GDP in Perspective

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Posted: Dec 02, 2015 12:01 AM
GDP in Perspective

I know the new normal of this economy has everyone excited about a GDP growth rate of anything over 2%. However, that rate just barely keeps pace with population growth if we use the real population numbers. This President and his Administration, with all their “economic brilliance,” often boast about the problems with Reaganomics—with trickle-down economic planning. They suggest this is the best economy in over 40 or 50 years—depending on which day they make those claims.

We don’t have to go all the way back to 2009 to get the picture. Considering the period from 2011 to the present, we can see we are on track from a total cumulative GDP growth per capita of about 9% growth in that five-year period. If we look at 1981 to 1985, we see a 31% increase per capita in GDP growth. Many will chalk that up as being some unique time in history.

Fine. Let’s look at 31% and see what a real economic growth model would look like. Let’s say—conservatively speaking—that a real economic growth model might be 15% from 2011 to 2015. It would take a miracle in the fourth quarter to reach anywhere near 15%. That is, of course, if you believe the numbers coming out of the Bureau of Labor Statistics, the Department of Labor and the Commerce Department.

When considering the 9% rate, we should factor in real inflation over the same time. Remember, we had some times from 2011 to 2013 when gas prices were close to $4.00 a gallon and food prices were increasing dramatically (not factored in to the inflation rate). Here is the reality: when factoring in real-time inflation as well as deflation in wage growth, we show negative growth per capita in the United States of America from 2011 to 2015.

I am not sure why we can’t use real numbers, except that it would not be politically advantageous. As we prepare to look at our vote for 2016, we must consider the reality of this administration. And we must be informed voters economically. We don’t need to know all the sticks and stones—but at least some basic information would help us as we begin to think about the candidates we will vote for.

Four more years of the current administration, in my opinion, would be devastating to this economy—particularly as we look at the stagnation in wages and the lowest real labor participation since perhaps the Great Depression.

So how should we examine the candidates? Not by their talking points. Let’s observe how each embraces the current economy as “the greatest thing since Ronald Reagan.” And let’s look for a real economic plan to turn the country around, turn the GDP around, put people to work, increase wages, put labor pressures on employers and begin to create an economy that we would be proud to leave to the next generation.

It is hard to believe that any of that can be done without a severe reformation of the tax system of this country. I believe it is broken beyond fixing. In all likelihood, the only reasonable recourse may be to abolish the IRS and establish a fair tax system.

The other issue to look for when considering candidates is their plans for an educational system that would prepare our children through building trades, technical skills and higher education to help grow the economy and prosper while doing it. To do that, we have to leave it to the states—not to the federal government.

These steps alone will begin to reduce spending dramatically in our government as we continue to increase revenues in a thriving economy. Study the real numbers—and then find the candidate with definitive plans to turn America’s economy around.