Bruce Bartlett on the Bush Boom
Credit goes (again) to Bruce Bartlett for getting the facts right:
For an interview with a reporter about the state of the economy, I looked up a few numbers that are interesting. I compared the state of the economy today to where it was at the exact same point during the previous business cycle. Thus, according to the National Bureau of Economic Research, the most recent recession ended in November, 2001. If you count forward 21 quarters to the first quarter of 2007, we see the following:
Real gross domestic product: Up 16.4 percent
Real gross private domestic investment: Up 10.2 percent
Payroll employment: Up 5.3 percent
Standard & Poor’s 500 stock index: Up 34.2 percent
Viewed in isolation, these numbers don’t seem too bad. For example, real GDP has risen at a 3.1 percent annual rate since the end of the recession. But in areas such as this, there are no objective criteria for saying what is a good performance from a bad one; only experience can guide us. Thus it is interesting to look at the same numbers above counted forward the same number of months from the end of the previous recession, which the NBER tells us ended in March, 1991:
Real GDP: Up 17.9 percent
Real investment: Up 51.2 percent
Payroll employment: Up 10.8 percent
S&P 500: Up 82.2 percent
It is obvious that by every standard, the recovery and expansion after the 1990-91 recession was significantly better than that after the 2001-01 recession. Recognizing this fact is important for several reasons.
Credit goes to Mark Thoma for this comment:
I also wish the mindless repetition of false mantras would end, but I don’t expect it to change much. In the media, the commodity being sold is entertainment, not information, so it shouldn’t be too surprising that the two will come into conflict even on shows labeled as news. Still, I would have thought there would be more market discipline than exists now. There seems to be little penalty for providing false or misleading information (even if it leads to war) so long as the entertainment value is high enough (unless you count even more bookings and more exposure in the media as a penalty). I wish I knew how to bring the information and entertainment objectives into better alignment, we need it, but I don’t know what the answer is.
Mark is correct that the media is just awful at reporting accurate information on the economy. Which is why it is so refreshing to see honest conservatives like Bruce getting space over at Townhall. He would not be allowed by the folks at the National Review to write such honest information – but this is why other outlets should give Bruce more space. He does not need to sully his good reputation by writing for a rag like the National Review. But why we are putting out accurate information, let me just had a few longer term averages for real GDP growth. We often hear about average annual real GDP growth being around 3.5%. This was true for the period after World War II up to the end of the Carter Administration. Since then?
From 1980QIV to 1992QIV, average annual real GDP growth = 3.0%.
From 1992QIV to 2000QIV, average annual real GDP growth = 3.6%.
From 2000QIV to 2006QIV, average annual real GDP growth = 2.6%.
Notice something? During the low tax eras (Reagan-Bush41 and Bush43), we witnessed lower growth rates. During the Clinton Administration – which began with its fiscally responsible policies with a tax rate increase – we saw strong growth. Maybe part of the explanation has to do with the impact on national savings from fiscal irresponsibility justified by phony free lunch promises.
Yet – the media cannot be bothered with such a simple story. Now I don’t expect Faux News to tell us the truth about anything. But CNN? MSNBC? ABC? CBS? NBC? Oh wait – what’s the latest on Paris Hilton?
Update: Check out the comments box over at Bruce’s blog. Seems one of his readers named RW is a true believer of the free lunch supply-side view we often hammer here. But I don’t have to hammer RW’s spin over at Bruce’s place as Bruce is doing a masterful job of making whatever point I might have to offer. And if you think that I’m suggesting our readers should check Bruce’s blog out more often – you are right. At least I will.