In 1850 sub-Saharan Africa had about the same GDP per capita as America. The difference between America’s average standard of living today and that of Burundi is a mere 0.9 percent of extra growth a year. If Presidents Lincoln through Reagan had put in place policies, taxes, or regulations that slowed economic growth a mere 1 percent of what it actually was, 99 percent of us would now be living in soul-crushing poverty.
That is why America’s anemic 1.3 percent growth rate last quarter is worrying. Moreover, what was by comparison a sterling 1.8 percent growth rate in the first quarter has been revised almost out of existence, to a measly 0.4 percent. Despite a massive government stimulus program that added trillions of dollars to the nation’s liabilities, real GDP has risen just 0.7 percent over the 14 quarters since the recession began, compared to an average increase of 9.9 percent in past recession/recovery cycles.
Let’s be clear about something. If the United States does not restart its growth engine, everything else falls apart. Everything. We need to more than triple the current growth rate just to keep unemployment where it is. And where it is, is in a really bad place. If unemployment were properly measured so as to include those working part-time who wish to work full-time, along with those so discouraged that they gave up looking for work, then we would find that almost one in five Americans is out of work. This is Great Depression levels of unemployment.
By almost any measure one cares to look at, the economy is on life support. What is truly amazing is that the administration and much of Congress are apparently willing to pull the plug. Tax proposals continue to proliferate, while a tidal wave of regulations (taxes by another name) descends on American businesses. Every new tax or regulation serves to lower our growth rate by some small fraction. Unfortunately, those minute fractions rapidly add up to a really nasty number.
Some time back, I attended a conference on homeland security where it was pointed out that the accumulated cost of all the security measures then on the drawing board would reduce our future GDP growth by 1 percent a year. The senior government official present remarked, with an air of nonchalance, that “1 percent is a small price to pay for security, and I am sure Americans would not mind paying it.” Similarly, 1 percent annual GDP growth has been called a small price to pay if it wards off the mirage of global warming. Nor is forfeiting 1 percent too much of a burden if it acts to shackle our banks so they can never again make another mistake. Who cares if in the process of outlawing risk we also make banks incapable of accelerating economic growth?