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Home Publications Blogs Beat the Press WaPo Tells Readers They Should be Happy Because Growth Path Will Bring Us to Potential GDP in 2021!

WaPo Tells Readers They Should be Happy Because Growth Path Will Bring Us to Potential GDP in 2021!

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Saturday, 07 December 2013 15:13

I'm not kidding. That was in a front page "news" story on the November jobs report. The piece told readers:

"Some economists are forecasting growth as high as 3 percent next year. New data released Friday showing robust hiring in November suggested that the private sector already is gaining momentum.

"The only thing that has to happen is that lawmakers have to do nothing,' said Mark Zandi, chief economist at Moody’s Analytics. 'It’s a pretty low bar.'"

According to the Congressional Budget Office the economy is currently operating at a level of output that is approximately 6 percent below its potential. The rate of growth of potential GDP is in the range of 2.2-2.4 percent annually. This means that if the economy sustains the 3.0 percent growth rate that has the Post so excited, it will close this gap at the rate of 0.6-0.8 percentage points a year. That means it will take between 7.5-10.0 years to close the gap, if the Congress follows Zandi's prescription.

It probably would have been worth including the views of an economist who would have pointed out that this path would imply the loss of between $4.0 trillion and $5.5 trillion in potential output, an amount that is between 100 and 140 times the size of the proposed cuts to SNAP that has been filling public debates. The overwhelming majority of this lost potential output is coming out of the pockets of low and moderate income workers.

Comments (5)Add Comment
Looked forward to a bigger blast
written by Kathryn Baer, December 07, 2013 3:11
I’m rather disappointed that you pick on this one point when the headline and major theme sound as if they come out of the Republican playbook: Government impedes economic growth. Note that policies blamed for the drag of growth include the expiration of stimulus spending and the payroll tax holiday.

Letting them expire, with no replacement is indeed a policy. But it’s a policy to “get the government out of the way.”
...
written by JDM, December 08, 2013 5:20
While you're right, Katheryn, that it's a policy, I think Dean is even righter to continually point out that virtually no one who is claiming to support a "get government out of the way" ever actually supports any such thing. Their claim is just PR cover for specific interventions by government that favor the rich and near-rich at the expense of the middle class and poorer.
SNAP is a transfer...do not be confused.
written by pete, December 08, 2013 9:08
There is no impact of GDP on SNAP, it is just a transfer, not government spending on goods and services. As such, there is no necessary relation between the size of the transfers (SNAP, SS, etc.) and the GDP gap. This is strange accounting for Dean who is usually more careful. There are no bounds on transfers.
...
written by Kathryn Baer, December 08, 2013 12:51
I agree,JDM. I was merely expressing regret that Dean hadn't pointed it out here, when the WaPo was doing one of its editorial numbers on the front page--another important point he often makes.
One small note
written by Ryan, December 09, 2013 10:41
" $4.0 trillion and $5.5 trillion in potential output"

You really should place this in the context of the projected size of the economy over the 7.5-10 years. Big dollar amounts don't scare me anymore!

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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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