Some great charts from economist John Taylor putting the weak economic recovery in some deep historical perspective. First, here is the three-year old Obama recovery. As Taylor points out, “The gap between real GDP and potential GDP (CBO estimates) is not closing at all. That is the main reason why unemployment remains so high.” It’s just not getting better:
Next, here is the Reagan recovery after the 1981-82 recession. Again, you have severe drop, but then the output gap between is closed.
But let’s go much further back and look at two recoveries that occurred after financial crises. Here’s the recovery after the Panic of 1907, a downturn which led to the creation of the Federal Reserve:
Finally, here is the Depression of 1893:
No Federal Reserve stimulus. No $800 billion American Recovery and Reinvestment Act. And yet, 100 years ago, the U.S. economy somehow managed to recover after two nasty downturns, each marked by a banking crisis.
Maybe we’re not doing it right.
Comrade,
Obama is doing it right: With such economic stagnation, the need for yet more redistribution from those who have to those who have not is clearly needed. Only when the haves become the have-no-more (right-thinking Party members excepted) will true social justice be achieved.
All is proceeding according to plan.
For the older charts, why does “potential GDP” start out so much lower than actual GDP? These two charts make no sense without an explanation.
That looked suspicious to me too. Why didn’t the potential GDP line track with the pre recession growth line on those 2, like it did in the 1st graph. Even though I can see from the raw data that the authors claim is true, that Obamas recovery is much weaker than all of these, using different rules to draw the Obama potential gdp line, vs the last 2, looked like some bias on the part of the one who drew the line.
It is of interest that after the formation of the Federal Reserve, that we have had the deepest recession (1919-21) and the longest recession (1929-1945).
It seems to me that the cure was worse than the disease.
Comrade Tovarich, I will trade you my Zil for your dacha in Delaware. I just can’t figure out what to do with my copy of “What is to be done?”
using the simpson bowles metric of govt spending being 21% of gdp would require our gdp to be at 17.16 trillion.
(n.b.-imho, the 21% number is far larger than the number used by clinton to project his ‘budget surpluses’. In 1999, when the clinton admin made the projections, govt spending was supposed to be averaging less than 18.6% of gdp for 04-08)
current gdp is 15.09 trillion. were the simpson bowles plan to be adopted, govt spending should be 3.168 trillion, instead of 3.603 trillion.
the plan is simple…
we freeze spending for 3 years, and hope for 4%+ growth.
at our current pace of 1.5% growth, we could just freeze spending for the next 8.5 years, and presto:
in two presidential terms we’ll be able to follow the debt recommendations of the council appointed by barry.
strange how dems accept govt spending at 24.1% of gdp, when they were once touting clinton’s spending at 18.6% of gdp. what’s 30% more spending among friends?
this is what is so ludicrous about the dems plan to raise taxes to the clinton rates…
they worked to pay for a govt that was spending less than 19% of gdp(98-01 average spending was 18.5% of gdp.) we now need a tax plan that pays for spending at 24% of gdp.
even more tragic is that the dems want the clinton bracket of 250k. yes, it was his bracket… in 1993. he adjusted for inflation, yearly, and by 2000 it was the 300k bracket. Now, it should be the 397k bracket…
Exactly. If the dems want to return to clinton era taxation, they should return to clinton era spending as well, 18% of GDP, compared to the present completely bloated 25% of GDP. But giving Obama a tax hike now, with his toleration of bloated spending, is like giving a bottle of vodka to a drunk.
Great graphs; what about ’29-’41?