June 2014 was the fifth anniversary of the end of the 2008-09 recession. But the US economy has not yet begun an acceptable recovery. Polls show more than half of Americans believe we’re still in recession.
According to the “advance estimate” published Wednesday by the Commerce Department, Gross Domestic Product (GDP) grew at an annualized rate of 4% in the second quarter, ending June 30th. (This estimate will be revised twice and the final number, due in about sixty days, could be significantly different.)While 4% is nearly double the average for the past five years it’s still not the strong growth America needs to begin a genuine recovery from recession. And, as the chart shows we’re suffering through the weakest post-recession recovery since the government began issuing quarterly GDP reports 67 years ago.
Last fall the Obama Administration spiked the football on news of a 4% quarter. But the three quarters since then average an anemic 1.8%. So this time the post on the White House website was more subdued. It began with the obligatory blame-hurling at Republicans – without acknowledging any failing for which someone should be blamed. The rest of the post was a bland, academic assessment with the cautionary advice that “GDP figures can be volatile and are subject to substantial revision.”
Perhaps they realize at the White House that they’ve declared economic victory too many times — beginning with Joe Biden’s “recovery summer” of 2009 — and no longer have any credibility.
The Obama era American economy, while the most resilient in human history, struggles under the weight of decades of accumulated government intervention in the form of excessive regulation, taxation, and bureaucratic mandates, the most recent being Obamacare and the massive, Dodd-Frank financial regulation law. These government intrusions into the private sector and the generally anti-business, anti-investment attitude of the Obama Administration discourages and deters entrepreneurs and investors, resulting in fewer of the business start-ups and expansions that create jobs and expand the economy.
Defenders of big government economic intervention say the current recovery is the weakest on record because the 2008-09 recession was deepest/worst on record. But that isn’t consistent with the historical data. The last time we suffered an exceptionally severe recession was 1981. Depending on which statistics one considers most important 1981 was either the worst or second worst recession on record.
Like President Obama, President Reagan inherited a an economy in crisis due primarily to huge losses and retrenchment in the banking sector. Unlike Obama, Reagan faced historically high interest rates. In 1982 Mortgage interest was 15% compared to 4.5% today. The prime rate, paid by the largest, most credit worthy corporations was also in the teens, compared to 3.25% today. The unemployment rate spiked up to an even higher level in 1981 than in 2009.
Reagan’s approach was directly opposite of Obama’s. Instead of raising taxes and intensifying government interference in the private sector as Obama has done, Reagan deregulated and cut taxes. The chart below compares the results, quarter by quarter, and demonstrates that a severe recession doesn’t have to lead to an anemic recovery. In fact, the historical data show that more severe recessions tend to resolve into more, not less robust recoveries..
The 1981-82 recession was either the worst or second worst on record. But, as the chart above shows, the 1982-86 recovery was the third strongest out of ten since the government’s quarterly GDP reports began