Lawrence Kudlow‘s latest column at Real Clear Politics focuses on the impact of a 2 percent economic growth rate.
The good news is that the economy is growing at 2 percent and that there’s no recession in sight (barring a complete collapse of profits). The bad news is that the economy is growing at 2 percent. It’s been doing so for nearly 15 years under Democratic and Republican administrations.
Coming off a deep recession, real GDP growth is averaging no better than 2 percent. After 25 quarters of so-called recovery under Obama, it has increased a total of only 14.3 percent.
Compare this to earlier periods. After the JFK tax cuts of the early 1960s, the economy grew in total by roughly 40 percent. After the Reagan tax cuts of the 1980s, the economy grew by a total of 34 percent.
And here’s the killer: Real middle-class wages are still flat-lining. These folks get nothing out of 2 percent growth.
As I feared, subpar economic growth never really came up in the Republican debate in Houston. Rather than growth, we got more cat fights. It’s time to get serious.
In a recent essay, John H. Cochrane, a senior fellow at the Hoover Institution, wrote that “sclerotic growth is the overriding economic issue of our time.” He has numbers to back this up.
From 1950 to 2000, the U.S. economy grew at an average rate of 3.5 percent. That generated a massive gain in real GDP per person from $16,000 to over $50,000. A huge win for the middle class.
But as Cochrane noted, if the whole post-WWII period had grown at 2 percent, income per person would have increased from $16,000 to only $23,000 — about half of what actually happened at 3.5 percent growth.
There is a big difference between 2 and 3.5 percent growth. It’s not abstract or theoretical. Essentially, the middle class has not gotten a raise in 15 years. In fact, a new report from Sentier Research finds that median household income of $56,700 (adjusted for inflation) at the end of 2015 is almost exactly where it was at the end of 2000.
