Well, it turns out Annie had it wrong. The sun won’t come out tomorrow.
That was basically the message from Federal Reserve chair Janet Yellen last week when she acknowledged the economy is doing more poorly (again) than previously hoped. The Fed admitted that sluggish growth that caps out at 2 percent is with us for as far as the eye can see, or at least through the next two years. Is this a declaration of the last rites for Obamanomics? It should be. Throw it in the dustbin of history alongside all the other failed liberal economic experiments.
The previously bullish Fed finally and openly acknowledged that sluggish growth is the long term new normal for America. Secular stagnation is here to stay. The growth rate has limped out of the 2008-09 recession at a 2 percent pace now for seven years. The Joint Economic Committee of Congress tells us a normal recovery gives us about 3.5 percent growth and the Reagan and JFK booms were closer to 4 percent. So the GDP today thanks to President Obama is about $2 to $3 trillion smaller than it should be. This is roughly the equivalent of losing the entire annual output of every business and worker in Michigan, Ohio and Indiana combined.
Instead of speeding up to recover all this lost ground, we’re decelerating. Growth was 1.4 percent in the 4th quarter of 2015. It was 0.8 percent in the first quarter of this year. The Fed now has downgraded growth now to less than 2 percent for the rest of 2016 — down from an original forecast of 2.4 percent. Ms. Yellen now is telling us that the chances of an interest rate hike this year before the election are close to zero. That certainly worked out well for Hillary who needs a growing economy to have any chance of winning in November.