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Barack Obama’s $8 Trillion Output Gap ^ | April 21, 2013 | Daniel J. Mitchell

Posted on 04/21/2013 9:38:04 AM PDT by Kaslin

I’m not a very exciting guy. It’s Saturday afternoon and I’m perusing the Budget and Economic Outlook from the Congressional Budget Office.

But sometimes it pays to be a nerd because I just found an interesting tidbit of information. Here’s what CBO says about the anemic economic output we’re experiencing compared to the growth we should be enjoying.

…output is likely to remain below its potential (or maximum sustainable) level until 2017—almost a decade after the recession started in December 2007. CBO estimates that real GDP in the fourth quarter of 2012 was below its potential level by about 5½ percent; that gap is only modestly smaller than the gap (of about 7½ percent) that existed at the end of the recession in mid-2009 because growth in output since then has been only slightly faster, on average, than growth in potential output.

Let’s translate this bit of jargon into English.

What CBO actually is saying is that the economy hasn’t enjoyed the bounce of above-average growth that normally follows a recession (and we have more than 130 years of data showing this is the normal pattern). As a result, instead of recovering all the lost output associated with the downturn, we’re still suffering from sub-par levels of output.

CBO specifically says that we were “about 5½ percent” below potential at the end of last year. That’s about $880 billion of lost output. Not exactly a ringing endorsement of Obamanomics.

But that’s just part of the story. CBO also looks at the cumulative output gap.

With such a large gap between actual and potential output persisting for so long, the cumulative loss of output relative to the economy’s potential between 2007 and 2017 will be equivalent to nearly half of the output produced last year.

Since output last year was $16 trillion, the cumulative output gap is $8 trillion. That’s a ton of money, even by Washington standards.

Here’s a chart from CBO showing this output gap.

CBO Obama Growth Gap

By the way, I’m not sure I believe CBO’s estimate that we’ll get back to the trend line by 2017. Why expect good things when the economy is saddled by excessive taxation, wasteful spending, and burdensome regulation?

CBO Obama Growth Gap 2

All that we know for sure is that the economy has been lagging, which is starkly evident if we simply look at actual data.

By the way, if you think I’m cherry picking numbers to make Obama look bad, my first reaction is to laugh since CBO leans way to the left and has zero reason to make Obama look bad. Remember, these are the clowns that tried to justify Obama’s Keynesian stimulus scheme.

But if you don’t want to believe the CBO data for inexplicable reasons, how about the Washington Post, which certainly is on the left side of the political spectrum? Surely they’re not part of the vast right-wing conspiracy, right?

Check out this chart they posted comparing the current recovery to a normal recovery, though you won’t be surprised to learn that they conveniently waited until after the election before sharing this vital bit of information.

Or what about the Minneapolis Federal Reserve, which has an interactive website enabling a reader to compare all the business cycles since the end of World War II.

These charts show both employment and output for every one of those business cycles. You can click to see larger versions, but all you need to know is that the current business cycle is the red line – and it happens to show that Obamanomics has generated the worst results whether we’re looking at jobs of GDP.

Minn Fed Data

None of this is to suggest, by the way, that Obama’s policies caused the recession. That happened on Bush’s watch.

But I am stating that Obama’s big-government policies have played a role in keeping the economy from enjoying a strong recovery. That’s been no post-recession bounce.

Ronald Reagan also inherited a dismal economy. He had to deal with high interest rates and inflation rather than a banking crisis, so I don’t know which President was dealt a worse hand of cards. But I know that Reagan’s policies of free markets and smaller government helped trigger an economic boom.

Obama, by contrast, basically has continued Bush’s policies of intervention and bigger government. No wonder we’re suffering a multi-trillion dollar output gap.

TOPICS: Business/Economy; Editorial; Government
KEYWORDS: economy; obamanomics; obamunism

1 posted on 04/21/2013 9:38:04 AM PDT by Kaslin
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To: Kaslin

Obama isn’t smart enough to run a sno cone stand.

2 posted on 04/21/2013 9:41:03 AM PDT by blueunicorn6 ("A crack shot and a good dancer")
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To: blueunicorn6

He couldn’t run his finger up his a....oh well.

3 posted on 04/21/2013 9:45:49 AM PDT by Lurkina.n.Learnin (Obama is the Chicken Little of politics)
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To: Kaslin

I think they better revise their forecast.... DOWNWARD. We will not grow under the current circumstances. It will take the rest of this administration and most of the next, if it is desirous of change, for any improvement.... at least another 6 to 8 years for us to see real improvement to the mean. Until there is regime change any growth will be in spite of the regime.

Someday, if we survive as a republic at all, we may revert to the mean. Similar to the 80s it could be a period of immense growth. Unlike the 80s we will be trained labor force restrained and so the growth may not take place. Add to that the sad state of our production base... it is much gone.

I’m counting on reversion to the mean to take me into retirement. Without that it will be work until I die because there is not enough return on investment to retire without harvesting the nest egg. Never a good plan.

As for work, 40mm Gen X will not replace 80mm Boomers anytime soon. The largest jobs growth group in the nation... 50is and up. Remarkable.

4 posted on 04/21/2013 10:17:09 AM PDT by Sequoyah101
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To: Sequoyah101

I agree with you, 100%. I’m 53 and have really hit my employment stride these past few years. I’m experienced enough to do my job, but still relatively ‘cheap to keep’ from an employers standpoint. Also mature enough to show up on time, get things done, etc.

My plan is to pay off my farm, ASAP. It’s the only debt I have and without any debt, I’ll have much better cash flow (for what THAT’S worth - *Rolleyes*) in case I do become unemployed - via downsizing or my health takes a dive, or I’m injured, etc.

I’ll downsize in another decade when the market turns around. If. And then I SHOULD have enough money to get me through the following Tuesday, LOL!

It’s SO disheartening, isn’t it? I used to be such a generous, giving person - now I’d just as soon everyone else p*ss off and leave me alone. Well, mostly Government, but still. ;)

5 posted on 04/21/2013 10:57:56 AM PDT by Diana in Wisconsin (I don't have 'Hobbies.' I'm developing a robust Post-Apocalyptic skill set...)
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To: Diana in Wisconsin

That is a lot of lost taxes.

6 posted on 04/21/2013 1:13:54 PM PDT by jimpick
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To: Kaslin

Obama destroys our economy. We would be better off if he ignored it and left things alone.

I haven’t bought McDonald’s take-out for a while, maybe a year. I was shocked at the downsizing of the food portions and the increase of prices. A Big Mac looked like a child’s size serving, with each of the double beef patties wafer thin, thickness of a quarter. I’m sure I’m not the only one saying never again, to refuse to buy again from McDonald’s and other food outlets. Food is getting expensive everywhere, and we’re getting gouged on prices. I’m sure a lot of places are going to go out of business. Everything is getting bad in the Obama economy.

7 posted on 04/21/2013 2:22:05 PM PDT by roadcat
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To: Kaslin


8 posted on 04/21/2013 2:28:30 PM PDT by ballplayer
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To: ballplayer


9 posted on 04/21/2013 3:01:26 PM PDT by upchuck (To the faceless, jack-booted government bureaucrat who just scanned this post: SCREW YOU!)
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To: blam; neverdem

You may like this.

10 posted on 04/21/2013 6:54:24 PM PDT by FreedomPoster (Islam delenda est)
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To: FreedomPoster


11 posted on 04/21/2013 7:19:38 PM PDT by blam
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