Misleading GDP Gains Mean U.S. Economy Has Been Failing Since 1998, Economist Says

FORTUNE:

The economy has been bedridden far longer than we realize -- and you can blame lying statistics for at least some of it.

So says Rob Arnott of Research Affiliates, a Newport Beach, Calif., investment management firm with some $50 billion under management. He argues in his monthly newsletter that, contrary to popular belief, the roots of our current malaise predate the financial crisis - and not by a little bit.

Read the whole story: FORTUNE

Comments

[vippy]

12:49 PM on 04/21/2011

Debt is only significant as a percentage of GDP, so if you want it to fall, the simplest way is to grow the GDP.  And if you borrow to achieve that, as long as the new interest you take on is less than the growth in the GDP, it is fine.  After that one can argue over whether it is better to grow the GDP, cut expenditure, or a combination of the two, but just to cut spending is wrong. 

[GuyCybershy]

03:50 PM on 04/23/2011

GDP figures are dishonest, like most our economic statistics.
http://www.huffingtonpost.com/2011/04/20/misleading-gdp-gains-failing-economy_n_851501.html

[drp103]

11:24 AM on 04/21/2011

Ah, 1998: the year I officially became a member of the "working class" in my field of study. 401k contributions that have done nothing. Savings rates near zero percent. Deregulation starting with Clinton that have benefited Wall Street only. Two bubbles. One Great Recession. Falling wages. Manufacturing down. Outlook worse than ever.

Could somebody e-mail this article to Washington?

[BowlingForRevenge]

10:39 AM on 04/21/2011

I guess the GOOD THING is they can pinpoint when the downward spiral began.
I guess the BAD THING is most will not listen to what the causes were...or comprehend if they do...a response would require an actual "taking of responsibility".
Facts do not lie but heck fire what have facts got to do with it? Seriously.

If would be lovely if everyone in the house and the senate would work together to get America going forward again.
BUT you cannot move forward without acknowledging what went wrong and having a united goal for our country.
That's why the vast majority will stay like they are ...treading water with a life jacket.
PAX

[drkazmd65]

10:35 AM on 04/21/2011

This year's "World's Worst Kept Secret Award" goes to,...

Anybody who didn't already realize this fact.

[bluepond]

10:11 AM on 04/21/2011

Any ordinary working/thinking person could have told us this. We have watched (too bewildered and passively) while our wealth drained away, and our real wages ebbed for the last 30 years or so. If the safety net is removed, it will be the last straw. Watch out for the school of unintended consequences. Revolution or total demoralization of the population will destroy the wealth of the top, in the end.

[stape45]

10:05 AM on 04/21/2011

jnratliffCommented 13 hours ago

"The only way to fix it is to throw the bums out!"
-----------------
We did that. But they were just voted back in, five months ago. Plan B, anyone?

[Trustfunded1]

08:28 AM on 04/21/2011

America is a Keynesian failure.

The Ivory Tower Keynesian's will never admit it though.

Savings and hard work built America.
Keynes and his minions destroyed Americans savings.

[olephart]

08:42 AM on 04/21/2011

You're right! That's why there was no growth or opportunity in America from the end of World War II until 1981. It was all those liberal Keynesian programs that did it. That's also why since sound supply side economics was introduced by Reagan we've had no problems in the financial markets, wage earners have florished and the National Debt has been eliminated.

[Trustfunded1]

09:05 AM on 04/21/2011

The only reason America enjoyed growth and opportunity after WW2 was due to it being the only major power that didn't get destroyed in the war.

Those days are over.
The only thing that will bring them back is another World War that leaves America unscathed.

[totaldisbelief]

09:33 AM on 04/21/2011

but Friedman and the Chicago School are OK ?

[rksnj67]

09:47 AM on 04/21/2011

That's a recipe for disaster!

[nixrox04]

08:13 AM on 04/21/2011

A consumer economy created by corporations, abetted by congress, consumed itself.

