Tuesday, June 7, 2016

It's About Growth

President Obama now seems to be assured to be the first President in United States history to not preside over one year of at least a 3.0% annual GDP growth rate.

He is now projected to end his eight years as President with an average annual growth rate of 1.55% per year.

It has now been over a decade since we had one year of economic growth of at least 3.0%. To put that in perspective, from 1889 to 2009, U.S. economic growth averaged 3.4% per year.

There are those that claim that we have entered a "new normal" and that this type of economic growth is no longer realistic for the United States. However, as recently as the period from 1982-2007, we averaged real economic growth of 3.3% per year.


Credit: cnsnews.com

Why is GDP growth so important to all of us?

Quite simply, it determines how big the economic pie will be that we all take a slice of.

The bigger it gets the better opportunity all of us have to have a better life.

The bigger it gets the more that government can tax, spend and redistribute.

If it slows, it gets tougher for everyone, but particularly for those in middle and lower income classes, as we have witnessed over the last few years

If it stagnates, what becomes harder turns into hardships for everyone.

If it falls, people start to get very hungry and government starts to run out of money.

For example, look at GDP growth in Venezuela over the last few years.


Credit:TradingEconomics.com

This is a country that is imploding before our very eyes. Socialism does not work very well when you run out of other people's money to spend. That is what is happening in Venezuela. The economic pie is shrinking each year. There simply is not enough money to go around. The result---lack of almost every basic necessity, empty grocery store shelves and rampant crime.

You might think that a 1.5%, or even a 2% growth rate, is a small difference compared to a 3% growth rate.

However, when you are talking about a $18 trillion economy, and you also factor the compound effects of that growth, it has substantial impacts over time.

Consider the differences in the size of the economic pie based on various growth rates over the next 20 years.




If we continue on the economic growth path we are currently on, the pie will only grow by about 1/3 in 20 years. At that rate of growth it will be next to impossible to deliver on most of the current programs and promises that government has made in entitlement spending. We will find ourselves vastly over leveraged and over extended no matter where we turn.

If we could get back to something resembling our historical long term growth rate of 3.4%, the economic pie would double in 20 years. That would equate to an extra $10 trillion to spread around in 2036 compared to a 1.5% growth rate. That is a lot of money that could be used for a lot of things.

You can talk all you want about helping the poor, expanding health care, better funding for education, infrastructure spending, a stronger national defense or a billion other things. However, if the economic pie is not increasing, all of these things are difficult. If we see sustained, vibrant growth, all of these things get much easier. Most importantly, every American will also live a richer, more abundant life.

Nothing happens unless the economic wheel turns. And the rate it turns will have a huge impact on our future lives.

Liberals and progressives spend almost all of their efforts and energy on a static view of economic "equality" and "redistribution" and give little thought to the dynamics of economic growth. In fact, a major part of their agenda seems to be intent on hindering rather than helping promote economic growth. Using government to legislate, regulate and stipulate almost every aspect of economic activity. Picking winners and losers. Serving special interests rather than being concerned with the broader public interest.

If you have any interest in your future, the future of your children or grandchildren, and the future of our country, consider the difference a couple of percentage points can mean.

When voting this year, your first concern should be who is going to keep our country secure and your family safe.

Your second priority should be who is going to get that economic wheel turning faster so that our economic pie is getting larger.

Everything else does not matter much in the political realm if we don't get those two things right.

It is your future.

Think clearly. Choose wisely.

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