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-- Brad Delong

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Wednesday, February 18, 2009

A Disturbing Look at GDP Growth

The yearly values for GDP growth since the 50's are contained in a collapsing envelope, indicated by the green trend lines. These lines converge at about 1.8% in 2028. Make of it what you will.

Red and blue line segments represent the terms of Republican and Democratic presidents, respectively. Heavy red and blue lines are average values for a presidential term. The continuous horizontal line is the historical average of 3.77%. The yellow line is a 21 year moving average. Note the disturbing trend. It has been below the long average since 1980, and is on a declining trajectory.

Three interconnected economic phenomena have characterized this period: major reductions in the marginal income tax rate, relaxation of regulations on industries of all kinds, and a massive transfer of wealth from the least to the most wealthy. We reap what we sow.

The data series ends in 2007.

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