This post is virtually a repeat of my post in April 2014, “Taking the way of measuring our discontent,” except that I’ve up to date the graphs and the quantities and modified the commentary somewhat. It’s appropriate and well-timed, because the GDP revisions released today show that the recovery has been even weaker than we thought. The Great Recession of 2008-2009 wasn’t your typical recession.
In almost every other downturn in postwar background, the economy rebounded within a few years to return to its long-term development path. But not this time, and it offers nothing to do with the wealthy getting richer or the alleged upsurge in inequality. Instead, it has to do with the average person and the common family not making the type of improvement to which they are accustomed.
Understandably, people are upset. The graph above compares the real development of real GDP (blue) using its long-term craze of 3.1% per 12 months. Never before has real GDP fallen below its tendency by so much for so long-and still, once we are entering the seventh year of recovery, there is no sign of a true recovery. The existing “gap” between real GDP and its own long-term trend is approximately 15% by my calculations. 3 trillion in missing income.
We see the same design in the chart above, which compares the actual growth of a subset of retail sales (which excludes certain volatile categories) to its long-term tendency. They are the expenditures made by normal folk, not the mega-billionaires. This helps dramatize just how radically things transformed beginning in the second option fifty percent of 2008. Retail sales by this measure would need to increase some 20% overnight to reunite on their long-term trend path.
This is a way of measuring how much middle class families are hurting. After growing for decades at about a 1% annual speed, the work force ended growing in late 2008 suddenly, as the graph above shows. Things have picked up a little in the past year, but the labor force is “missing” around 10 million people-people who’ve given up trying to find a job or who’ve made the decision they just don’t care to work.
If one thing stands out in these charts, it is the abruptness and the severity and the persistence of the divergence from long-term tendencies that began in 2008. Something REALLY BIG happened; what was it? It had been not demographics, since demographics change at glacial speed. It was arguably not financial plan.
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The Fed was sluggish to release its QE efforts in past due 2008, but since then they have been working overtime to make sure the economy is not starved of liquidity and interest rates are as low as possible. The one thing that changed in a large and durable way really, starting in 2008, was fiscal plan. The Bush administration launched TARP in past due 2008, and the National government followed up with ARRA in ’09 2009. Came Obamacare this year 2010 Then, which purported to restructure completely one-sixth of the US economy within the space of a couple of years. Came the Dodd-Frank super-regulation of the financial industry Then.
Beginning in 2013, top marginal taxes rates were increased. 12.of this week 45 trillion as. As the second chart shows, that surge of borrowing more than doubled the federal debt burden, raising it from 36% of GDP in mid-2008 to just over 72% of GDP in the span of seven years. The only other time something of the magnitude happened with fiscal policy was WW II. 7.8 trillion over the course of the past seven years and handed the majority of the proceeds out by means of various transfer payments (which now make up over 73% of federal government spending).