Jul 07 2014
Economic Report for First Quarter of 2014 Was the Worst in Five Years
High hopes that the economy would see a major rebound this year were dashed with the latest data from the Commerce Department. The agency reported that economic output contracted by a staggering 2.9 percent during the first quarter of 2014 – a much more alarming figure than preliminary estimates. In fact, it was the worst quarter since the beginning of 2009, when the country was still in the midst of the last recession. Indeed, it is one of the 12 worst quarters the American economy has experienced since 1947.
Obamacare’s Harmful Impact
Several factors have been linked to the drop-off in gross domestic product (GDP), which measures the value of the goods and services a country produces. Some analysts have blamed harsh winter weather for reduced consumer spending, private investment, and exports. Others point to the President's health-care law.
Given that health care makes up one-sixth of the U.S. economy, it should come as no surprise that the move to government management of America’s health-care system would negatively affect GDP. Millions of Americans have been forced to deal with policy cancellations, as well as unfamiliar and more expensive health insurance plans, since the disastrous rollout of Obamacare at the beginning of the year. According to an editorial in the Wall Street Journal, even optimists “shouldn’t overlook ObamaCare’s role in nearly sending the economy back into recession.”
Worst Recovery Since World War II
Anemic economic growth has become the new normal under the Obama Administration. With onerous regulations and stifling tax increases, the President has prioritized a costly political agenda over policies to boost growth. A look at past economic recoveries sheds light on just how dismal the recent economic numbers have been.
GDP grew by an average 4.9 percent under President Reagan's leadership – more than double the average growth since President Obama took office. Based on the persistently sluggish job gains witnessed since the recession technically ended in June 2009, this has been the worst recovery following any recession since World War II.
According to the Joint Economic Committee, on which I serve, GDP must increase by 6.5 percent for the rest of President Obama's second term in order to catch up to the average set by all previous economic expansions since 1960. It is now highly unlikely that annual GDP growth could reach 2.0 percent, unless the economy skyrockets for the rest of 2014.
Pro-Growth Policies With Real Results
In a sustained recovery, Americans would see the impact of economic growth and job creation in their daily lives. Household incomes would be up, there would be fewer people living in poverty, and workers would be entering the labor force rather than leaving it.
As the latest jobs report shows, the labor force participation rate – reflecting the number of working-age Americans who have a job or are looking for one – is at its lowest level since 1978. What kind of recovery is it when the driving force behind the slowly falling unemployment rate is the number of American adults leaving the job market in frustration?
Boosting confidence – and ultimately economic growth – will require policies different from those put forward by the President and Senate Democrats. We need a new tack that encourages job creators to expand and hire. We need an approach to governing that reduces the burden of inefficient regulations on middle-class families. We need a free-market outlook that results in quick approval of the Keystone XL pipeline and other private infrastructure projects like it. These policies and others like them promise to revitalize the American economy, rather than miring it in negative growth and diminished opportunity.