Sunday, August 1, 2010

The Bush "Lost Decade"

I've been worrying about a Japanese-style "lost decade" for the US. Today I got a jolt. Daniel Gross in a Slate magazine article has stated the obvious from facts sitting right in front of my face. The US has already suffered a "lost decade" because of the Bush & Republican policies...
It's common to hear concerns that the U.S. economy faces a Japan-style lost decade. But as I've documented, when it comes to employment, income growth, market performance, and fiscal management—we've already had a lost decade. The period between 2001 and 2008, characterized by easy fiscal and monetary policy, lax regulation, and low taxes on capital gains, dividends, and income produced pathetic results—and then ended in the worst debacle since the Great Depression. And the macroeconomic performance of our last decade turns out to be worse than we thought. In this release, the BEA revised growth figures for 2007, 2008, and 2009. In 2007, instead of growing 2.1 percent, the economy grew only 1.9 percent. In 2008, instead of growing 0.4 percent, it didn't grow at all. And in 2009, instead of shrinking 2.4 percent, it shrank by 2.6 percent.
The above caught my interest. But the rest of the article is well worth reading. He is pointing out that the doom-and-gloom crowd is overplaying it with their wailing about a double-dip recession.

As he points out, the reality of the US is that the housing bust and the over-extended consumer creates a big sector of the economy that is and will be stuck in the mud for quite a while, but the parts of the US economy connected with the outside world are doing quite well:
The theme for the past year of recovery has been: a tale of two economies. Businesses that are connected to trade, to the global economy, and to business services are comparatively strong. The more global and less dependent on the United States you are, the better. We've seen excellent earnings from railroads, delivery companies, coal mining, and even automakers. But businesses and industries that are tethered exclusively to U.S. consumers, like the grocery chain Supervalu or housing, remain weak.
Perspective is very important.

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