Former Minnesota Governor Tim Pawlenty, now a candidate for the Republican presidential nomination, has been getting a lot of grief for his promise that the U.S. economy could grow five percent per year for 10 years if only we follow his program of big tax cuts, spending reductions and deregulation. The claim has raised eyebrows across the spectrum. After all, $15 trillion economies simply don't grow that rapidly over such long periods of time. Pawlenty argues that "we've done it before" and "the same can happen again."Between 1983 and 1987, he pointed out, the economy grew at an average rate of 4.9 percent, and between 1996 and 1999, the economy grew at an average rate of 4.7 percent.
via finance.yahoo.com
Interesting article but Gross conveniently ignores facts that would change his thesis somewhat. First, fiscal policy has a lag effect on the economy so FDR's policies, as well as the end of the war, wouldn't necessarily have been reflected in GDP during his tenure in office, despite multiple terms in office. Second, he ignores the fact that GDP CONTRACTED in four of the next five years (1945-1949) at an annualized rate of roughly (9%) per year. It wasn't until 1950 that the US finally found its footing and went on to grow in 22 of the next 24 years, 10 of which were greater than 5%. That may have been due to FDR's policies but may also have resulted from the policies of Truman and Eisenhower or by the activities of the Federal Reserve during the period. Point is, we don't necessarily need another FDR.
