This Recovery Has Been So Weak Because Government Action Has Been So Strong

By Jeffrey Dortman at Forbes

June 5, 2016

The 2007-2009 recession was very equivalent to the 1982 Reagan-Volker recession in terms of unemployment, yet the recovery from this recession has been much weaker. The Reagan-era recovery featured real GDP growth that averaged 4.8% per year, reached as high as 7.8% for a calendar year (1983), and never had a year of economic growth slower than 3%. Meanwhile, the recovery under President Obama has averaged only 2.1% annual real GDP growth and has never exceeded 3% growth for a calendar year (or any twelve month period). Some claim the slower growth is because the recession coincided with a financial crisis, others believe it is because government intervention was too timid. The reality is government intervention was so pervasive that it impeded the normal, free market path to recovery. All that government “help” has held the economy back.

For a little historical perspective on past stimulus packages, I annually assign each of my macroeconomic students to find the amount of stimulus spending in one of the recessions since World War II. What they find is that the stimulus spending for the 2007-2009 recession was greater than for all previous recession together, even after adjusting for inflation.

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