Let me help remove the rose-colored glasses for anyone who still thinks GDP this year is good.
First, GDP growth in the first quarter was not “great” as I’ve heard some claiming. It was, by US historical standards, mediocre. Second, the biggest tax cuts in history only got us down to 2.9% GDP growth for 2018. GDP had been pegged originally around 3.1%, but that was revised down, as is usually the case. Every administration tends to estimate GDP on the rosy side because bad news is swallowed easier the further back in time it lies. So, estimate high and revise lower seems to be the government’s perennial approach.
If you revise the number down after a little more the time has passed, people don’t care as much because they are now focused on the new number for the latest quarter. Revising actual GDP (not just the headline growth number) from past quarters down also makes it easier to show more growth in the present quarter. That means we are likely to see the second quarter’s number of 2.1% revised down to something like 1.9% when the third quarter comes in.
Either way, the latest number is far from being the “healthy pace in the second quarter” that one market commentator I read recently claimed we just saw. A reading around 2% is actually a pathetic number. When I was young, we considered that a pre-recessionary number. It was an amber light that said the economy was going soft.
GDP growth looks worse in context
It is when one considers all it took just to get us to this 2.1% growth, it looks pale. 2018 was the year of our discontent when the stock market crashed to a bear that is still growling around the market (what with Morgan Stanley saying 80% of the indices it monitors remain in bear mode since last year). Yet, 2018 was the year of the most massive trickle-down tax cuts in history — bigger than the Reagan trickle-down cuts and bigger than the Bush trickle-down cuts! That makes 2.1% GDP growth a milquetoast number at best.
Add this to the context: We got there after government “stimulus” spending that puts all other deficits in the past to shame. We ran the largest deficit the world has ever seen during a time that was already growing at 2%! We’ve gone exactly nowhere since Obama who also averaged around 2% GDP growth.
Read the rest here: The Great Recession