America has received little bang for trillions of bucks put toward economic recovery. With so much time passed and money spent, one must recognize that the problem is more fundamental than a crisis.
The third quarter’s gross-domestic-product data show another lackluster annualized increase of 2.1%, giving 2015 an annualized average growth of 2.2% over three quarters. That indicates the US economy remains mired in mediocrity. The economy has been limping along in low gear for years now, J. T. Young wrote for Barrons.
Sure, there have been three hopeful quarters of good growth over the past seven quarters (4.6% in the second quarter and 4.3% in the third quarter of 2014, and second-quarter 2015 growth of 3.9%), but they keep getting offset by the others. Last year’s overall growth was just 2.4%, which is right in line with the preceding five years’ weak performances. For coming on nine years, the US economy has yet to equal 2006’s 2.7% GDP growth.
An October poll conducted by the Associated Press and the German research institute GfK showed just how deeply Americans have come to accept the current economy, and how little they expect it to change.
The economy was rated “extremely or very important by 83% of respondents—the highest by at least 18 percentage points of the six issues polled. When asked to describe today’s economy, its total “poor” rating was 54%.
When asked whether the economy had improved over the past month, 21% said it had worsened and 60% said it remained the same. Around 25% also expected their family’s financial situation to worsen over the next year, with 44% thinking it would stay the same.
On the monetary-policy front, the Federal Reserve’s balance sheet was roughly $900 billion in 2008, as the financial crisis hit the economy. When the Fed’s purchasing operations ended in October 2015, the balance sheet was about five times greater—approximately $4.5 trillion—the result of several rounds of quantitative easing, which injected unprecedented monetary stimulus into the economy and brought interest rates to roughly 0%, where they still stand.
On the fiscal-policy side, the effort also has been extreme. Federal debt held by the public measured $5.8 trillion in 2008. In 2014, according to the Office of Management and Budget, it was $12.8 trillion. That is a 121% increase, and it’s 74.1% of GDP, the highest level since 1950.
All told, the Fed’s balance sheet increased by $3.5 trillion and the federal debt by $7 trillion in just under six years. And how has the economy responded in the face of this unprecedented stimulus? During those six years, the economy has averaged annual growth of a mere 1.2%—and if 2015’s average thus far is included, the seven-year average is 1.3%.
