Eclipsing the Clinton Wonder Years

Twin deficits. Housing “bubble.” Inflation. Gas prices. 500,000 unemployed. Demise of the dollar. The whine. The gripe. The humanity.

European leftists have their own terminology for describing the current state of economic affairs in the US. The left-leaning German magazine Der Spiegel, for one, drops the phrase “shines with strong growth” in reporting on the most recent GDP data. “Enviably robust” is another description used. “US economic growth,” they continue, “by now has surpassed the 3% mark for ten consecutive quarters. According to the record, this constitutes the longest period with such high rates since 1985/86.”

I did a bit of checking around, but I really couldn’t find a whole lot of American commentators who thought it worth pointing out that the Bush Administration’s economic policy has now eclipsed the Clinton wonder years. You know what I mean: the period of the inflating Internet bubble that people have been trying to sell as the Last Golden Age of American prosperity.

In fact, the White House’s supply-side economics have now pulled even with the level of economic stability achieved during the Reagan years.

US GDP growth in the July through September quarter came in at an annual rate of 3.8%. Consumer spending increased by 3.9%, business spending was up a staggering 8.9%. Less conductive to long-term prosperity, government spending rose 7.7% on the Federal level. Meanwhile, the core inflation rate was 1.3% - down from 1.7% in the previous quarter.

Scanning my archives, I noticed another snippet of data that really didn’t make it into the laundry list of financial talking points. On October 14, the latest figure on the budget deficit for the past fiscal year came in. At US$319 billion, the 2005 fiscal-year deficit amounted to 2.6% of GDP - a whole point below the 3.6% recorded in 2004. Initially, the White House had forecast a 2005 deficit of US$427 billion.
There may have been some sandbagging involved in the original number, but it clearly looks like lower taxes and pro-growth economic policies have not only created millions of jobs but also swelled tax revenues quite impressively over the past year.

As a percentage of GDP, new 2005 debt actually compares very well with that incurred by supposed financial stalwarts such as China (budget deficit - as far as ascertainable - around 5.5% of GDP), Germany (over 3.4%, not counting new debt incurred due to ongoing reunification costs), or Japan (chronic deficits of around 7% of GDP).Something to keep in mind when you hear the remigrés chanting about how terrible we have it here in the States…

J. Christoph Amberger
Executive Publisher
The Taipan Group’s 247profits e-Dispatch Team