We need to significantly reduce the regulatory burden on the private sector. The Obama administration is doing the opposite. They’re loading on more and more regulation on the private without respect to how the economy functions. - Dick Cheney
What has happened since October 9, 2007? Oh, not that much…
The stock market absorbed a 57% decline, the U.S. elected then re-elected Barack Obama, dubious amounts of political partisanship has become the norm, Obamacare became reality, Dodd-Frank was passed and slowly enacted, the U.S. has seen its credit rating downgraded, the Fed has implemented QE1-Infinity, unemployment peaked above 10% and now sits at 7.7%, the markets have experienced a 4-year bull market since bottoming out resulting in a return to all-time highs, the economy has experienced 4 years of tepid economic expansion …you get the point, a lot has happened.
Historically, the economic bounce-back from severe recessions has been staggeringly forceful, as was the case with the most recent recovery initially; however it has gone through periods of regression and improvement along the way. Much of the relative impotence along the way has been the result of ill-conceived policies that have blunted the economy.
The financial crisis was an abhorrent event to have to recover from; it rocked investors, businesses and the general public to the core. It made us question how we do things in the U.S. Yet memory is short-lived and most recovered from this event relatively quickly, but then Washington did everything it could to limit expectations and cause new volatility.
This has manifested itself presently in the form of weak 2013 GDP growth projections that range anywhere from 1.7-2.3%. This begs the question, “Where could the U.S. growth be without Washington’s wrangling and regulations?”
Dodd-Frank was the initial knee-jerk reaction to the financial crisis. Intentions aside, the program of financial reforms has been estimated to withhold nearly 2.7% from U.S. GDP.
The “Fiscal Cliff” tax increases both payroll and on the highest wage earners was another ill-timed farce. Although seemingly small in nature, the increase has a consensus negative impact of nearly 1% of GDP.
The March 1 automatic spending cuts, aka “Sequestration”, were never meant to be a viable option for Congress to take; however that is a discussion for another column altogether. What Congress, with a lack of leadership from the President, has managed to do is shave another .5-1% off 2013 GDP.
Finally, it is time to address the elephant in the room, Obamacare. This well-intentioned, yet poorly devised and vetted healthcare reform law has economic ramifications that are only now becoming apparent. It was only on January 1 that a partial understanding was beginning to emerge and it most likely will take the remainder of the year to understand what type of ceiling Obamacare places on the economy.
It is important to look at GDP and the government policies, because it affects all. The more growth, the more money for support services for the poor, the more money for to provide for our families, the more money to start new businesses and innovate, the more opportunity to be the United States.
All things considered, the economy has been expanding and will continue to do so, largely due to the will of the private sector. Washington did a terrific job stunting what could have been a more efficient, meaningful and widely felt expansion. Through poorly developed policies, they have shaved 4.2-4.7% off of GDP. That difference is the difference between real economic growth and stymied growth that has many still feeling beleaguered, depressed and idle. It is time for Washington to become a real partner with the private sector as opposed to a selfish counterweight. It is for the good of America dammit!
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ABOUT THE AUTHOR: Erol Senel has been plying his trade in the world of finance and personal investing. Through this real world experience, he has found his true professional passion in economics and financial history.
Contact: erol.senelATgmail.com
Twitter: @senelslant
