This is the worst recovery since the Great Depression – and maybe even including the Great Depression. Typically, after a sharp downturn, the economy bounces back enough so that it gets right back on its 3 percent GDP trendline within a couple years. That hasn’t happened. Another way of saying this is that income per household would be about $15,000 more if this were a typical recovery. Think of what the economy would be like if every family had an extra $15,000 to spend.
So why such a terrible recovery? Certainly, mistakes were made: the bullying of business, the advent of a massive and expensive new health care system, the stimulus itself. But put those aside as well.
Also, forget the excuse du jour – gasoline prices, the European debt crisis, sluggishness in China and India, intransigence in Congress, etc., etc. The hard truth is that the United States has been on a low-growth trajectory ever since the recession officially ended three years ago.
What we truly lack, to continue Shakespeare’s metaphor, is a lodestar, a guide, a goal. That goal is growth. Strong growth, in the range of 4 percent on a sustainable, consistent basis, cures all economic ills. It dramatically lowers unemployment. It cuts the deficit.