Best Quarter-Century of Economic Performance in American History?

Richard Green:

How does Michael Boskin do math?, by Richard Green: He writes in the Wall Street Journal this morning:

The lower marginal tax rates in the 1980s led to the best quarter-century of economic performance in American history.

This didn’t seem right to me, so I went to the National Income and Products Account web site. For GDP growth after 1947 (the beginning of the quarterly NIPA data), the best 25 year period was between the first quarter of 1949 and the last quarter of 1973, when the economy grew by a multiple of 2.68.  This is well before Reagan took office. The period of 25-year spells after Reagan took office is small, but the best period is the fourth quarter of 1982 until the third quarter of 2007, when the economy grew by a multiple of 2.26.

GDP growth likely overstates the benefit of the post Reagan era, because the benefits of the growth have been unevenly distributed. If we look at median household income, it is really hard to figure out how to find a “best in history” 25 year period after Reagan.

As subtle but important point here is how to define “best.” For example, echoing Richard’s point, is growth all that matters if it is distributed inequitably?

About Mark Thoma 243 Articles

Affiliation: University of Oregon

Mark Thoma is a member of the Economics Department at the University of Oregon. He joined the UO faculty in 1987 and served as head of the Economics Department for five years. His research examines the effects that changes in monetary policy have on inflation, output, unemployment, interest rates and other macroeconomic variables with a focus on asymmetries in the response of these variables to policy changes, and on changes in the relationship between policy and the economy over time. He has also conducted research in other areas such as the relationship between the political party in power, and macroeconomic outcomes and using macroeconomic tools to predict transportation flows. He received his doctorate from Washington State University.

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1 Comment on Best Quarter-Century of Economic Performance in American History?

  1. ” …is growth all that matters if it is distributed inequitably?”

    I will accept your premise if you can show me a time in all of human history when growth has been distributed equally.

    Growth of the economic pie where growth comes from the non governmental sector is always good. Those who take a risk that inspire the growth will always benefit more than those who coat tails on the side of a successful risk venture. It should be noted that the benefit always has a risk on the other side: if the risk doesn’t pan out then the coat tail crowd is not going to be there to make the risk taker whole.

    It was the risk taker that lead to the founding of the colonies, looking for economic and political gain. It was the risk taker that lead to the founding of this nation, protecting their assets from an unruly government – those who had the most to lose put at risk all that they had so that everyone who was at economic and political risk could benefit going forward. After the war, those that survived, benefitted from placing what they had at risk. It is in this sense that political capital and financial capital are intrinsically tied in our nation.

    It has been the risk taker in the form of the small business person who grows their business from a single person to multiples that has been the backbone of the united states as an economic miracle for 200++ years. Implicit in this is a protection of property rights and access to capital that has been heretofore unrivaled in history. You stifle the reward and limit the risk and you will kill the growth because you also limit the incentive to think outside of the box to benefit personally. Yes, growth has a selfish component, but the people who are hired also benefit.

    In the past couple of years I sought to bring a person back to work that had to be laid off. I offered five times and then quit offering, for I could only offer them 50% more in take home than they were receiving from the government in terms of benefits, for which they would have to give up their golf two days a week and complete freedom the other days. This person’s incentive to perform had been broken. The risk and reward mechanism altered in such a way that the upside associated with even moderate risk was eliminated after a extended period of government support.

    When the economy improves I will benefit more than this person because my higher reward is tied directly to my ability to accept a higher degree of risk. Anything else would be unfair to those of us who produce and grow the economy.

    When you feed parasites you get more parasites. If money = food, who then does the government prefer feeding in this day and age? By my read it would appear that the takers are winning favor instead of the producers and that is a model that is not sustainable for it is the producers who fund it all.

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