Revised State Real GDP Changes in 2013

According to the U.S. Bureau of Economic Analysis, the percentage change of real GDP in 2013 was:

Now recall that real GDP is under-corrected for inflation due to the government insistence in leaving such volatile, but clearly more rapidly increasing cost, items such as food and energy are not included in the cost of living index.  Then also recall that one should really be looking at real per capita GDP since that tells us whether our standard of living is actually increasing.  If the GDP increases by less than the rate of growth of the population, then our standard of living actually falls.  The average US population growth rate was 0.9% from 2001 to 2010, so real GDP increases of 0.9% provides a stagnant standard of living.

New York state which is running ads nationally claiming to be the second best job creator state in the nation clearly underperformed in 2013 with a state GDP that grew by a mere 0.7%.  The state of Maryland, whose Governor O'Malley believes himself ready to run for the presidency, had a 0.0% growth rate.  Yes, preventing the growth of one's own state's GDP now qualifies a politician well for the Democrat Party nomination for the presidency!

Most of the high growth states in the US are in the center of the nation.  The Dakotas, the Rocky Mountain states, Nebraska, Oklahoma, Texas, and West Virginia are the heroic states for those who wish to earn a living.

The Obama Economic Stagnation and Real American Growth

As government takes control over more and more of the wealth of the nation, the economy staggers.  Obama is the quintessential Big Government man who has no appreciation for the fact that our real standard of living is improved not by government, but by private sector enterprises.  But improving most Americans standard of living takes time, and today very many Americans seem to want to benefit from government redistributions that will immediately transfer the wealth created by a minority to a majority less able or willing to create that wealth.  This is a short-sighted aim even for the immediate beneficiary, since redistribution results in the total wealth of the society becoming smaller over time than it would otherwise become.  It is also generally the case that those who think they will benefit from the forced transfer of wealth will fall victim to exaggerated promises and condemn their own children to a much more bleak future.  Others believe that some under-performing or disadvantaged Americans will be better off if forced transfers of wealth occur, but do not think that many such people will be better off over a greater part of their lives if the whole American economy grows healthily than if it does not.

If you are a 30-year-old American today, you are probably going to work until you are 70 years old.  The size of the American economy in 40 years will have a big impact on the quality of your retirement, not to mention many of the years between now and then.  Let us suppose you actually want your children to live in an economy that offers a much higher standard of living than we have now.  The median American mother is now 31 years old, which means that barring changes in that, her children will be having their own children a median 31 years from now.  Let us consider the size of the American economy 31 years from now under various growth rates to see how this newly long generation of 31 years will affect the next generation of children.

Of course we are interested in using real GDP numbers, not the nominal numbers affected by games played upon the money supply.  Unfortunately, the actual numbers reported by the government for real GDP are not fully corrected for inflation, but we will assume future numbers will be truthful.  In addition, in terms of its impact on our standard of living, we must be aware that the U.S. population has been growing by about 1% a year.  Thus, a real GDP growth of 2.0 %, the rate of GDP increase under the last four years under Obama, is really only a real per capita GDP of 1.0 %.  Note also that when America had much less government, it was able to sustain long-term real growth rates of 5 and 6%.  The following plot shows how the real, per capita size of an economy will grow over a generation of 31 years assuming a continued population growth rate of 1% a year.

So, assuming that the 2.0% growth rate under Obama is continued for 31 years, as one expects given his anti-business policies, the real per capita GDP will only be 36.1% larger then than now.  How incredibly disappointing that will be!  On the other hand, were the government to shrink considerably, we might easily average a real GDP growth rate of 5% a year and the real per capita GDP would be 3.373 times its present size in 31 years.  The Obama economy is easy to imagine and little different than the present economy.  The small government per capita economy would be two full U.S. present economies larger than the Obama economy and such a robust and innovative economy is really very difficult to imagine.  But, such an economy will make almost every American much, much richer and much, much more secure than we are now.  Such an economy is worlds better than the Obama economy in terms of our standard of living.

Note that each additional percent of real GDP growth makes more and more difference to the future economy.  This curve has a strong upward bend, so any act of the government that makes it harder for businesses to grow takes a great deal away from our future.  If government regulations and new mandates by law make it harder for a company to even manage to match its last years income, we all pay for this in the long run.  And no, I am not talking about when we will be dead.  I am talking about long before recent college graduates will retire and the entire lives of their children.

