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Recent unemployment figures and a scattering of other data have led many economists and policy makers to conclude that, at long last, the U.S. is recovering from a terrible recession. The Dow Jones Industrial Average, considered a predictor of future growth, crossed the 13000 mark for the first time since May 2008, GDP for the fourth quarter was revised upward to 3%, and consumer confidence jumped in February to its highest level in a year. Perhaps most dramatically, the price of gold dropped nearly $100 an ounce on Wednesday, which some analysts interpreted as an indication that the economy is doing so well that the Fed may revise its easy-money policies, thus pushing up interest rates. Higher rates may mean that investors will abandon gold for assets that pay income, like bonds and dividend stocks. The economy is definitely getting better in the very short term, but to call this recovery anemic is the understatement of the century. Some perspective is necessary. Typically, the worse the recession, the stronger the recovery. History shows that in past declines GDP fell below its trend-line growth of 3.5%, but, after a few years at a higher level, it settled back to the average. As Jim Grant pointed out in the Wall Street Journal: “The Reagan recovery, starting in the first quarter of 1983, rushed along at quarterly growth rates (expressed as annual rates of change) over the next six quarters of 5.1%, 9.3%, 8.1%, 8.5%, 8.0% and 7.1%. Not until the third quarter of 1984 did real quarterly GDP growth drop below 5%. Compare our recent growth rates. Yes, we made it to 3% for the final quarter of 2011, but growth for the year was just 1.7%. The bipartisan Congressional Budget Office is predicting 2% growth for the full year 2012 and just 1.1% for 2013. There are a number of reasons for this gloomy prospect, but let me list just one: The U.S. budget deficit is 8.7% of GDP. That is the third-worst among the 42 countries tracked weekly by The Economist magazine. Only two countries — Greece and Egypt — outdo us. The U.S. economy will not truly recover — and more important, will not truly reach the sustainable level of 4% growth that’s needed for opportunity and prosperity — unless policies change. The lesson of the past few years is that policy matters. Specifically, we need policies that promote growth — which means that government has to establish an environment where entrepreneurs can start companies, where established businesses can expand, where individuals have incentives to enhance their skills, and where investors can feel some confidence when they take risks. When numbers are getting better, the urge to complacency is hard to resist. But the truth is that one big reason consumers are buying more is that they have bought so little in the recent past. The average age of a car on the road in the United States is 11.1 years, a record. At some point, you have to buy a new car. Americans are not out of the woods. We are still wandering around, deep inside them. What we all need now is a growth map to get out.
James K. Glassman is the Founding Executive Director of the George W. Bush Institute and the interim Director of the Military Service Initiative.
He served as undersecretary of state for public diplomacy and public affairs from June 2008 to January 2009, leading the government-wide international strategic communications effort. Among his accomplishments at the State Department was bringing new Internet technology to bear on outreach efforts, an approach he christened “Public Diplomacy 2.0.”
From June 2007 to June 2008, Glassman was chairman of the Broadcasting Board of Governors (BBG). He directed all non-military, taxpayer-funded U.S. international broadcasting, including Voice of America, Radio Free Europe, and Alhurra TV. Glassman was a senior fellow at the American Enterprise Institute in Washington, D.C., from 1996 to 2008, specializing in economics and technology.
He has been moderator of three weekly television programs: Ideas in Action and TechnoPolitics on PBS and Capital Gang Sunday on CNN.
Glassman has had a long career as a journalist and publisher. He served as president of Atlantic Monthly, publisher of the New Republic, executive vice president of U.S. News & World Report, and editor and co-owner of Roll Call, the Congressional newspaper. Between 1993 and 2004, he was a columnist for the Washington Post and the International Herald Tribune and continues to write regularly for Kiplinger’s Personal Finance and Forbes. Shortly after graduating from college, he started Figaro, a weekly newspaper in New Orleans. His articles on finance, economics, and foreign policy have appeared in The New York Times, The Wall Street Journal, the Los Angeles Times, and various other publications.
Glassman has written three books on investing, and in April 2012 was appointed to the Investor Advisory Committee of the U.S. Securities and Exchange Commission. He was formerly a member of the Policy Advisory Board of Intel Corporation and a senior advisor to AT&T Corporation and SAP America, Inc.Full Bio
TARIFFIED: Trade Talk with Matthew Rooney
This week, trade relations between the U.S. and India are continuing to escalate. Earlier this month, the U.S. stopped granting India special trade privileges by taking away the Generalized System of Preferences (GSP) program, and India has responded by enforcing more tariffs of its own. The George W. Bush-SMU Economic Growth Initiative Director Matthew Rooney breaks down the trade conflict: For more information on trade groups and the global economy, visit www.bushcenter.org/scorecard.
How Trade Spreads Holiday Cheer
It is projected that the average American household will spend more than $1,000 during the holidays this year.
Deporting Salvadorans May Lead to Economic Decline
We should think carefully about a policy whose major impacts are likely to be reductions in employment and economic activity here at home, and increased instability and lawlessness along our borders.
Bush Institute's Laura Collins Talks Immigration on Good Morning Texas
Last week, Deputy Director of Economic Growth at the George. W. Bush Institute Laura Collins spoke with Good Morning Texas about immigration myths. During the interview, Collins had the opportunity to set the record straight and address common misconceptions about legal immigrants living in America today. The segment was inspired from facts released earlier this fall by the Bush Institute in the third edition of America's Advantage: A Handbook on Immigration and Economic Growth. Watch the full Good Morning Texas interview here.