Neither the Private nor the Public Sector is Doing Fine
Today’s GDP data show roughly what was expected: Real GDP growth is estimated to have been 1.5 percent in the second quarter; the first quarter growth figure was revised upward from 1.9 percent to 2.0 percent. The economy is growing, but not nearly as fast as it should be. (Note, though these data are quarterly, all figures are annualized rates of change.)
The public sector continues to shrink; in the second quarter, government GDP declined at a rate of 1.4 percent. But even when you look at private sector figures alone, they are unimpressive: Real private sector growth was 2.4 percent in the second quarter and 3.2 percent in the first quarter.
Those would be OK -- not stellar -- rates in normal times. But the economy is supposed to grow extra fast during an economic recovery as formerly idle workers return to the workforce. In 1983, the last time we were growing out of a very severe recession, real private GDP grew 8.8 percent.
This is why Barack Obama’s “doing fine” comment about the private sector struck such a sour note. It’s true that the private sector is growing faster than the public sector, and that layoffs in state and local government are dampening the economy. But avoiding public sector cutbacks would not get us anywhere near where we need to be on private sector growth.
The problem hasn't changed since I wrote about it in the fall. President Obama doesn’t have a plan for economic growth other than fiscal stimulus, and he can’t get any more of that from Congress. The president won’t engage on monetary policy or housing policy, and he has turned up the volume on his hare-brained industrial policy ideas that would only make the economy worse.
That’s why, despite all his manifest horribleness, I might still vote for Mitt Romney. Our best hope with Romney, even if it is a thin hope, is that he has a secret plan to fix the economy. It’s no secret that Obama doesn’t have one.
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