The Great Growth Hoax
Jeffrey Tucker

For several days, ever since the supposedly amazing GDP report from quarter four 2023, we’ve been blasted by the media about how great the economy is doing.

It’s exasperating because these claims do not fit with human experience. Last we heard from the Census Bureau, real income is down, and no one doubts it. Everyone, or at least most average people, has felt strong downgrades in living standards over these last four years.

And yet, no recession has been declared. This is for technical reasons. A recession is supposed to show up in the technical reading of the GDP plus unemployment.

We’ve known for years that the unemployment data is broken. It does not account for labor dropouts or adjust for multiple job holders or otherwise reveal anything about labor participation or remuneration.

Unemployment is technically low, but so what?

As for GDP, it is not a measure of the standard of living or even economic growth. It is a measure of output — stuff going on as measured in dollar terms, whether necessary, productive, society serving, efficient or not at all.

The aggregate was concocted at a time when economists believed that spending was itself productive, whether it flowed from a sustainable capital base or government itself. Anything moving and churning was regarded as good.

We Don’t Need More GDP Reports Like These

When the latest report came out and everyone cheered, I dug around the data a bit but figured I would wait for my favorite analysts to weigh in. Sure enough, Peter St Onge writes it up and it is a doozy:

Fresh GDP numbers came in and it was a blowout. The kind of blowout that only a $2.7 trillion government deficit can buy while the private economy crumbles around it. Another couple blowout GDP reports like this and Americans will be living under an overpass.

The essential ruse comes down to unfathomable amounts of government spending that is being recorded as productivity and output, and interpreted by the media as growth:

In the past 12 months the federal deficit increased by $1.3 trillion. Yet we only got half that in GDP — about $600 billion. In other words, everything else shrank. It’s even worse for that brave and stunning Q4 — there we got just $300 billion in extra GDP for — wait for it — $834 billion of new federal debt.

To put a fine point on it:

Essentially, [GDP is measuring] the pace at which we’re going Soviet, replacing private wealth with government waste.

It Costs $2.50 to Generate $1

In his interpretation of the data, we are destroying wealth at the fastest rate since 2008. An analysis by Zero Hedge echoes the same thought:

While Q4 GDP rose by $329 billion to $27.939 trillion, a respectable if made-up number, what is much more disturbing is that over the same time period, the U.S. budget deficit rose by more than 50%, or $510 billion. And the cherry on top: The increase in public U.S. debt in the same three-month period was a stunning $834 billion, or 154% more than the increase in GDP. In other words, it now takes $1.55 in budget deficit to generate $1 of growth… and it takes over $2.50 in new debt to generate $1 of GDP growth!

To further the analysis, and doing the math:

Every dollar in GDP growth cost $1.69 in new debt, and also means that every new job cost future generations of Americans $957,100.48.

To say this is unsustainable is more than obvious. It is a disaster and this is dragging American prosperity into the pits, if by prosperity you mean quality of life. No matter how many gizmos to which you have access, the resources for living a good life are depleting very fast.

The American Dream?

The idea of a one-income family is nearly extinct, whereas it was the norm three-quarters of a century ago. Even the gizmos are falling apart and not serving us well.

Household appliances don’t work unless you somehow get your hands on the most high-priced models. They’re trying to shove everyone into urban commuter cars so that you cannot drive on those big vacations that used to be the American norm.

College is out of reach and the degree that costs a fortune to get is increasingly worthless anyway. People are ever more despairing for the future and thinking that this is just the new normal.

Even looking at output data over the long term, you can see the trend, even given all the manipulation and fakery. It’s still very obvious where things are headed.

It didn’t need to happen. The United States has been the world center of technological innovation during these years, and the historical home for free enterprise and entrepreneurship. We should have had the greatest boom times in our history! Instead, government stole all that energy for itself.

It’s a tragedy.

Is There Hope?

Everyone underestimates the wild effect of 2020 and the following chaos caused by lockdowns. Those sent the workplace into upheaval, wrecked data collection, made property rights and liberties far less secure and entrenched a professional managerial class in government and industry that conspires against the public.

On the good side, we are seeing the evaporation of trust in media, medicine, academia and government. Large media organizations are laying off workers in droves just to survive, and the woke agenda generally seems on the ropes.

Dramatic reforms are possible but are they likely? We will see. There needs to be wholesale reform in government and much more besides in order to save what’s left of the great American prosperity machine.

As it is, the more likely outcome is to go the way of empires past, a long slog through the miasma of corruption and stagnation until generations hence will speak of the United States in the past tense the way we talk about the Portuguese empire.

That’s a big departure from the way this article opened so let’s go back to the point. The GDP data is not reflective of anything real except government profligacy and stagnation in every sector that counts.

You can read the headlines or look at the underlying realities. One perpetuates existing myth-making and the other reveals that the myth is not long for this world.

 

I'm executive editor of Laissez Faire Books and the proprietor of the Laissez Faire Club. I'm the author of two books in the field of economics and one on early music. My main professional work between 1985 and 2011 was with the MIses Institute but I've also worked with the Acton Institute and Mackinac Institute, as well as written thousands of published articles. My personal twitter account @jeffreyatucker FB is @jeffrey.albert.tucker Plain old email is [email protected]

 

 

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