By the way, here’s a graph of actual real U.S. GDP and its major components relative to their long-term (1970–2007) trendlines through the end of 2013. Note how things fell off a cliff in the recession. GDP, consumption, and government spending are all about 15% below where they’d be had they continued to grow in line with their long-term trend. (The hysteria over out-of-control government spending looks ludicrous in the light of this graph.) Investment is about 25% below where it “should” be. thanks largely to the housing collapse, though it’s staging something of a recovery. The other components have yet to begin closing the gap, because the recovery’s been so weak.
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Those are useful graphs Doug, thanks, but I don’t know how you produced them, because how did you calculate the 1970-2007 trend line? In my Phd studies in 1987 I looked at the difference between actual GDP and what real GDP would have been, if it had continued to grow at the same average rate it did in 1947-1973 (the average rate was about 4%). I don’t think it makes so much sense to use 1970-2007 as a basis for the trend line, since that period already covers different era’s of slower and faster growth.
By: Jurriaan Bendien on April 19, 2014
at 7:17 am
Trend lines are pretty crude measurements but this one just highlights how weak the recovery has been.
By: jeff on April 21, 2014
at 7:54 am