Economic growth for the second quarter of 2012 officially has been revised down to 1.25%, which is below the lowest previous estimate.
In an effort to stimulate the economy, the Obama Administration and the U.S. Congress have added $6 trillion to the federal debt, with annual deficits exceeding $1 trillion. The Federal Reserve Board meanwhile has announced its third round of quantitative easing, on top of Operation Twist.
Yet the unemployment rate remains over 8% and, as we stated earlier this month, could be as high as 19% if you take a true and accurate count of everyone who is not working.
Since the current “recovery” began, real income for the average American has dropped 5.7%, and while inflation as a whole remains in check, the price of essentials such as oil and food has soared. At least we can credit quantitative easing with taming deflation!
This all sounds pretty gloomy, but cheer up. Alan Krueger, who chairs the President’s Council of Economic Advisors, says “we’re making progress.”
It’s All Relative
Progress, of course, is relative. It’s true that the free fall that began in 2008 created the worst economic conditions we’ve encountered since The Great Depression, but in the past the rule has been the greater the recession, the greater the recovery.
Not so this time. Cumulative growth for the past three years has been just 6.7%, according to the Congressional Joint Economic Committee. In comparison, the average for all 10 post-World War II recoveries is 15.2%.
In other words, the economic growth we’re experiencing is well under half of what it has been historically after past recessions, even though it should have been among the best periods of growth ever, given the severity of the recession.
Worse still, we can look forward to the long-term impact of today’s failed economic programs. Someday, the debt we’ve accumulated will have to be paid back. And quantitative easing may keep the country’s debt payments manageable today, but it weakens the dollar and boosts inflation.
And sooner or later interest rates could rise to the point where our current tax revenues will not be enough to pay the interest on our debt, let alone support government programs.
So what do we do when the current economic programs produce the same results as they have in the past? Prepare for a multi-trillion dollar stimulus package? QE3, the third quantitative easing program is open ended and can last as long as The Fed wants it to last, so at least we don’t have to worry about QE4.