Stubborn Refusal to Acknowledge Economic Reality

The Commerce Department has issued its Economic report for the second quarter.  Gross Domestic Product or GDP increased by an anemic 1.7%.  First quarter GDP, which had already been revised downward from the initially reported 2.5% to 1.8% was further downgraded to 1.1%.

Over at the White House web site Alan Kruger, the President’s chief economic adviser tried for a positive spin, emphasizing the total growth in GDP since the end of the recession in June, 2009:

Real GDP has risen by 9.0% since the business-cycle trough in [second quarter of 2009]

As with almost all public communication from the Obama White House, this was intended to deceive people who don’t have the time or inclination to become fully informed.  Mr. Kruger hopes that without any context we’ll think 9% sounds like a lot. 

The red bars in this chart provide context around the White House spin by comparing the last four year’s 9% growth rate with every previous post-recession recovery of the last six decades.  It turns out that for four years we’ve endured the weakest recovery since the government began issuing quarterly GDP reports.

The blue bars compare increases in government spending during the first two years of each recession and recovery cycle.  As the the 2008-09 recession began Congress and the Bush  Administration followed the advice of Keynesian economics and enacted a relatively modest spending increase.  Then President Obama roared into office and piled on what turned out to be the largest, Keynesian “stimulus” ever recorded, nearly three times the second place increase on the chart.

Together, the red and blue bars show that the biggest Keynesian spending increase ever enacted, bought the weakest post-recession recovery.  Indeed, if there is any correlation to be discerned from history it is that more spending correlates with a weaker recovery.  Certainly our actual experience does not support the Keynesian doctrine of government “stimulus” that is an article of faith on The Left.

One would hope that politicians and academics would acknowledge from the numbers plotted in the chart that Keynesian economic theory has been repudiated, once and for all.  Surely, even the most naive have learned from the past 5 years that government can not buy prosperity by taxing and borrowing resources away from the productive, private economy to spend on political priorities. 

But our agonizing lesson in economic reality has gone right over the heads of the President and his allies in Congress and the media who now say the 2008-09 spending surge didn’t deliver the promised results because it wasn’t big enough! 

Obama has begun a campaign style series of speeches to excoriate House Republicans for refusing to appropriate funds for his “economic vision” of even larger spending programs on the same old progressive priorities including

Construction projects (remember “shovel ready”?)

Subsidies for green energy schemes (remember Solyndra?)

Job training programs, The Government Accountability Office reports that 9 federal agencies already spend $18 billion on forty-seven training programs.  Those programs do not report back to Congress on results.  Nobody knows if the trainees actually learn any legitimate skills or if they eventually land jobs that require the skills they are taught.

“Rebuilding our manufacturing base”: Government should build what the president calls “regional manufacturing hubs” as if the problem were lack of space rather than vacant, shuttered manufacturing facilities all over the country.

Education:  The Progressive Movement, which is Obama’s intellectual, philosophical and emotional base, is sure government will never, can never spend enough on programs, subsidies, studies and bureaucracies, associated with “education.”  But, much like our experience with Keynesian stimulus, federal education spending correlates with deterioration, not improvement in public schools.

We’re told by the media that the problem is Republican induced gridlock in Congress that prevents enactment of the President’s “jobs plan” for economic growth.  But  the real problem is his stubborn refusal to acknowledge economic reality.