Our U.S. Gross Domestic Product (GDP) grew 3 percent or more in each of the last two quarters. “So, what, who cares?” — some will say. Many people react this way when they see GDP figures. They scorn the attention people give to them. “Who cares? Doesn’t affect me. 2 percent GDP or 3 percent […]
Our U.S. Gross Domestic Product (GDP) grew 3 percent or more in each of the last two quarters. “So, what, who cares?” — some will say.
Many people react this way when they see GDP figures. They scorn the attention people give to them. “Who cares? Doesn’t affect me. 2 percent GDP or 3 percent GDP. What’s the big deal? It’s only a 1 percent difference.”
I answer that GDP is similar to your temperature. If your temperature is up a degree, we know something is going on in your body. Something more than the ordinary.
GDP is a measure of what the country produces. The products all of us churn out. The services as well.
Economists measure your economy in a hundred additional ways. They split hairs over this figure and ponder that trend.
Doctors do the same with your vital signs. They split hairs over your blood and urine samples and imaging.
Through all their tests, readings, and ponderings, docs keep an eye on your temperature.
Through all the tests, readings, and ponderings, economists keep an eye on your GDP.
“Yeah, but GDP going up only means big companies are making more money. And the rich are getting richer. I’m on a salary. It doesn’t affect me,” some may say.
It does affect you. Here is how GDP does affect most everyone.
When GDP increases, the economy creates more jobs. More jobs obviously mean more people go to work. More people working is good for the health of the country. Good for the morale of the country. And good for the government coffers.
When more people work, government collects more taxes — because those workers pay taxes. What does government do with that extra money? It ends up funding more programs. It is more likely to fix your highways sooner. It’s more likely to add to its many programs that help your schools. And help your state. And help your city.
It is also more likely to lower your taxes. Or less likely to raise them. Because the rising GDP has given the government more money to play with.
Maybe you love environmental programs. Maybe you love welfare programs. Or more ships in our navy. Whatever your favorite government program is, a rising GDP is likely to help that program.
This is true even when politicians take the knife to programs. The cuts they make are likely to be smaller if the money flowing into government is growing. Which it will be when GDP is growing at a faster pace.
The GDP has been in the news lately. That is because it has grown at a 3 percent clip or higher in the last couple quarters. This is a faster growth rate than during President Obama’s two terms.
President Obama’s defenders argued that the slow rate did not matter. It did. Because the low growth rate reduced the flow of tax money into government, this forced Washington to borrow even more to pay its bills.
Did Obama’s economic policies cause the low GDP numbers?
Well, Obama did add a lot of taxes and regulations. Such moves rarely stimulate economies. And the timing was not good. The economy was trying to recover from a major recession. It did not need more taxes and regulations at that point.
Have President Trump’s policies spurred the quicker GDP growth?
Well, Trump has slashed the number of regulations. And proposed tax-rate cuts and the elimination of some taxes, pending Congressional action. Such measures usually stimulate economies.
A few robins don’t a summer make. Any more than two quarters of 3 percent GDP growth make for a huge expansion.
However, any expansion is encouraging. A lot of economists scoffed at the possibility of 3 percent and even 4 percent growth. But many of them were all wet over the Obama policies. They promised rapid growth that never came in the Obama years. They prompted Joe Biden to boldly promise the Summer of Recovery. Right.
Set aside your political preferences. Don’t worry about who gets the credit. Be thankful whenever you see the GDP expand at 3 percent or higher.
From Tom…as in Morgan.
Tom Morgan writes about political, financial, and other subjects from his home near Oneonta. You can write to Tom at tomasinmorgan@yahoo.com. You can read more of his writing at tomasinmorgan.com