America’s recent economic performance has made us envious of mediocrity. Yet instead of implementing the economic recovery we want, we have made excuses for the economic recovery we have. The recession ended almost five years ago. The time has come to take stock of where we are, and how far we are from where we want to be.
Last year, the economy had its fourth year of growth, but the growth was anemic, at just 1.9 percent. Once more, the rush to excuse it starts. This time we hear references the last half of the year being good, only to see that this January’s job creation figure was just 113,000 – about 70,000 below expectations.
Over the last four years, America repeatedly has followed this economic cycle; anemia, then excuses. Although we’re unable to admit we are accepting what once would have been considered relative failure, we are all too ready to excuse it.
Over the last four years, the economy has averaged just 2.25 percent real growth. Since 1930, that is the lowest average for any four years in which America’s economy has grown annually.
Instead of listening to these wakeup calls, we have hit the snooze button.
Last year, the first excuse was the sequestration of federal spending. That the spending cuts did not happen until March – and even then only removed a relatively small portion of spending from the federal budget – did not seem to matter.
The next excuse was that Washington’s political fighting was the problem. It started as a fear of a government shutdown, followed shortly by a real one. The threat of a shutdown was supposedly keeping the private sector from investing. When it actually happened, it was keeping the government from spending the money needed to keep GDP climbing.
Yet lo and behold, the strongest part of last year’s economic performance was the second half, when the government shutdown and the debates surrounding it occurred.
Over the last four years, the excuses have marched like elephants in a circus parade – each clutching the tail of the one preceding it.
We have blamed Europe and its debt crises. Yet Europe is relatively stable now. America’s growth is still subpar.
We have blamed state budget cuts when they sought to match their spending to their revenues — a scandalous idea in Washington. Now, the states are running surpluses – even more shocking to Washington – and still the nation’s economy snails along.
Amazingly, some even have blamed Washington for not spending more when it was racking up $1 trillion-plus deficits and spending almost a quarter of the nation’s GDP. We got a sizable increase in the federal debt as a result, but not sizable economic growth.
While we have been excusing the nation’s remedial economy, we also have ignored the monetary policy side. The Fed’s program of “quantitative easing” has pumped enormous liquidity into the monetary system, driving interest rates to historic lows. For those who see the world thusly, federal spending has been nothing if not “stimulative,” averaging 22.4 percent of GDP over the last four years.
America is a nation founded on optimism, not excuses. It is time we stop making them and look inward, admit where we are – and where the economy is not – take the steps needed to truly fix its performance.
We could look at reducing the crushing weight of over-regulation, lowering the developed world’s highest corporate tax rate, and fully unleashing our new growth areas – such as an energy sector now just beginning to be tapped by innovative means. Simply: we could just have Washington get out of the way.
We could do all those things, and more. Or, we can start working on our next round of excuses.
J.T. Young served in the Treasury Department and the Office of Management and Budget from 2001 to 2004 and as a Congressional staff member from 1987 to 2000.