Sunday, March 10, 2024

Don't brag about our economic growth, make it worth bragging about

My wife insists on watching CNN and MSNBC. I find the shows tiresome because their arguments are often weak. For example, a Biden supporter comes on the show and says the U.S. economy is doing better than any other country. I don't believe it. Last I checked, China's economic growth rate had fallen from 10% to 6%. That may be slow for China, but 6% annual growth is about twice the U.S. rate. 

But even if it is true, it is not a strong argument. A strong argument would be to compare recent U.S. economic growth to our own past growth, and point out how well we are doing now. But we cannot do this because, by that standard, we are not doing well.

To see how good our economy is now, I compare our current performance to the high points of our past performance. The red line on the graph below shows the trend of those high points:

Annual US Real GDP Growth Rate and the Trend of Peaks  1948-2023

I connected the 1955 peak (7.1% growth) to the 2018 peak (3.0% growth), then extended the red line out to 2023 and back to 1948. Three above-trend peaks are easy to spot:

  • 1950-1951: Probably due to Korean war spending
  • 1984: Reagan's "Morning in America"
  • 2021: Real GDP growth in the year after the covid shutdown

In addition, U.S. economic performance surpasses the trend of peaks briefly in the mid-1960s, and again in the latter 1990s. Other than that, all the peaks are at or below the trend line. Even the 2023 data (which is preliminary and will likely change) is below the trend of peaks. If I was Biden, I would be embarrassed that my people are bragging about how good the Biden economy is. His people are probably losing him votes. 

By the way, the trend line itself shows a downtrend nearly as long-lived as Biden. This downtrend is clearly not Biden's fault. Maybe he should say as much, and add that he wants to turn the trend upward in the next four years. 

That trend can't go much lower. It fell five percentage points in less than 80 years, and is now near 2.5%. If the trend continues another 40 years, it will be approaching zero growth. Zero GDP growth means the only way to get a raise is to take income from someone else. That's not how things are done among a civil people.

There are better ways to run an economy, other than expanding credit and accumulating private-sector debt until the economy wants to die. "Perhaps the U.S. needs another, more modern Keynes..."

I checked: They dunno 2023 yet. But for 2022, China's real GDP grew 2.99%. So, 3 percent in 2022. The U.S. GDP grew 1.9% in 2022, and 2.5% in 2023. In 2021, the bounce-back year after the covid-shutdown recession, U.S. GDP grew 5.8% while China's economy grew more than 8%. 

"Which country is doing better?" is the not the question to ask. Better would be "How do we fix this?"


To my good eye, comparing US growth to that of other nations makes for a weak argument. Comparing our current economic growth to that of our own past makes a much stronger argument. But Biden can't do that until he makes the trend turn upward. And the trend will not show growth improving until we start making better economic policy decisions.

Don't brag about our economic growth, make it worth bragging about. All we need is the right plan.

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