Worst recovery since World War II

Remember how liberal politicians claimed that President George W. Bush was presiding over “the worst economy since Herbert Hoover”? It's amazing how they couldn't recall Jimmy Carter's 20% interest rates and double-digit inflation.

Well, here's a pull quote from an early Associated Press report on today's economic growth report from Uncle Sam's Bureau of Economic Analysis (link is dynamic and subject to change):

“Overall, the U.S. economy may be performing much better than those in Europe, but this is still the weakest and longest economic recovery in U.S. postwar history,” (Capital Economics U.S. Economist Paul) Dales said.

Capital Economics calls itself “The Leading Independent Macroeconomics Research Consultancy.” It appears to be client service-driven, and not to have a particular political agenda.

Mr. Dales's statement is a damning indictment of the administration's choice to attempt economic recovery through time-debunked stimulus instead of time-tested tax cuts. This morning's BEA release of its third estimate of first quarter 2010 gross domestic product (GDP) growth apparently cemented his convictions.

BEA originally estimated in April that the economy grew by an annualized 3.2%. May's downward revision was to 3.0%. Today's announcement further reduced the result to 2.7%.

BEA's estimates for the fourth quarter of 2009 went from 5.7% to 5.9% to 5.6%. Third quarter of 2009 estimates went from 3.5% to 2.8% to 2.2%.

That's five out of six revisions in a downward direction. By contrast, GDP revisions I tracked from 2005 until the recession as normal people define it began in the third quarter of 2008 were usually upward.

Why the difference? There's nothing sinister about it, but simply put, the BEA's models, and economic models in general, tend to be slow to recognize the positive impact of a relatively low-tax, low-uncertainty business environment, and are also slow to pick up on the negative impact of a relatively high-tax, high-uncertainty business climate.

That we are currently in a high-uncertainty situation is beyond dispute. One never knows from day to day what new regulations the current administration in Washington will dream up (just one example: possible health insurance price controls), or who will be the next target of its bully-pulpit wrath. Meanwhile, significantly higher taxes loom beginning next year.

Many businessmen, entrepreneurs, and investors are laying low and focusing on muddling through instead of working on growth and expansion. Who can blame them? As long as the hostile business climate continues, the recovery, assuming it doesn't run out of steam and turn into a double-dip recession, will continue its historically poor performance.

Bay Area NewsGDPjobsstimulus

Just Posted

Dominion Voting Systems, a Denver-based vendor, is under contract to supply voting machines for elections in San Francisco. (Kevin N. Hume/Examiner file)
Is San Francisco’s elections director impeding voting machine progress?

Open source technology could break up existing monopoly

The 49ers take on the Packers in Week 3 of the NFL season, before heading into a tough stretch of divisional opponents. (Courtesy San Francisco 49ers)
‘Good for Ball’ or ‘Bad for Ball’ — A Niners analysis

By Mychael Urban Special to The Examiner What’s the first thing that… Continue reading

Health experts praised Salesforce for keeping its Dreamforce conference at Moscone Center outdoors and on a small scale. (Kevin N. Hume/The Examiner)
Happy birthday, Marc Benioff. Your company did the right thing

Salesforce kept Dreamforce small, which made all kinds of sense

Former San Francisco Mayor Willie Brown, pictured with Rose Pak in 2014, says the late Chinatown activist was “helping to guide the community away from the divisions, politically.”
Willie and Rose: How an alliance for the ages shaped SF

How the Mayor and Chinatown activist shaped San Francisco, then and now

The Grove in Golden Gate Park is maintained largely by those who remember San Francisco’s 20,000 AIDS victims.<ins> (Open Eye Pictures/New York Times)</ins>
Looking at COVID through the SF prism of AIDS

AIDS took 40 years to claim 700,000 lives. COVID surpassed that number in 21 months

Most Read