Wednesday, June 08, 2011

More Pawlenty Nonsense

Speaking (transcript here) at the University of Chicago's Harris School on Tuesday, Tim Pawlenty attacked the slow growth of the economy, remarking

Let’s start with a big — positive goal. Let’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. We’ve done it before. And with the right policies — we can do it again.

While starting with "a positive goal," the Minnesota governor neglected to start with accuracy. As this report indicates, the average annual change in the real GDP did not approach 5% for any of the last six decades. In the 50s, it was 4.1%; in the 60s, 4.2%; in the 70s, 3.3%; in the 80s, 3.1%; in the 9s, 3.1%; and in the 00s, 2.0%.

Oddly, Pawlenty implied that such growth is realistic by noting "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%." Neither of these brief periods of rapid growth, however, featured a jump in GDP by 5.0%. And both of these periods were succeeded by a dramatic drop in economic growth.

Pawlenty is correct, though, when he maintains "Growing at 5% a year — rather than the current level of 1.8% — would net us millions of new jobs." So much so that, noting a "consensus estimate" of 2.5%-3.0% annual growth, Ezra Klein explains

Pawlenty’s promised 5 percent is almost double that. Alan Blinder, a former vice chairman of the Federal Reserve, ran the numbers for me. “Trend growth is three percent or so,” he wrote in an e-mail. “Five percent growth would be two percentage points higher, which should cut the unemployment rate by about one percentage point per year. So after 10 years, it will have fallen from nine percent to minus-one percent. Nice trick!”

A neat trick, indeed, although promising what he can't deliver is cost-free. Tim Pawlenty, a smart guy, apparently believes that's the path to nomination in the GOP.

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