I came across a Wall Street Journal opinion piece titled “Bush Has a Good Economic Record”:
“U.S. output has expanded faster than in most advanced economies since 2000. The IMF reports that real U.S. gross domestic product (GDP) grew at an average annual rate of 2.2% over the period 2001-2008 (including its forecast for the current year). President Bush will leave to his successor an economy 19% larger than the one he inherited from President Clinton. This U.S. expansion compares with 14% by France, 13% by Japan and just 8% by Italy and Germany over the same period.”
Do we believe this is the full story? These growth figures are presumably calculated in local currency, albeit adjusted for inflation. The U.S. dollar has shrunk by about 30 percent against the Euro, so if measured in Euro, the total value of the U.S. economy has declined under the reign of King Bush II.
A lot of the growth in the GDP was from such unproductive activities as building sprawl, rebuilding from disasters such as Katrina, exercising the military, etc. If the Japanese built a factory and we built a housing development 1 hour from Phoenix, who has done better? Japan has almost no crime. Part of our GDP comes from replacing smashed windows and stolen GPS units.
Another factor to consider is deficit spending. We had ourselves a huge party of low interest rates and deficit-spending by the Federales. That made for good-looking GDP figures, but has saddled our nation with a lot of debt. For some perverse reason, probably because the CPI is fraudulently calculated , that hasn’t shown up in inflation that would erase the real GDP growth (if inflation is understated by 2.2% per year, all of the growth mentioned in the article evaporates). Investors, however, are harder to fool and the dollar is now worth much less.
The final problem with these numbers is that they don’t take into account population growth. The author compares the U.S., which every day welcomes more immigrants to its shores, to countries that don’t have much in the way of immigration or population growth (Japan’s is negative). One way to have GDP growth is simply to host more people and as long as they can scratch up something to eat or do child care for each other, that builds the GDP. It does not make Americans who were here before the immigrants arrived necessarily better off. In fact, we are probably worse off from all of the population growth because our roads are so clogged with traffic and housing has become so expensive.
We have inefficient local, state, and federal governments, high corporate taxes, enormous pension obligations to former employees of governments and big companies, and schools that are measurably worse than those of many other countries. Could it be that the developed nations mentioned in the WSJ article are even more inefficient than we are?
You make some good points there about growth. Our workforce is clearly growing much faster than the workforce of countries such as Japan, Italy, etc. which have less immigration and lower birth rates. Some more interesting statistics to look at would GDP growth per capita, per worker and per hour worked. I’ve seen statistics that show that French workers, for example, are more productive than American workers, meaning that they produce more per hour worked. We achieve higher GDP growth, in part, by working more hours per year. At this point the typical American worker works more hours per year than his Japanese counterpart.
The UN comes out every year with something called the Human Development index (http://hdr.undp.org/en/statistics) which combines GDP per capita with health and education statistics. By that measure we’re number 12 in the world. We’d probably be a lot lower if crime rates were included.
Admit it Phil, you just hate hearing anything good about the Bush administration.
Your currency argument is bogus, because anyone who has lived overseas knows that everything you buy is far more expensive than the identical product in the US. In England, for example, the rule of thumb is that the prices for object X in sterling will be the same as the dollar price in the U.S.
Americans have far more purchasing power than their counterparts overseas, which is one of the many reasons why people all over the world vote with their feet and move here if they can.
Good point Jim
A small 1 room apartment in most urban Japanese cities goes for 1.5 million U.S. dollars. The cost of living is out of this world. I could comfortably go to the largest US city and have much higher standard of living. I mean gas is about 8 bucks a gallon and everything is out of this world. I’ve been there and other asian countries and we got it made compared to them. I guess I could say that I prefer the US to any other country I’ve visited as far as standard of living, development, taxation and prosperity. In no way am I putting anyone down though, because I love all the people in asia and they are very warm and hospitable.
Re your comment about housing prices in the US.
Given that and your usually inquiring mind, you might be interested to read “The Gridlock Economy: How Too Much Ownership Wrecks Markets, Stops Innovation, and Costs Lives” by Michael Heller.
He makes the argument that houses are a lot more expensive than they need to be due to an interesting economic problem. He calls it the anti-commons – the opposite of the tragedy of the commons. Too many people can stop you building the house you want to, so houses end up being a bad fit and expensive. The problem is worse in Japan. Parts of Kobe lay in ruins for years after the earthquake due to difficulties in getting building approvals.