[muysuave41]

02:30 AM on 04/21/2011

Finally someone states what actually happened in the '90s: a huge bubble collapsed. Hopefully the Clintonistas will read the article and quit spouting about the '90s boom years.

[CPAwADD]

06:42 AM on 04/21/2011

Yes, Clinton was not as effective in his second term. Both of W's terms were disasters. Article makes clear that problems with debt financing started in 1998!

[muysuave41]

08:24 AM on 04/21/2011

There was a culmination of policies that led to the dismal economic performance of the late '90s. The spiral downward of 1998 started on that trajectory long before 1998. As most postings on the web, there is more than meets the eye.

[floodmfx]

07:38 AM on 04/21/2011

someone didnt read the article

[muysuave41]

08:25 AM on 04/21/2011

May I suggest you read the article and provide an informed response?

[theuniversalcollective]

02:00 AM on 04/21/2011

Toxic Derivatives are what slaughtered the economy. End Sentence. Full Stop.

[drkazmd65]

10:41 AM on 04/21/2011

True enough collective - but those toxic derivitives were only the final blow to an economy that had already be starved, sick, and wobbly for quite some time before that.

One could say the beginning of the end can be tied to the first time OPEC flexed it's muscles in the early 1970s - demonstrating to those who paid attention (including President Carter) that we were no longer completely masters of our own economic fate.

An economy based solely on cheap & plentiful fossil fuels, consistent defecit government spending of wealth not yet generated, and fiat currency backed by fairy dust & good intentions have all conspired to drag us down.

[mcostello]

01:27 AM on 04/21/2011

Anybody following this could have told you

[NeverUndecided]

12:05 AM on 04/21/2011

Finance bloggers have been making this very claim for years now, but mainstream economists (including "liberals") have virtually all accepted the Fed's highly self-interested therefore subverted version of the discipline.

Same as explained in this piece (linked). Mainstream economists simply ignore the role of speculation. Trillions of dollars hurtling at light speed into every form of stupidity imaginable, and economists IGNORE it. Half the world is up in arms, and as far as the Fed is concerned, there is no connection whatever to the financial crisis and its aftermath - a crushing blow followed by an Everest of free money laundered to speculators who relentlessly pursue their sick game no matter how many dead or how much damage done.

http://english.aljazeera.net/indepth/opinion/2011/04/2011415143212280315.html#

[mcostello]

01:27 AM on 04/21/2011

The emperor has no clothes

[MikeyJaii]

11:48 PM on 04/20/2011

Dam are those PC's from the 90's?

[moose and squirrel]

06:39 AM on 04/22/2011

ha ha my 90mhz pentium with 80MB HD.....

[uniquindividual]

10:54 PM on 04/20/2011

I think it's a thirty year problem. Far more serious than this article states.

About thirty years ago trade was liberalised to a far greater degree than ever before in our country's history which lead to ever expanding deficits in trade...

http://4.bp.blogspot.com/_pMscxxELHEg/SXu-IBM6k3I/AAAAAAAAEXE/Q2KYO8ce_9Q/s1600-h/TradeDeficitGDP.jpg

This had an impact on the working class. An example here of the rapid decline of unions in the USA is germain to this issue..

http://www.sott.net/image/image/s2/58749/large/Union_percent_1950_2010_442x33.png

The expanding income gap is another indicator of the export of the way of life for many americans to other parts of the world,

http://www.cbpp.org/cms/index.cfm?fa=view&id=3220

While the aristocracy was shipping jobs to communists/totalitarians and getting rich, they were also getting big tax breaks, thus running up the debt, thus limiting the options our country has at its disposal

http://zfacts.com/p/1195.html



Domestic industrial capasity has been shipped to totalitarians that lack free press, internet, speech, association and elections.

