How likely is 5 percent growth in a decade?(Read article summary)
Presidential candidate Tim Pawlenty wants to grow the economy by 5 percent, just like Reagan and Clinton did. But are those wise examples to bring up?
How ambitious is Pawlenty's growth goal? Plenty.
Letâ€™s grow the economy by 5%, instead of the anemic 2% currently envisioned. Such a national economic growth target will set our sights on a positive future. And inspire the actions needed to reach it. By the way, 5% growth is not some pie-in-the-sky number. Weâ€™ve done it before. And with the right policies, we can do it again.
Between 1983 and 1987, the Reagan recovery grew at 4.9%. Between 1996 and 1999, under President Bill Clinton and a Republican Congress the economy grew at more than 4.7%. In each case millions of new jobs were created, incomes rose and unemployment fell to historic lows. The same can happen again.
In the aftermath of the Great Recession, it wouldnâ€™t be surprising to see a couple years of strong growth at some point. Letâ€™s hope itâ€™s soon.
But could we have remarkably strong growth for a full decade, as Pawlenty hopes? His two examples donâ€™t inspire confidence. In each case, strong growth ended in four years or less.
So when was the last time the United States grew at 5% for a full decade?
Mid-1958 through Mid-1968. Over that span, U.S. growth averaged exactly 5.0% per year.
But thatâ€™s the only instance since World War II. Economic growth was lower than 5%, usually much lower, in every other decade since 1947 (see chart above.)
Growth hasnâ€™t reached even 4% over any decade since the late 60s and early 70s.
Getting up to 5% over the next decade thus seems not merely ambitious, but almost unthinkable.
Of course, a few years back many would have said the same thing about getting the U.S. growth rate down to 2%. Until the Great Recession, there was only one ten-year stretch in the post-war period, ending in early 1983, in which growth averaged as low as 2%.
Sadly, weâ€™ve broken that record handily. Over the past ten years, growth has averaged a meager 1.8%.
So maybe T-Pawâ€™s right, and the economy can break out to the upside just as weâ€™ve done to the down.
But I wouldnâ€™t bet on it, regardless of who is president.
P.S. The quarterly data I use here are available since 1947. Annual data go back to 1929. Perhaps not surprisingly, every ten-year period ending in 1941 through 1951 had an average growth rate of 5% or more, thanks to World War II and the rebound from the Great Depression.
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