Until World War II and the postwar years, when the federal bureaucracy institutionalized the government’s preferred method for calculating national income, economists offered sound arguments for excluding government spending from estimates of gross domestic product. Using their general approach reveals that the private economy’s performance for the past thirteen years has been only somewhat better than complete stagnation.Higgs concludes:
As the basic Keynesian model implies, the recent increases in government spending appear to haveprevented an even greater decline in real GDP during the recession that began in the winter of 2007–2008. However that may be, because so much of this spending may have had little or no value—or even negative value—in itself, the question remains as to whether, despite what the official GDP figures show, the population’s true economic well-being might have suffered a greater contraction than mainstream economists, journalists, policymakers, and others for the most part believe. To resolve this question, I have computed what I call real “gross domestic private product” (GDPP), which is simply the standard real GDP minus the government purchases part of it. Figure 1 shows the movement of this variable from 2000 to 2012, the most recently completed year. If real GDPP had grown at its long-run average rate of about 3 percent per year during the period from 2000 to 2012, it would have increased by about 43 percent. In reality, however, real GDPP increased during this period by only 22 percent or by about 1.7 percent per year on average. So during this period of more than a decade, private product grew at only slightly more than half of its historical average rate. Between 2002 and 2007, while the housing bubble was giving rise to seemingly buoyant growth even beyond the housing sector, the good times appeared to have returned, but the inevitable bust from 2007 to 2009 and the slow recovery since 2009 pulled the intermediate-run growth rate for 2000–2012 back to an anemic level. The recovery of the period 2009–12 brought real GDPP up to a level only 3 percent above its 2007 level, signifying five years in which almost no net gain had been made and much suffering had occurred between the beginning and the end of the period. Perhaps the most positive statement we can make about the private economy’s performance during this thirteen-year period is that it has been somewhat better than complete stagnation.[...]
[T]he federal government’s huge run-up in its spending and debt; the Fed’s great expansion of bank reserves, its allocation of credit directly to failing companies and struggling sectors, and its accommodation of the federal government’s gigantic deficits; and the federal government’s enactment of extremely unsettling regulatory statutes, especially Obamacare and the Dodd-Frank Act—have served to discourage the private investment needed to hasten the recovery and lay the foundation for more rapid economic growth in the long run. To find a similar perfect storm of counterproductive government fiscal, monetary, and regulatory policies, we must go back to the 1930s, when the measures taken under Herbert Hoover and Franklin D. Roosevelt turned what probably would have been an ordinary, short-lived recession into the Great Depression (Higgs 1987, 159–95; 2006, 3–29). If the government and the Fed persist in the kind of destructive policies they have undertaken since 2007, the potential for another great depression will remain. Even without such a catastrophe, the U.S. economy presents at best the prospect of weak performance for many years to come.
(Via Tyler Cowen)
No comments:
Post a Comment