Among the issues most commonly discussed are individuality, the rights of the individual, the limits of legitimate government, morality, history, economics, government policy, science, business, education, health care, energy, and man-made global warming evaluations. My posts are aimed at thinking, intelligent individuals, whose comments are very welcome.

07 March 2010

The Worst Economic Decade Since the Great Depression

First, let us consider the record for Gross Domestic Product or GDP increases by decade since the 1930s, as given in an article in The Economist, 27 February - 5 March 2010.  The data in each graph to follow will be the average annual growth rate for the decade:


GDP grew by a shade less than 1% in the 1930s, but then it grew rapidly in the 1940s at about an average 5.5% a year.  The growth rate for the 1940s may be a strange animal, given WWII.  The 1950s and 1960s were great years of growth, exceeding 4%.  The 1970s, 1980s, and 1990s were all about the same at 3% or a bit more.  Finally, we come to this last decade, the 2000s, and we managed only a 1.9% increase over the 10 years in GDP.  Why?  Let us look at some further figures to see if they might cast some light on the reason.

Here are the figures on Consumption and Income:


Of course the 1930s being dominated by the Great Depression, both consumption and income increases were very small.  The consumption increases were higher than that of income, as people used up savings to scrape by in the Great Depression.  Income was suppressed further by large tax increases during the Great Depression, not to mention the many anti-business acts of the Progressives Hoover and Roosevelt.  Among other foolish policies, they both tried to push industry to keep wages high, which led to industry employing many fewer people than they otherwise would have.  This in turn suppressed overall income growth and consumption.  In the 1940s, 1950s, and 1960s, consumption growth averaged about 4%.  In each of these decades, income growth averaged annual rates in the range of 4.3 to 4.5%.  Income growth in each decade was a bit higher than consumption growth.  In the next period of the 1970s, 1980s, and 1990s, the growth in consumption was somewhat greater than that in incomes.  Consumption grew between 3.2 and 3.5% a decade, while income growth was about 3% each decade.  Then come the 2000s and the growth in consumption is 2.5%, but the growth in income is a measly 1.5%!  Consumption was a full 1% greater than income.  No decade from 1930 could match such a large discrepancy between income and consumption.  In the 1940s and 1950s, income exceeded consumption by about 0.5%, but prior to the last decade, the worst case of consumption exceeding debt was the 0.4% of the 1930s.  Debt piled up very high in the 2000s.

Another important economic metric is the change in non-farm payroll employment, called non-farm payroll.  This is the number of jobs in construction and manufacturing or the goods-producing industries.


The average annual increase in non-farm payroll jobs in the 1940s - 1970s was between about 24% and 38%.  We managed only 20% increases in the 1980s and 1990s.  This last decade was abysmal, with an actual loss of goods-producing non-farm jobs.  Heavy government regulations and mandates coupled with our sharing the honors with Japan for the highest corporate income tax rates in the world in a global economy helped mightily to bring this situation about.

The reason the decade of the 2000s has been so unproductive is primarily the growth of federal, state, and local governments and their many strangling regulations and mandates.  Just as the Great Depression was a period of very little GDP growth and one of consumption exceeding income greatly, so has been the 2000s.  The Great Depression was a period of huge growth in the cost of government and of government regulations and mandates.  So has the decade of the 2000s been such a period.  This problem was already very apparent back in July 2008, when I wrote this from this blog post.
Americans for Tax Reform calculates the cost of government based on what they spend and on the cost of regulations. They calculated that 16 July was the day the average American stopped working for the governments. This was 4 days later than last year! Individuals worked 83.7 days this year for the federal government and 50.5 days for state and local governments. Government regulation costs each of us 62.6 days this year! If we nationalize health care or add a cap and trade bill to combat the mythical man-made global warming, these costs will go up dramatically. They are going to go up dramatically in any case because Baby Boomers are about to start retiring in large numbers, which will at once remove many high income earners from higher tax brackets and increase Social Security and Medicare costs.

Federal spending is up 11.4% more than the size of the economy since 2000. So despite the economy growing well over that period and federal taxes rising even faster than the economy did, Congress spent more money than the bonanza they were given in increased tax revenues. If the rate of government spending had been held to the rate of the growth of the economy, the federal deficit would have disappeared in 2006.

Regulation costs this year are 17.2% of the national income. These regulations hurt the economy and its growth in ways whose costs are not included in that figure. Reductions in output, jobs, lower wages, and slowed economic growth are estimated to cost as much as another $1.5 trillion per year.

State and local government expenditures have increased by 19.1% more than the national income since 1999. In Connecticut, the people will work until 31 July before they come even with the cost of government, while in New Jersey the date was 30 July, and in New York it was 29 July.
Since that time, Obama and the Democrat-controlled House and Senate have made huge transfers of wealth from the productive private sector to the mischief-causing and boondoggling public sector.  The situation is worsening and doing so very rapidly.  Throughout this last decade, the manipulations of the markets by the government have pushed the People more and more into more spending and consumption than their incomes can sustain.  More and more, the People are finding that they cannot both satisfy the heavy demands of government and make real profits.  If they are productive and make good money, the Democrats plan to tax nearly all the producers produce away to fund their visions of socialist government and socialist entitlements.  The Democrats have added the burdens of supporting the banking, auto, alternative energy, electric power grid, and investment industries to the backs of the American People.  They want to add many more health care and energy costs onto their wearily bent backs.  They want to transfer more of the management of American companies to labor union leaders.  It is the private sector that drives home the possibility of increased income for Americans, not the public sector.  The public sector only adds costs, once it surpasses its legitimate functions of defense of the nation, police protection, and the enforcement of contracts.  When the federal government exceeds its constitutional powers, as three-quarters of its spending surely does, it becomes a powerful engine carrying the whole nation ever deeper into the muck of a dismal swamp.

The dismal GDP and income results of the first decade of the 2000s was not just a matter of bad luck.  No, we achieved all this by design.  It took a lot of effort by our government office holders to ignore the costs of what they have promoted.  As the Baby Boomers retire and go on Medicare in huge numbers in the next few years, the drain of the public sector spending on the productive private sector is going to skyrocket.  Drastic cutbacks in all levels of government are direly needed.  Yet, we hear only of plans for further expansion of these governments from our current office holders.  This is ridiculously irresponsible.  We must not only turn these buffoons out of office in massive numbers, but we must eliminate many of their positions and replace those needed with people with a very much greater respect for the productive private sector.  We need office holders who are satisfied to be the servants of the People, rather than their arrogant rulers. We should also hunt down those most responsible for the many fraudulent claims that various government programs would cost much less than they did and provide much greater benefits than they did and prosecute them for fraud. 

Or, we could simply have a great Tea Party and Tar and Feather the worst offenders of our Constitution and run them out of town on a rail.  There ought to be a real payback for those who commit treason, which is what an office holder does when he purposely ignores his oath to protect, preserve, and defend the Constitution of the United States of America.  We the People, must make it clear that it is no longer acceptable for a public office holder to ignore the Constitution and its severe limits on his power to rule.  After all, the Constitution is a very simple document compared to the hundreds of thousands of pages of federal laws alone which we the People are expected to obey or face heavy fines or imprisonment.  We are told that ignorance of the hundreds of thousands of pages of federal law is no defense.  Well then, payback is due and We the People should be adamant that all public office holders are expected to comply with the limitations on their power of the Constitution and ignorance of the Supreme Law of the Land is no defense!

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