(Mark Hendrickson, Mises Institute) What is noteworthy about the depressing title to this article is its source. In a case of uncommon candor, President Biden’s economic team has announced that once the artificially high, stimulus-juiced GDP (gross domestic product) measurements of the next two years subside, the United States will experience sub–2 percent growth for the rest of the decade.
This dismal forecast wouldn’t be surprising if it had come from Biden’s political opponents, but coming out of the White House itself, it is an astonishing admission.
You don’t need to have any specialized knowledge of economics to see why team Biden is projecting protracted slow growth. Consider the previous dozen years.
Shortly after former president Barack Obama left office, I explained why he had presided over a historically weak economy:
During the eight years of Barack Obama’s presidency, the average annual real GDP growth was 1.5 percent—the weakest economic performance of any post-WWII president, and the fourth worst ever…. The average growth of real GDP in the 10 most recent previous recoveries from recessions was 33.5 percent; under Obama, it was 17.1 percent. If the Obama recovery had been merely average, today’s GDP would be $2.4 trillion higher ($19,000 in lost income per household over those eight years). There have been 12 million fewer jobs created than would have happened in an average recovery.
The depressing economic weakness was a direct consequence of his policies:
Even the signature piece of legislation that Obama claimed was his crowning achievement, the Affordable Care Act, has wrought economic harm on millions of Americans. For millions, their employer cut their hours (their income) to avoid the heavy burden of Obamacare taxes. For millions of others, health insurance premiums and deductibles rose so drastically that, as The New York Times reported, many Americans no longer feel they can afford exams and treatments.
Subsequently, under former president Donald Trump (until the covid outbreak upset everything) the economy picked up noticeably, with minorities and lower-income Americans prospering as never before.
While Trump was no free enterprise radical (as is plain from his economically costly tariffs and his extravagantly wasteful spending, including sending direct payments to citizens in the name of covid relief), he understood that the source of our country’s economic strength is the private sector. He knew that the private sector provides the wealth that government spends, and not the other way around. Thus, he cut taxes, pared down burdensome government regulations, and allowed the private sector to flourish.
Today, it is clear that Joe Biden is obsessed with erasing every last vestige of Trump’s presidency. He wants to return to the status quo ante—the way things were B.T. (before Trump) when Obama was president. With Biden reversing Trump-era policies and reinstating Obama-era policies, is it any wonder that the outlook is for a return to Obama-era slow growth?
That is what I meant when I wrote above that you don’t need to be an economist to figure this out. Ideas and policies have consequences, and policies that caused sluggish growth in the past will cause sluggish growth in the future.
The challenge for team Biden going forward will be how to convince Americans that prolonged slow growth is the best they could hope for and the right course for our country to follow. To accompany the announcement of years of projected slow growth after the sugar high of massive government cash handouts wears off, the Biden economists offered a lame excuse: they said the US economy is caught in the grip of “secular stagnation.”
That is only half correct. Yes, stagnation was and will be the problem, but it isn’t “secular”—that is, sluggish growth doesn’t have to happen.
A more accurate description for long-term slow growth is “progressive stagnation.” The coming stagnation isn’t foreordained; it is simply the inevitable outcome of a progressive agenda that exalts big government and disdains free enterprise. It is the bitter fruit of the socialist mindset that despises the private property order and craves top-down economic planning wherein government elites decree what should be produced (e.g., electric cars, wind and solar energy, etc.), even if that is what citizens don’t want or can’t afford.
Centralized economic planning—i.e., planning by a political elite—only benefits the elite while progressively impoverishing the average citizen. It will be interesting to see if, in the next two election cycles, the American electorate responds to team Biden’s progressive agenda of long-term economic stagnation.
Mark Hendrickson is adjunct professor of economics at Grove City College.