Texas—a jobs magnet. What happened? For one, says the demographer, Californians are now voting more based on social issues and less on fiscal ones than they did when Ronald Reagan was governor 40 years ago. Environmentalists are also more powerful than they used to be. And Mr. Brown facilitated the public-union takeover of the statehouse by allowing state workers to collectively bargain during his first stint as governor in 1977.

….

So if California’s no longer the Golden land of opportunity for middle-class dreamers, what is?

Mr. Kotkin lists four “growth corridors”: the Gulf Coast, the Great Plains, the Intermountain West, and the Southeast. All of these regions have lower costs of living, lower taxes, relatively relaxed regulatory environments, and critical natural resources such as oil and natural gas.

Take Salt Lake City. “Almost all of the major tech companies have moved stuff to Salt Lake City.” That includes Twitter, Adobe, eBay and Oracle.

Then there’s Texas, which is on a mission to steal California’s tech hegemony. Apple just announced that it’s building a $304 million campus and adding 3,600 jobs in Austin. Facebook established operations there last year, and eBay plans to add 1,000 new jobs there too.

[1] http://online.wsj.com/article/SB10001424052702304444604577340531861056966.html

Pictures from Wikipedia Commons.

Government Vultures Pick At Taxpayer Carcasses for Green

In 2012 Elections, Economy, Government Spending, President Obama on July 6, 2012 at 8:09 pm

 

Unused parking spots near author’s residence. Photo by author.

President Obama is no fan of American capitalism of the venture sort.  He actually used the term ‘vulture’ to refer to Bain Capital. [1]  Despite Bain’s obvious success in promoting many successful companies WITH ITS OWN MONEY, Obama has been the real vulture, picking at taxpayer carcasses. 

One after another, the President’s ‘green’ investments have failed.  Oops, did I say the President’s investments?  I mean your investments he makes.  Unlike Bain, the Obama bad investments, which seems to be essentially all of them, come right out of your pocket.

Bloomberg reports on Abound Solar’s failure:

Abound plans to file for bankruptcy in Wilmington, DE, next week and will fire about 125 employees, according to a statement yesterday.

The company, based in Loveland, CO, borrowed about $70 million against its guarantee. U.S. taxpayers may lose $40 million to $60 million on the loan after Abound’s assets are sold and the bankruptcy proceeding closes, Damien LaVera, an Energy Department spokesman, said in a statement. [2]

After Solyndra, Ener1 [3] and other taxpayer-backed bankruptcies, it should be clear to everyone it is best to leave investing to the real venture capitalists, private equity firms and stock markets and avoid the real vulture: the federal government, which tends to make bad investments to politically-connected parties.  Anthony Kim, analyst at Bloomberg New Energy Finance in New York said this of the Abound Solar bankruptcy, “This is not surprising at all,” because they backed the wrong type of technology. [2]  With your money. Solyndra logo.svg

 [1] http://online.wsj.com/article/SB10001424052702304840904577424583779000656.html [2] http://www.bloomberg.com/news/2012-06-29/abound-failure-revives-debate-over-obama-solar-policies.html [3]http://abcnews.go.com/Blotter/ener1-parent-obama-backed-green-company-files-bankruptcy/story?id=15456414 Parking lot picture by author.  Solyndra logo from Wikipedia Commons.

San Bernadino County to Seize Mortgages Using Eminent Domain

In Economy, Housing Bubble, Loan Forgiveness on July 5, 2012 at 5:00 pm

Threats to our rights not only come from Washington, they originate in city halls and county offices across the nation.  An example is a movement in several economically devastated California municipalities to use the power of eminent domain to seize not land, but mortgages.  The San Bernardino Board of Supervisors approved this action June 20, 2012.  [1]   Unemployment is as high as 30% in parts of San Bernardino County. [2]

Regardless of the merits or demerits of the specific proposal, this most certainly is NOT what eminent domain is intended for.

This odd interpretation of a city’s right to condemn land needed for a public project (e.g. building an expressway) is to be used to go after the mortgage holders of vacant properties.  [2] Note it does nada to improve the properties nor does it get jobs for out-of-work borrowers.  It is simply to seize mortgages from the prior mortgage holder and shrink the loan balance to an amount determined by San Bernardino and its private-sector financial partner.

The obvious impact of this attack on long-standing property rights would be to make lending more dangerous.  This will increase mortgage rates and make lenders less likely to extend mortgages, both of which have the long-term impact of making mortgages harder to come by, especially for the poor.  Which would seem to be a perverse effect of the original attempt.

Who came up with this hair-brained idea?  Someone with their hand in the cookie jar.  A couple of San Francisco investment banks and venture capital fund devised the idea and just happen to profit from the transactions (the Mortgage Resolution Partners firm refinances the seized mortgages for municipalities).  Roger Altman, the chairman of one of the investment banks, Evercore, just happens to be a former Clinton Administration official who also raises funds for President Obama. [2]

Let’s hope this misguided attack on property rights is nipped in the bud by the courts.

 

[1] http://www.latimes.com/business/money/la-fi-mo-eminent-domain-20120620,0,4970444.story

[2] http://online.wsj.com/article/SB10001424052702303933404577505013392791018.html?KEYWORDS=cities+california+mortgages

 Pictures from Wikipedia Commons.

Statistics Show 2009-12 The Weakest Economic Recovery Ever

In Economy, Obama Administration, Regulation, Unemployment on April 11, 2012 at 1:16 am

The worst economic recovery ever? 

Yes, this ‘recovery’ is worse than those following the Great Depression and the near depression of the 1980, 1981-2 double dip recessions.  Deep recessions are usually followed by broad-based booms.  Consumers and corporations have delayed needs that are typically fulfilled through accelerated purchases.  Twenty Twelve does not have a feel even remotely like robust 1984.  Few would refer to today as “Morning in America.” 

An excellent free piece (not behind the paywall) at the Wall Street Journal comes from Edward P. Lazear. [1]  Highlights follow:

The Great Depression started with major economic contractions in 1930, ’31, ’32 and ’33. In the three following years, the economy rebounded strongly with growth rates of 11%, 9% and 13%, respectively.

The current recovery began in the second half of 2009, but economic growth has been weak. Growth in 2010 was 3% and in 2011 it was 1.7%. Who knows what 2012 will bring, but the current growth rate looks to be about 2%, according to the consensus of economists recently polled by Blue Chip Economic Indicators. Sadly, we have never really recovered from the recession. The economy has not even returned to its long-term growth rate and is certainly not making up for lost ground.

Contrast this weak growth with the recovery that followed the other large recession of recent decades. In the early 1980s, the economy experienced a double-dip recession, with contractions in both 1980 and ’82. But growth rates in the subsequent two years averaged almost 6%. The high growth that persisted throughout the 1980s brought the economy quickly back to the trend line. Unlike the current period, from 1983 on, the economy was in rapid catch-up mode and eventually regained all that had been lost during the early ’80s.

It would be difficult to argue that government polices over the past three years have enhanced confidence in the U.S. business environment. Threats of higher taxes, the constantly increasing regulatory burden, the failure to pursue an aggressive trade policy that will open markets to U.S. exports, and the enormous increase in government spending all are growth impediments. Policies have focused on short-run changes and gimmicks—recall cash for clunkers and first-time home buyer credits—rather than on creating conditions that are favorable to investment that raise productivity and wages.

[1] http://online.wsj.com/article/SB10001424052702303816504577311470997904292.html

Pictures from Wikipedia Commons.