Why?

http://cache.boston.com/images/bostondirtdogs//Headline_Archives/BDD_Greed1.jpg

http://1.bp.blogspot.com/-CGI934CtLp8/TWbVIrWW2AI/AAAAAAAAODk/rM6zVFzRXpU/s400/repjesus22.gif

It started thirty years ago! the jokes on the millions of former middle class americans who voted for a man and a belif system based on trickle down economics

http://1.bp.blogspot.com/_snwIfQbStd4/TU7JTPMwolI/AAAAAAAAF9Q/fXB3me3Ufdo/s1600/Reagan.jpg

[mcostello]

01:28 AM on 04/21/2011

So what do we do?

[uniquindividual]

08:32 AM on 04/21/2011

Start taxing those who can afford it.

http://motherjones.com/files/images/Blog_Tax_Rates_Rich.jpg

Implement policies of fair trade, promoting commerce with democracies and discouraging it with totalitarians that do not shair our democratic values.

http://jurist.org/paperchase/2011/01/china-fails-to-deliver-on-human-rights-promises-hrw.php

Reintroduce Tariffs and domestic content standards.

Reduce spending on a bloated millitary...

http://www.globalfirepower.com/defense-spending-budget.asp

And continue the effort to offer a public option for health care, Americans are sadled with the most costly healthcare program in the world...

http://www.visualeconomics.com/healthcare-costs-around-the-world_2010-03-01/

Why a public option? Here's why...

http://bp1.blogger.com/_pnpnK28g9K4/R_mJg5GnGKI/AAAAAAAAALk/9uuo-eq7x8U/s1600-h/helathcare+money.gif

[leftyirishwoman]

09:43 AM on 04/21/2011

At some point US history books will compare the changes to the American economy that began under Ronald Reagan to Herbert Hoover, and Herbert Hoover will come out as a much better president.

[uniquindividual]

09:47 AM on 04/21/2011

You are assuming there will be US history books. The republican aristocracy hate democracy so much and are in the process of destroying the country.

[OldTulsan]

10:42 PM on 04/20/2011

http://www.gnh-movement.org/press_detail.php?id=120
Stiglitz: GDP may be poor indicator of economy

"Joseph Stiglitz, the Nobel laureate economist tapped to head a new French study, said Tuesday he sees gross domestic product (GDP), the most often cited yardstick, as an imperfect indicator.

Stiglitz, named by French President Nicolas Sarkozy to head a panel to find a new method of economic calculation that will include quality-of-life factors, said the current yardsticks "only reward governments if they increase materialistic production."

"If you improve the quality of life, but it doesn't show up in more material consumption, it doesn't show up in GDP, and you'll be criticized," the US economist told AFP in a phone interview.

Sarkozy earlier announced in Paris that Stiglitz and a fellow Nobel economics laureate, Amartya Sen of India, will participate in the project.

The 64-year-old winner of the Nobel economics prize in 2001 and currently a professor at Columbia University in New York, is to chair the panel.

Stiglitz, known for his outspokenness and criticism of globalization, said the French president had given him "a broad-ranging mandate trying to put together a commission study on the broad questions of how do you measure well-being."

"Among the economics profession there has been a strong sense for a long while that gross domestic product is not a good measure. It doesn't measure changes in well-being, it doesn't measure comparisons of well-being across countries," he said.

[bllnsinchnge]

11:52 PM on 04/20/2011

GDP includes us blowing up an airport in Baghdad, then building a new one there in the same spot. I don't consider the majority of government spending "Domestic Productivity"

[uniquindividual]

08:34 AM on 04/21/2011

I think it's GNP your talking about

[OSCPJ]

09:29 AM on 04/21/2011

I read a good article aimed at Krugman.  It stated for one day we fly our AF over the states, devestating the roads, bridges and all infastructre and then build it back.  The Liberal way of counting GDP.
 
Krugrman actually argued that GDP would increase after the Earthquake/Tsunami in Japan.  As the Japanese had to rebuild.
 
GDP is used make the govt feel good.  And rise or lack of descent in the GDP now is attritible to rising costs, not increased productivity.