Real GDP Growth for the Past Six Years

AB reader ddickson is one of our very smart conservative friends here and he drops me an email talking about real GDP growth from 2000QIV to 2006QIV. I have graphed the quarter by quarter annualized growth rates for the past 24 quarters. We did see a large increase in 2003QIII, which led to a flurry of comments from the Usual Suspect of Bush cheerleaders who know nothing about economics (even as they pretend they do) as to how this was the best economy ever. But as our graph shows, this one-time jump in growth followed ten quarters of sluggish growth, so most Keynesians were expecting a vigorous recovery. For those of us who were hoping for a strong and sustained recovery, the subsequent growth rates were a bit of a disappointment.

But we now here from the Bush cheerleaders that the economy is great if not the best ever. Even the Federal Reserve seems to think we are near full employment, which is why they have raised interest rates and are not backing off. Let’s suppose that the smart folks at the Federal Reserve are right so comparing 2000QIV to 2006QIV is a decent way of looking at the growth rate of potential output. Real GDP (2000$) was $11,513 billion as of 2006QIV as compared to $9,887.7 billion as of 2000QIV, which represents a 16.44% increase over six years. In other words, the average annualized growth rate has been a mere 2.57%. So that supply-side miracle that the Bush cheerleading free lunch supply-side spinners keep talking about does not seem to have materialized. But why would anyone thing otherwise given the fall in national savings from the Bush fiscal irresponsibility that this Bush cheerleading free lunch supply-side keep endorsing?