One really needs to think about it when the EPA says that generating a bit more CO2 than they want us to will just conceivably cause a fraction of a degree higher temperature in 87 years so we should give up one or two percent of future GDP growth for this reason.  The damage of doing that to all of us is certainly much greater than any damage to the environment.  Indeed, I have shown over and over that the science used to make these claims is bad and the catastrophic man-made global warming hypothesis is simply wrong.

Or take the wild claims of the EPA that mercury produced by coal-fired power plants has significant health consequences, so we should pay higher electricity costs to replace those power plants with much more expensive and unreliable power plants with their own environmental problems.  This EPA ruling also has important consequences for the growth rates of our economy.

We need to remember that every new paperwork requirement put on businesses also takes resources that they could otherwise be using to improve their products and services or their marketing efforts in a world market.  Businesses suffer greatly from the thousands of little cuts that unthinking state and federal legislators and state and federal bureaucrats just love to make, of course while acting as though they are saving the average American from some harm.

In fact, most of this is pretense.  Almost every business wants to improve the lives of its customers.  That is how they make money.  At least the majority who have no special favors from government do.  Yes, there are some state-regulated monopolies who are less well-behaved and there are crony mercantile companies such as Obama's green energy companies who are simply trying to take advantage of us.  But, these are companies corrupted by Big Government and eliminating it will also eliminate companies that no longer care to bring in customers on a voluntary basis for each others mutual benefit.

Congresswoman Donna Edwards Replies

Periodically, I send my Congressional Representative or my two Senators notes expressing my abhorrence about something or other they are about to do to suppress the rights of the individual.  Usually, the response indicates no appreciation for my note in the form of acknowledging the legitimacy of my points.  But, most of the time, it at least broadly indicates something about what I was addressing.  Sometimes they respond as though I agreed with them, as all right-thinking Progressive Elitists, or Aristocrats, do in Maryland, where the Free State of old has long been a sad, poorly used skeleton.  They simply cannot conceive that a decently written note could come from someone who opposes the Nanny State and their Progressive Aristocracy dedication to the victims of a society that has made almost everyone rich and free by the low standards of most of the world.  Today, I received a particularly aggravating non-response from Congresswoman Donna Edwards.  My reply is given below:

Donna Edwards,

I contacted you last year when I was still in your gerrymandered district.  I am not sure about what and I cannot find a hint about what from your response.  Now I am in the most incredibly gerrymandered district of John Sarbanes.
Of course, neither of you are in the least interested in my one, dominant need for the freedom to exercise my equal, sovereign individual rights to life, liberty, property, the ownership of my own body, mind, and labor, and for the pursuit of my own personal happiness.  You are both enthusiastic supporters of tyrannical, rights-violating, and illegitimate government.  If you think your government is legitimate, re-read the Declaration of Independence.  You might also observe that the reason for a Constitution was for the People to mandate a government of highly limited and precisely enumerated powers which would operate as a legitimate government as defined by the Declaration of Independence.

I am a small business owner and operator who can no longer provide as many jobs as I could before the government-induced recession, from which my business is still suffering.  Thank you for the big government model of special interest controls which has brought about a total stagnation of the real per capita private sector portion of GDP.  It is so clever of you to understate inflation, which acts as a hidden tax on all of us Americans.  It is a neat trick to take any increase in GDP, even government spending on your favored special interests and campaign donors with dummy green energy companies, and attribute that to the health of the economy.  It is especially neat that we are not supposed to be aware of the fact that what matters is the size of the per capita private sector, hence a stagnant economy is one that grows in real value at the same rate as the population is growing.  The number of missing jobs has remained constant over the last 3 years (see http://objectivistindividualist.blogspot.com/2013/03/obama-jobs-recovery-in-99-years.html).  With the booming potential of our fossil fuel supplies and American innovative proficiency, it is a really amazing feat that big government has been able to totally stagnant our economy.  Industry-killing regulations, ever increasing taxes, and many unfunded mandated expenses imposed on the private sector are your stock-in-trade.

