As usual, bad news was released on Friday when the nation was focused on the debt deal that has apparently been completed with non-binding “savings” stretched out over ten years, which covers three Presidential terms and five congressional terms. We will not see it. Anway, since it is Monday, the beginning of the news cycle, let us talk about the economic data that was buried in Friday’s news.  The economy has not grown since 2009. All of the stimulus money has been burned with nothing to show for it. See a telling graphic here from Political Calculations that shows if anything, we have actually entered into a microrecession.

Here is the Wall Street Journal’s analysis (or click through Google News):

The historical pattern is that the deeper the recession, the more robust the recovery. This is precisely what happened after the deep 1982 recession, as the nearby table shows. Growth was 4.5% in 1983, 7.2% in 1984, and it averaged nearly 4% for the five years after that through 1989. That is what a healthy recovery is supposed to look like, which is in marked contrast to the anemic eight quarters of this recovery.

This tale of two recoveries is an object lesson in economic policy. Taking office in 2009, President Obama embarked on one of the greatest reflation bets in history. He deployed the entire arsenal of neo-Keynesian policies to lift domestic demand, much as former White House economist Larry Summers still instructs at Harvard and most of the media still recommend.

So Congress deployed nearly a $1 trillion in stimulus, plus a battalion of temporary and targeted programs: cash for clunkers, cash for caulkers, tax credits for home buyers, 99 weeks of jobless benefits, “clean energy” grants, subsidies to states, and so much more. We were told that every $1 of this spending would conjure $1.50 in new economic output. The Federal Reserve has also more than cooperated by keeping interest rates near-zero for 31 months.

The bet was that with all this stimulus the economy would rebound as it did in the 1980s. Most of Washington and Wall Street believed that Mr. Obama was set up beautifully to inherit a normal recovery, claim victory for his policies, and ride easily to re-election. The problem is that the policies haven’t worked. We are left with slow growth, high unemployment and $4 trillion in new debt.

An old axiom in managing your career is to never take over an organization or team that is excelling because there is only one way to go. Rather, the best thing you can do for yourself is to take over at the lowest possible point because the odds are good time and circumstance will be in your favor. However, if you do take over at the worst point and your leadership takes your organization even lower, you rarely do not keep your job for long.

Comments

  • Edgar Harris

    The article in the Wall Street Journal fails to mention one key fact. Historically it takes five years for the economy to recover from a collapse of the financial sector.

    • http://scottslant.blogspot.com/ Scott A. Robinson

      It does mention the financial sector issue, though not the specific “five years” you cite. Read it. Paragraph 9.

      • Edgar Harris

        Yeah, I don’t have a subscription to the the Wall Street Journal, so I’ll just take your word for it.

  • RFA

    Right on! This deal will never actually cut and real fat in our spending if all the cuts are back-loaded into the next ten years. We need to have the cuts starting NOW! This debt is gonna drag on our economy and we will be seeing numbers like this keep coming if we don’t change our DC habits.