Catch-Up Growth

Posted on  

"Catch-Up Growth"

My view is that we’re not going to have an economy that looks and feels healthy until (nominal) GDP catches up with the long-term trend. What trend? Well, that’s a bit hard to say. But I think if we take the trend that extended from the NBER-defined peaks Q1 of 2001 to Q4 of 2007 we’re looking at a period of time that I don’t think qualified as unrealistically fabulous prosperity. And the situation looks like this:

trends

To catch-up by the end of 2012, you need GDP (i.e., output times the price level) to grow at almost 8.7 percent per years starting in Q2 of 2010. Even to achieve the catchup by the end of 2016, you need it to grow at over 6.7 percent. The pre-crisis trend was more like 5.2 percent. Realistically, I think the Powers That Be aren’t going to do this. Unemployment of around 7-8 percent will be declared “the new normal” and the cause will be said to be hazily defined “structural problems” that can only be solved by cutting Social Security.

« »

By clicking and submitting a comment I acknowledge the ThinkProgress Privacy Policy and agree to the ThinkProgress Terms of Use. I understand that my comments are also being governed by Facebook, Yahoo, AOL, or Hotmail’s Terms of Use and Privacy Policies as applicable, which can be found here.