It is an alarming, jaw-dropping conclusion. The U.S. standard of living, says superstar Northwestern University economist Robert Gordon in a new paper, is about to experience its slowest growth “over any two-decade interval recorded since the inauguration of George Washington.” That’s right, get ready for twenty years of major-league economic suckage. It is an event that would change America’s material expectations, self-identity and political landscape. Change in the worst way.
Get ready for the Long Recession.
Well, at least a long period of time where it is going to seem like the US economy is kind of sickly. That is the conclusion of productivity guru Robert Gordon in a new paper. He says US living standards now face their slowest two-decade growth rate “since the inauguration of George Washington.” More:
Gary Becker gets straight to the point:
The only real remedy for the long-term (and other) unemployed is to have the economy grow fast, as it did after the severe recession in 1982 when unemployment peaked in December of that year at 10.8%, and then fell rather rapidly. There is no magic bullet to accomplish this, but I do believe it would help a lot if the leaders in Washington did not try to radically transform various aspects of the economy while we are recovering from a serious recession, and thereby magnify the high degree of uncertainty that is typically caused by a recession. Instead, they should be concentrating on fighting the recession, and stimulating long-term economic growth.
That is how IHS Global calls it:
The fourth-quarter GDP surge was produced by a sharp turn in the inventory cycle. Firms still cut inventories in the fourth quarter, but much less severely than in the third. That led to increased production, which boosted GDP. Final sales growth, a better guide to the underlying path of the economy, was much more sedate, at 2.2%, but that was still an improvement on the third quarter’s 1.5% pace.
From the great David Goldman:
When Reagan took office in 1981, the baby boomers were in their 20s and 30s, America had a 10% savings rate, the current account was in surplus, and America was the world’s largest net creditor nation. Reagan was able to cut taxes and finance an enormous budget deficit because the world’s demand for US Treasury securities was correspondingly large. In 2010, the baby boomers are in their 50s and 60s, America has saved nothing for a decade, the current account remains in severe deficit and the world is choking on the existing supply of Treasury securities. Cutting taxes to stimulate the economy is not as simple this time round.
The always fantastic Joel Kotkin lays out the argument:
By 2030, all our major rivals, save India, will be declining, with ever-larger numbers of retirees and a shrinking labor force. … By then, the U.S. will have 400 million people, which may be more than the entire EU and three times the population of our former archrival Russia.
I recently had the chance to sit down and chat with Rep. Paul Ryan, a Wisconsin Republican and the ranking GOPer on the House Budget Committee. Ryan’s a rising Republican star (he’ll be just 40 next month), a guy some folks were pushing to be John McCain’s running mate in 2008. If there’s a young Jack Kemp in today’s Congress, he’s it. And if you’re wondering what the 21st century Republican Party will stand for, many of the ideas will probably come from Ryan. Here are some excerpts from our conversation:
Here is how economic analyst Ed Yardeni sees things:
Could the S&P 500 rise back to its record high next year? I was in Boston on Tuesday, and met with the first money manager on Planet Earth to ask me this question. That is definitely a contrarian’s scenario. I am currently predicting a 2010 high between 1300-1350, and more specifically 1332 by March 6, which would be up 100% on a y/y basis, from the Da Vinci Code bottom of 666. Then I see a nasty correction on growing concerns that the expiration of the Bush tax cuts might depress the economy in 2011. That selloff could last until the November Congressional elections. If Gridlock wins, with the Democrats losing their majority control of one or both houses of Congress, then stocks might resume the bull market.