WASHINGTON, July 30, 2015 – Just released figures for the growth rate of GDP for the United States in the second quarter show the economy grew at a tepid 2.3 percent annual rate.This is starting to sound like a broken record.
That means for the first half of 2015 GDP growth has averaged an annual rate of less than 1 ½ percent. This is a continuation of the Obama stagnation.
The Bureau of Economic Analysis also released the final revised figures for 2011 to 2014. During that period annual growth averaged about 2 percent. That means that, since Barack Obama was elected president, economic growth averaged under 2 percent annually, considering 2009 saw negative growth and during 2010, Obama’s best year, growth was 2.5 percent.
This contrasts sharply to the 4 ½ percent annual growth that followed the more severe recession in 1981. The reason for Obama’s poor performance is simple. President Obama doesn’t understand the role of economic policy.
The top priorities for economic policy are supposed to be growth, full employment and price stability. Instead Obama’s priorities are to re-distribute wealth, expand the safety net for low-income earners and fix income inequality. The reality is that had Obama concentrated on the proper goals, he would have been more successful at achieving his own goals.
Almost every economist agrees that growth should be the No. 1 priority following a deep recession. When the economy grows, there is an increase in employment. That means fewer people receiving government handouts like unemployment compensation, welfare, food stamps and government-supported health care.
As more people are employed their income rises, which helps to reduce income inequality and removes the need to redistribute wealth. More employment also reduces the need for a safety net. Increased growth means that there are more goods and services available to all Americans, which raises the standard of living.
For those who have acquired advanced knowledge or learned a skill, there is abundant opportunity, which provides the incentive for people to take more individual responsibility rather than expecting the government to provide a social responsibility.
While the majority of Americans benefit greatly by economic growth, some Americans who for whatever reason have not acquired advanced knowledge or leaned a skill are generally left behind during the prosperous years. Obama has concentrated his policies on providing for the lowest 15 percent of American income earners, rather than the majority.
In his first two years as president, Obama had control of both the House and the Senate and he was able to get all of his priority policies into law. But instead of stimulating the economy, the focus on providing health care to the lowest income earners was paid for by raising taxes on everyone else.
He also had Congress pass a massive stimulus bill that added little to short-term growth and increased the annual deficit to almost $1.5 trillion, which is a drag on long-term growth.
He particularly concentrated on raising taxes on the wealthy to reduce income inequality. The result is that income inequality has worsened. He wanted to raise the minimum wage and did so on all federal contracts. He encourages some cities and states to raise their own minimum wage above the federal level.
Some cities raised the minimum wage to $15 per hour. That translates into more than $30,000 per year for unskilled workers. This worsens the unemployment in those municipalities, makes income inequality worse and slows economic growth.
He forced his Affordable Care Act through a partisan Congress that took the inconceivable action of passing a law before they actually read it. While Obama claims the ACA is a success because an additional 11 million Americans now have health insurance, the remaining hundreds of millions of Americans are paying for those previously uninsured, which leaves less disposable income. This slows growth.
He decided a top priority would be to protect the environment. Primarily through executive action he implemented thousands of new regulations, making it difficult for new businesses to start and existing businesses to expand. This slows economic growth.
The U.S. has not experienced a solid period of growth since 2007. The result is that we are stuck with about the same level of full-time (40 hours per week) workers today as we had before the great recession began. Unless Obama or the next president concentrates on growth, we will be stuck in this stagnant economy for years to come.