Phill Gramm may have worded his assertion in an impolitic manner, but the latest economic data proves him correct. The US economy grew at an annual rate of 3.3% in the second quarter, almost twice as much as first predicted. Exports led the way, followed by an increase in personal spending:
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 3.3 percent in the second quarter of 2008, (that is, from the first quarter to the second quarter), according to preliminary estimates released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.9 percent.
The GDP estimates released today are based on more complete source data than were available for the advance estimates issued last month. In the advance estimates, the increase in real GDP was 1.9 percent (see “Revisions” on page 3). …
The acceleration in real GDP growth in the second quarter primarily reflected a larger decrease in imports, an acceleration in exports, an acceleration in PCE, a smaller decrease in residential fixed investment, and an upturn in state and local government spending that were partly offset by a larger decrease in inventory investment.
Does this cut out the legs from the Democrats in their non-stop themes of complaint regarding the economy? It should, but it probably won’t. A growth rate of 3.3% is a good, solid number, one that shows real substance in the economy. It remains weak in some areas as does the dollar, but fundamentally strong.
The Democrats have tried to make the current economy as bad as the Depression, but in fact it hasn’t even gotten near the Clinton recession that began in his last year in office. They have been hammering themes of economic mismanagement, but the real weaknesses in the economy have bipartisan fingerprints all over them. Chris Dodd’s sweetheart deals with lenders while chairing the Banking Committee certainly looks very suspicious, as did Barack Obama’s own selection of VP vetter Jim Johnson, a major player in the credit-market failure while raking in millions in unreported income at Fannie Mae.
In the end, the scare mongering may still have some resonance, as job growth is a lagging and not leading indicator of recovery. That tactic worked well for Bill Clinton in 1992 when George H. W. Bush couldn’t explain clearly enough that the recovery from the 1991 recession had already begun. In this case, John McCain and the GOP need to point out that Obama intends to attack the incentives for investment needed to continue the growth and create new jobs. They’ll have plenty of time to do that next week, while Democrats continue to insist that the sky is falling when clearly no disaster has occured.
Update: Earlier, I mentioned that the numbers exceeded inflation, but real GDP already accounts for inflation. The 3.3% annual growth is above inflation already.