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Without An Economic Recovery Plan, America Would Lose More Than $8,800 In Potential GDP Per Person

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"Without An Economic Recovery Plan, America Would Lose More Than $8,800 In Potential GDP Per Person"

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The impending American Recovery and Reinvestment Act is President Obama’s first step towards closing the current gap between what America is producing and what it could be producing. Without his recovery plan, CBO estimates that the United States’ GDP gap will yawn to $2.7 trillion from 2009 to 2011. That’s more than $8,800 in potential GDP for every man woman and child in America.

GDP Gap Per Person

The ‘GDP gap‘ represents workers who want to work but can’t find a job, businesses who are reluctant to hire new employees, land being put to sub-optimal use, and banks and credit institutions who accumulate money instead of lending it out. It’s wages gone unearned, profits unmade and revenues uncollected.

The CBO projects that the above shortfall “would be the largest — in terms of both length and depth — since the Depression of the 1930s.”

GDP Gap

But a sizable stimulus package, such as the American Recovery and Reinvestment Act, is only the first step towards closing this gap. The banking system must be flushed of bad or unpriced assets clogging up the credit markets and the collapsing housing market must be supported to help worthy families stay in their homes and prevent a vicious cycle of land depreciation and neighborhood devastation.

Going forward, to evaluate progress towards recovery, politicians, policymakers and citizens should take care to mind the gap.

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