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Tuesday, December 15, 2009

A V Shaped Recovery, But Government Slowed it Down

Economists Brian Westbury and Robert Stein argue that we are indeed in a 'V' shaped recovery and are projecting 4-4.5% growth through 2010. They say that the growth should be much higher after the dramatic recession, but government got in the way.

While the pessimists keep looking for things to worry about--seasonal adjustment factors, sales tax receipts--we are forecasting real GDP will grow in the 4% to 4.5% annual rate range at least through 2010. We also expect the unemployment rate to fall consistently in this next year as well. Unfortunately, government spending and stimulus is costing jobs and growth. The economy would be doing even better, and unemployment would be lower if government had stayed out of the way.

I guess that prognosis is good news, but I question the staying power of any recovery. Despite the fact that this recession was almost as bad as that which Reagan inherited, I don't think growth will get anywhere close to the average 5.3% growth we saw for the three years from 1983 to 1985. Tax rates are increasing, regulation is increasing, and the assault on capitalism is increasing. I hope our government gets a change of heart, but that's like Elin or Hillary hoping their husbands stop looking at other women.