GDP growth of 1.5% might be acceptable for European economies, but it is terrible for our economy, even during a regular period within the business cycle. It is calamitous within the first few years after the recession, when GDP has typically grown by 4-5% in order to recover lost ground. Our average growth over the past 4 quarters has been 1.9%. At this pace, we will never recover from the recession. Let’s remember that the Obama administration predicted that their policies would lead to 4-4.5% growth in 2011-2012. Their assertion that the slow growth is somehow still a result of the Bush administration’s policies is nonsensical.
Drilling down into the numbers of today’s report from the Bureau of Economic Analysisreveal little to cheer about. Net corporate profits were revised down for as far back as the eye can see. For 2009, they were revised down by 1.4%; for 2010 they were revised down by 5.4%; for 2011 they were revised down a whopping 6%. That means that we are missing an additional $233 billion in profits that we though had already existed. Personal income was also revised down since 2009 for a loss of over $150 billion. Additionally, real final sales of domestic product — GDP less change in private inventories — increased just 1.2% in the second quarter.
What is even more important to note is that fact that the size of our debt will permanently surpass the size of our economy. At present, total GDP stands at $15.595.9 trillion. Our gross federal debt is $15.875 trillion. The debt to GDP rate is 101.8%. At 1.5% growth, our economy will never catch up.
The panacea to our economic ills is not a mystery. We need to repeal Obamacare, Dodd-Frank, Sarbanes- Oxley, and the biofules mandates. Concurrently, we must open up our natural resources for energy exploration and production, convert our progressive tax code to a simple pro-growth flat tax, wind down the welfare and entitlement state, and phase out discretionary government bureaucracies.
You hear that, Governor Romney?
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