Unemployment, low wages and lack of opportunity for income advancement dominate discussion of our economy these days. But an obvious ingredient is too often missing from the conversation: economic growth. Growth, the rising tide that lifts all boats, creates more jobs, more wealth, and more opportunities for advancement. The various ills that voters and politicians complain about are all largely the consequence of slow or non-existent growth.
This is the Obama administration’s most fundamental failing in domestic policy. Taking office in the wake of a severe recession, rapid growth should have been relatively easy to attain. But the administration’s wasteful spending (the stimulus) and anti-business policies (the EPA) put a lid on that great opportunity. The administration’s failure is dramatized by this simple graph, which compares the actual GDP growth in 2013 with the projections that the Obama administration made in its budget proposals of 2009, 2010, 2011 and 2012. Obama’s 2009 through 2011 budgets were predicated on the assumption that GDP would grow in 2013 by more than 4%. Only in 2012, with 2013 just around the corner, did Obama temper his prediction a bit. But even then, it was way off:
Barack Obama told the American people that his policies would produce economic growth in excess of 4% annually. He was wrong. His policies failed. They produced less than one-half the rate of growth that Obama promised. This is, in my view, the central failure of the Obama administration in domestic policy, from which so many other failures flow.
A second, less important point should also be made. I have written many times that budgets are meaningless to the extent that they go beyond the next fiscal year. This is partly because future Congresses do not behave as predicted, but it is also due to the fact that any budget incorporates assumptions about how the economy will perform in future years. The Obama administration’s rosy (but wrong) predictions about economic growth have allowed it to understate the deficits that its profligate spending will produce. The difference between 1.9% growth and 4% growth, extended over a period of years, is enormous. We can now see that all of the projections that Obama and his budget team have given us are worthless.