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Putting Better Growth in Context

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Friday, 10 January 2014 05:35

The NYT had a piece touting the improvement in the state of the economy. It notes that many economists now expect the economy to grow at close to a 3.0 percent annual rate in 2014. While this is considerably better than the growth rate over the prior four years, it is not an especially strong growth rate for a badly depressed economy.

The Congressional Budget Office estimates that the economy is still operating at a level of output that is roughly 6.0 percent below its potential. With potential GDP growing at a 2.2-2.4 percent annual rate, a 3.0 percent growth rate means that we are making up this gap at the rate of 0.6-0.8 percentage points a year. At this pace it would between 7.5-10.0 years to get back to potential GDP. 

The piece also begins by noting that exports hit a new record high in the most recent data. Actually exports generally grow, except in a severe world slump like the 2008 crash. For this reason exports almost always hit a new record high every month.

exports

Comments (2)Add Comment
Viewer II
written by Viewer, January 12, 2014 12:42
getting behind growth in the economy is difficult for many people to see these days.
Dear, Professor Baker
Your blog here is one of the few that attempts to rationalize real economic theory in a way that provides possible outcomes for prosperity. Heard you speak the other day on the job report. Yes, it's true that demographic changes are real, but the key in terms of growth is what you've stated again and again. And that is we our under-performing due to our own manmade constraints.
What you do here on this blog is extremely worthwhile and I thank you! And thanks also for always recommending important links for more information.
Viewer II
written by Viewer, January 12, 2014 2:15
What do you think about a Global Reserve Policy, as proposed by Joseph Stiglitz who says that just lowering the US dollars strength alone would be very risky to the rest of the world?

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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