Many of my friends on Facebook are Lefty Fundamentalists. Somehow or other they are under the weird misapprehension that the last 3 1/2 years of Obama Democratic administration have resulted in a healthy growing economy. They continue to make absurd misstatements related to this misapprehension on Facebook.
I started to put together all the relevant data. Remember I am not just a statistician, I had graduate training as an economist at UC Berkeley and worked directly with the leading economists in business cycle theory. They were my friends and I did graduate work for them.
I don't need to put together the data. The Wall Street Journal did it for me (April 28th).
“The economy has been growing for 11 quarters since the recession officially ended in mid-2009, and quarterly growth has averaged 2.4%. That's slower growth than in every modern expansion, and about half the growth rate of all recoveries since World War II, according to Congress's Joint Economic Committee. The first 11 quarters of the Reagan expansion in the 1980s, by notable contrast, grew an average of 6.1%.”
That is not what is relevant to me or you. Looking at the detailed data we find that the commercial economy has been growing at a healthy rate in this recovery, both consumer spending, profit, exports and capital investment.
So what is wrong. Government spending at state and local levels has been negative. There are two reasons for negative state and local government spending.
The first is that many states have tied their revenue to progressive income taxes especially NY. CA and Il. The consequence of this is that revenue is highly volatile because rich people have highly volatile income related to financial markets. Volatile income tax revenue means people, mostly teachers, have to be fired at regular intervals.
Second, most of our big state governments have been captured by union government employees. That means state revenue is being siphoned off into high salaries, retirement and health benefits instead of jobs. Money going into retirement and health benefits has a low multiplier certainly less than 1. Government spending is a drag on business to begin with, and government spending on retirement and health benefits is a bigger drag.
To summarize: Obama and the Democrats are drowning in the swamp they made themselves. Their stimulus went into government which was swallowed up by union wages and benefits. The Democrat hatred of the rich who generate business and jobs has created a progressive income tax structure that turns government into a perverse transmitter of financial disaster.
The Democrats are drowning in their own swamp of ideological blindness. The rich who are immune and the poor who suffer the most will continue to support this status quo.