I was angered (yet again) to read a headline claiming that ‘U.S. Has Record 10th Straight Year Without 3% Growth in GDP‘. Here’s an excerpt from the article.
The BEA has calculated GDP for each year going back to 1929 and it has calculated the inflation-adjusted annual change in GDP (in constant 2009 dollars) from 1930 forward.
In the 85 years for which BEA has calculated the annual change in real GDP there is only one ten-year stretch—2006 through 2015—when the annual growth in real GDP never hit 3 percent. During the last ten years, real annual growth in GDP peaked in 2006 at 2.7 percent. It has never been that high again, according to the BEA.
There’s more at the link.
What made me angry was that the figures provided (courtesy of the US government’s Bureau of Economic Analysis) are questionable from beginning to end. They’re made up on the basis of deliberate under-estimates of inflation, the use of questionable (some, including myself, would say deliberately fraudulent) ‘fudge factors’ and qualifications, and a healthy dollop of political correctness. Let’s examine the truth. (I might add that while I’m not an economist, I do hold a Masters degree in management and was a company director before a change of career path took me into ordained ministry. I have a pretty good basic understanding of the subject.)
John Williams has run the Shadow Government Statistics (SGS) subscription newsletter and the Shadowstats.com Web site for many years. His message is simple:
“… the quality of government reporting has deteriorated sharply in the last couple of decades. Reporting problems have included methodological changes to economic reporting that have pushed headline economic and inflation results out of the realm of real-world or common experience.”
In a 2004 analysis of Gross Domestic Product calculations (which you should read in full to see how the figures are and have been manipulated), Mr. Williams highlighted erroneous (if not outright fraudulent) assumptions and valuations, described blatant political interference in the process, and concluded: “With reported growth moving up and away from economic reality, the primary significance of GDP reporting now is as a political propaganda tool and as a cheerleading prop for Pollyanna-ish analysts on Wall Street.”
The impact of the real inflation rate (as opposed to the rate claimed by the government) is significant. Mr. Williams estimates real inflation, measured in an unbiased fashion and not changed to reflect ‘political correctness’, to be close to 10% – effectively, more than five times higher than the ‘official’ rate.
This discrepancy in the calculation of the inflation rate is confirmed by other sources such as the Chapwood Index, which we’ve mentioned in these pages before. Chapwood points out:
… the government has been artificially deflating the [Consumer Price Index] to keep figures as low as possible. The readings you see published today no longer represent the real out of pocket expenditures incurred by most Americans.
The government’s baseline CPI measure excludes items such as taxes, energy, and food; which are not only necessities, but also often a majority of our daily expenditures.
The CPI increase from 2008-2012 was a total of 10.2%, but our research has found that for many cities, the cost of living increase was more than that in 2012 alone.
These discrepancies carry over directly into the calculation of Gross Domestic Product, which must of necessity account for inflation.
As can readily be seen, if the real rate of inflation is taken into account, we’ve been without 3% growth in GDP for much longer than government statistics would reveal. In fact, real GDP’s been negative (that is to say, the economy’s been contracting) for most years during the past two decades.
Do you want to know why almost 100 million people in this country are considered ‘not in the labor force’? See the above charts, and wonder no longer. The economy’s too crippled to provide jobs for them. Furthermore, when mainstream media commentators pontificate about how the economy’s doing just fine, look at those charts again and realize that they’re spouting the politically correct line. The economy’s not doing just fine, and sooner or later the economic fairy-tales that are being told to us are going to be revealed as just that. Reality’s going to bite . . . and it’s going to be painful.
It already is painful for people trying to make ends meet on incomes that buy less and less every month, as inflation bites harder. They can tell you about economic reality far better than economists and statisticians calculating spreadsheets and issuing bulletins from their comfortable offices in Washington DC.
Peter
It's pretty brutal out there in nearly every sector. And there are no indications that this will be better anytime soon.
Been to the D.C. area over the past decade or so? The place is awash in money like never before. The parasite class has money coming out of their ears and every other orifice. Work for government, lobby government, are a government contractor or connected with any of the above and you're on the gravy train with biscuit wheels. Average Joe lunchbox in Peoria has no clue about the disparity. His real wages and standard of living has been falling from the the early 70s. When the props finally get kicked out and the economy comes crashing to earth it's gonna be ugly. It'll be orders of magnitude worse than the great depression and you won't have the homogeneous nation with intact family structures and sense of morality that helped soften the impact back then. This time imagine the yugoslavian civil war combined with the French revolution with a splash of Rwanda thrown in for good measure.
Re: That last chart, is the government line too optimistic: Yes. Is the SGS line too pessimistic: Yes. The government is trying to stay off the lamp posts and employed/elected and SGS is taking every single bit of bad news and sweeping it into a single heap which distorts things a bit at the margins, still…
Since population is growing at about 3%, any GDP growth of less than that represents a drop in well being for the country on average. An even more depressing chart could be made by averaging the 2 graphs so as to acknowledge the discrepancies, and subtract the population growth from that number. The difference is how much you lost in that year.