Fueled by tax cuts and monetary stimulus, the U.S. economic expansion will achieve another milestone this month when its duration surpasses the postwar average of 57 months. The ongoing expansion, poised to enter its sixth year in December, is a reminder that anger can waylay political analysts when they replace the human capacity to reason with base emotion.
Throughout 2002 and 2003, partisan critics of the Bush tax cuts repeatedly attacked this fiscal stimulus, and suggested that economic calamity would follow the mild, eight-month-long recession which greeted the new millennium. Such pessimism, typically reduced to a sound bite or a slogan, was 180 degrees off the mark.
The prognostications of some Wall Street analysts didn’t fare much better; that so-called “double-dip” recession never came to pass. However, while their conclusions were overly bearish, the professionals in this group later backed off when their bad calls became so blatantly evident to market watchers.
Perpetual bears, by contrast, are as confused about the expansion today as they were earlier this decade. Some direct their anger at conservatives in general, and President Bush in particular.
Any analysis of the U.S. economy’s health will rely on broad measures like gross domestic product, industrial production, and nonfarm payroll employment. Expanding GDP, production, and jobs are synonymous with positive economic growth. By contrast, contracting GDP, production, and employment are evidence of recession.
Here is what the data says about the current expansion:
Gross Domestic Product: Real GDP contracted in the third quarter of 2000 and again in first and third quarters of 2001. Since then, real GDP has expanded 19 consecutive quarters. Real GDP in the third quarter of 2003 expanded 7.5 percent, a rate similar to the one realized in the fourth quarter of 1999 (7.3 percent), which was the highest quarterly growth rate in the 1991-2001 period.
Industrial Production: Industrial production measures the output of the nation’s factories, mines, and utilities. Production peaked in June 2000 and hit bottom in November 2001. It has expanded for 39 months in this expansion, a 16.1 percent increase.
Nonfarm payroll employment: Employment peaked in February 2001, reached its trough in August 2003, and has expanded by 5.7 million new jobs since that date.
Here’s one other fact you won’t hear the bears cite:
Next month, the expansion becomes the fourth longest of the postwar era, trailing only the expansions of March 1991 to March 2001 (120 months), February 1961 to December 1969 (106 months), and November 1982 to July 1990 (92 months).
The ability of lower taxation and reasoned monetary stimulus to bolster the U.S. economy should never be underestimated. But it’s difficult to see the blue skies when hiding beneath the dark clouds of pessimism. The Wall Street bears should know better, but the partisan bears will never learn.
– Greg Kaza is executive director of the Arkansas Policy Foundation, a nonpartisan economic research group founded in 1995.