Are We There Yet?
Are We There Yet?Driving with No SpareA Muddle Through EconomyAbsent a Policy MistakeMaine and Turks, Etc.By John Mauldin
“… [this economic condition] has been brought about by policies which
the majority of economists recommended and even urged governments to pursue.We have indeed at the moment little cause for pride: as a profession we have
made a mess of things.”•
Friedrich August von Hayek, Nobel Speech 2010 1974Those of us who have taken young children on long road trips to somewhere they
wanted to go are familiar with the plaintive question “Are We There Yet?” As a nationand indeed the developed world, it is not unreasonable to be asking “Are We There Yet?”
about the road to recovery. The NBER, those self-appointed economists who are theofficial keepers of the score sheet of recessions and recoveries, have yet to tell us we areout of recession. Yet the economy is growing. Kind of. Today we look at the most recentdata on second-quarter US GDP (which came out this morning), and even though it isbackward-
looking data, we’ll see what we can discern that might help us chart thedirection of the future. And then, if there is time, I’ll highlight what is a very serious and
growing problem for our state and local governments. There is a lot to cover and so, with
no “but firsts,” let’s dive in.
Are We There Yet?
The economy of the US grew at a weaker than expected 2.4% in the secondquarter, but the first quarter was revised back up to 3.7% on the strength of stronger-than-projected inventory rebuilding. But the recession years were revised downward rathersignificantly for this late in the cycle. We find now that the recession was worse than wethought, taking the economy down a total of 4.1% during the recession. As of today, weare not quite back to where we started, still down 1%. That means it is quite possible that
we could finish the year and still not be “there yet.” (To see a 1% rise in GDP we wouldneed to see a 2% annualized rise for the rest of the year. We’ll look at that possibil
ity in afew paragraphs.)
Let’s look at a few charts courtesy of the Dismal Scientist, at