Finally, I will always remember that you voted for ObamaCare, really ObamaUncaringTax according to our crazy Supreme Court.  That unread bill is an attempt to steal the very ownership of my body from me.  It expects me to sign over my body by filling in an IRS tax form that acknowledges government ownership of my body.  I am supposed to bow and scrape and prove that I have submitted to the government directive on how I will maintain and support my body.  The draconian 5-year prison sentence you voted for, is supposed to cow me into slavery as a numbered body owned by the government.  Nothing about my individual nature is of interest to the government that aims to take control.  To be sure, you hope to simply steal money from me or that I will submit instead of revealing your tyranny so dramatically as to be hauled off to prison by tyrannical government thugs.  The theft of hard-earned income or the draconian prison sentence are supposed to prevent such public displays of principled stands for liberty.  As the Congress, President, and the Supreme Court have abandoned the Constitution and the concept of equal, inalienable individual rights, so are we the People supposed to abandon them.  I will not do so.

Perhaps that is why you are buying up so many assault weapons, as you call them, and so many rounds of ammunition for domestic government agencies.  American government has undergone quite an amazing transformation toward tyranny.

An American Dedicated to Liberty,

Charles R. Anderson, Ph.D.
Lab: (410) 740-8562
Mobile: (301) 830-1886
Home: (301) 384-3253
http://www.AndersonMaterials.com
http://AndersonMaterials.blogspot.com
http://ObjectivistIndividualist.blogspot.com/

The Fed Projects 3% Growth in 2015, But Be Wary

Bill Wilson of Americans for Limited Government has written an interesting review of the predictions for GDP growth by the Federal Reserve through this never-ending Great Socialist Recession.  He notes that the Federal Reserve is now predicting 3% GDP growth in 2015.  Let me summarize the story of the Federal Reserve predictions for real GDP growth and the actual real GDP growth with the numbers he gives and those I have added:

2008:
January 2008:  Prediction of 1.3 to 2.0%
October 2008: Prediction of 0.0 to 0.3%

Actual 2008: -0.3%


2009:
January 2008:  Prediction of 2.1 to 2.7%
October 2008: Prediction of -0.2 to 1.1%
January 2009:  Prediction of -1.3 to -0.5%

Actual 2009:  -3.1%


2010:
January 2009:  Prediction of 2.5 to 3.3%
January 2010:  Prediction of 2.8 to 3.5%

Actual 2010: 2.4% 


2011:
January 2009:  Prediction of 3.8 to 5.0%
January 2010:  Prediction of 3.4 to 4.5%
January 2011:  Prediction of 3.4 to 3.9%
June 2011:  Prediction of 2.7 to 2.9%

 Actual 2011:  1.8%


2012:
January 2010:  Prediction of 3.5 to 4.5% 
January 2011:  Prediction of 3.5 to 4.4%
January 2012:  Prediction of 2.2 to 2.7%

Actual 2012 So Far:  1.76% 
 

2013:
January 2011:  Prediction of 3.7 to 4.6%
January 2012:  Prediction of 2.8 to 3.2%
September 2012:  Prediction of 2.5 to 3.0%

2014:
January 2012:  Prediction of 3.3 to 4.0%

September 2012:  Prediction of 3.0 to 3.8% 

2015:
September 2012:  Prediction of 3.0 to 3.8%

Clearly, the Federal Reserve does not understand how the economy and businesses work.   It clearly consistently underestimates how much growth control of the economy by the government and the Federal Reserve itself is destroyed by their actions.  The Federal Reserve has been the eternal optimist in its real GDP forecasts for years now.  The closer they get to a year or its completion, the lower their estimates become, but never as low as the actual result.

Obama's New Normal Part-Time Economy

Average hours worked for all non-farm private employees has been stuck at 34.4 hours for 4 months now.  The average hours for non-farm private production and non-supervisory employees dropped 0.1 hours in October to 33.6 hours.

Real per capita GDP is $50,166 through the third quarter, but it would be $55,932 if long-term historical trends had not been replaced by the Obama "new normal."  This loss of $5,766 per person is sorely felt.  High unemployment and all-too-common part-time employment has kept the economy from expanding at historic rates.

As Mike Shedlock has noted, the recovery of hours worked following the period of nominal GDP contraction shown in the light blue region of the plot below has stalled out.  The earlier rate of increase was substandard following a recession.  For many months now, Obama's "new normal" has settled in.  The question is, are Americans ready to settle for the Obama "new normal."

There is no reason at all to do so.  The U.S. economy is more than ready to recover, if only Washington will stop doing everything it can to prevent business success.  One of the big factors is the pressure that ObamaCare, really ObamaUncaringTax, is putting on businesses to convert full-time positions into part-time positions.  ObamaCare defines full-time employment for the purposes of requiring health insurance coverage or the payment of a penalty by the business as a mere 30 hours of work a week.  As a result, many businesses are putting a limit of 25 to 28 hours a week on their employees.  The tax assessment on employees requires a look-back period of 3 months to a year, to be selected as an option by the employer.  Consequently, companies have had to ensure that at the latest, many of their employees had less than 30-hour workweeks for more than the last 3 months of this year.  The Obama "new normal" is a 25-hour workweek for many Americans.

17 Countries Now Have More Economic Freedom than the USA

The Economic Freedom of the World: 2012 Annual Report published by the Fraser Institute measured the economic freedom of countries using the data of 2010.  The principal authors of the report are James Gwartney of  Florida State University, Robert Lawson of Southern Methodist University, and Joshua Hall of Beloit College with contributions from eight other academics.

The economic freedom evaluation of the USA continued its nearly monotonic decline since the year 2000.  In 2000 we had a rating of 8.65 on a scale of 10.00, but we have sunk to a rating of 7.70 now.  Since the year 2000, the rest of the world has seen a small increase in rating from 6.71 to 6.83.  In 2010, our 8.65 rating of the year 2000 would have made the USA a close third to Singapore, with Hong Kong number one.  But in our state of degradation as of 2010, the USA is now disgracefully 18th in the world in economic freedom.  When the evaluation is made for 2012, we will find that we have slid much further down the list.

Here is what the world looks like color coded by quartile in economic freedom:

You can see why Mexicans have been coming across the border illegally to work in the USA from this map.  I was not surprised to see Venezuela and maybe even Argentina in the least free quartile, but I was surprised to see India there.

Here are the ratings and the rankings of the upper two quartiles:

These economic freedom ratings are made based on the following criteria with the individual USA ratings and rankings following each:

1) Size of government (6.43, 73rd, our worst major category ranking)

2) Legal system and property rights (7.14, 28th)

3) Sound money (9.68, 7th)

4) Freedom to trade internationally (7.46, 57th)

5) Regulation (7.76, 31st)

Regulation is further broken down into the following subcategories:

a) Credit market regulations (6.95, 121st, our worst regulatory ranking)

b) Labor market regulations (9.06, 3rd)

c) Business regulations (7.26, 30th)

If we evaluate which areas of economic freedom are most pulling our ranking down in order, they are:

Size of government, 73rd
Freedom to trade internationally, 57th
Regulation, 31st
Legal system and property rights, 28th

in which areas our ranking was worse than our overall ranking. Note that our size of government ranking of 73rd puts us at the top of the list of nations in the third quartile.  That is in the lower half of the 144 nations evaluated.  Does that hurt your pride?  It should.  It should be excruciating pain.  Personally, I find each of these rankings to be disgraceful and a source of great anger.

Our economic freedoms are as basic as any other freedoms.  To sustain our lives, we need to be free to earn a living.  We also need to be free to enjoy earning our living without having burdens constantly loaded on our backs such as heavy taxes and unnecessary regulations and paperwork requirements.  The American businessman sees his business drained by excessive taxes, is forced to be an unpaid tax collector, is forced to divulge much too much private information, is forced to assume responsibilities and risks that are properly either those of his employees or his customers, is kept from doing things according to his own judgment by laws that are often irrational, and is forced to comply with unintelligible and excessively voluminous rules and regulations.

The American businessman is treated like a slave of the state and generally forced into being a criminal by laws and regulations he cannot even read, cannot understand, and in many cases could not abide by if he understood them.  This is exactly what a great many politicians want.  They want to extort tax money, favors, and campaign contributions at will from businessmen.  They use the overly complex and voluminous law and the threat of still more laws and regulations to make most businessmen cower before them.

There are very practical consequences for our economy.  As our economic freedoms are lost, our ability to grow our real per capita GDP decreases.  See the graph I have prepared from World Bank data for the years from 1980 to 2011:

Note that the post-2000 performance is clearly much worse than that of 2000 and earlier.  A loss of economic freedom is a loss of opportunity and an increase in uncertainty.  With less opportunity and more uncertainty, fewer people will start start-up companies and fewer people will be hired by such companies:

George W. Bush grew government and added many regulations, but Obama has grown government even more and added slightly more regulations and many more very expensive regulations.  With many more regulations awaiting a second term and hopes for many tax increases, Obama intends to further degrade our economic freedoms in the name of redistribution and a wrongheaded claim that catastrophic man-made global warming will result if he does not drastically cut our fossil fuel energy use.  If he is re-elected, he will attempt to greatly further decrease our economic freedoms.