Overview of U.S. Economic Growth

September 2, 2020

Vance Ginn, Ph.D.

Vance Ginn, Ph.D., is an accomplished economist finding free-market solutions that let people prosper. He is founder and president of Ginn Economic Consulting where he provides high-quality research and trusted insights on how to affect change at the federal, state, and local levels. Ginn’s experience includes time in public policy, government, and academia. He is chief economist at Pelican Institute for Public Policy and a senior fellow at several think tanks, including at Americans for Tax Reform, Texas Public Policy Foundation (TPPF), and Young Americans for Liberty.

Overview: The U.S. Bureau of Economic Analysis recently released the second estimate of real (inflation-adjusted) gross domestic product (GDP) in Q2:2020. The latest figures show GDP contracted by 5% (annualized) in Q1:2020 and 31.7% in Q2:2020 for a total GDP loss of $2 trillion this year. The Federal Reserve Bank of Atlanta’s GDPNow running estimate of real GDP indicates it could increase by 28.9% in Q3:2020 (as of August 28) depending on COVID-19 responses. The U.S. private economy has lost $2 trillion this year from COVID-19 and resulting lockdowns by state and local governments, but it will keep improving as states reopen.

Details: The U.S. economic expansion ended in February 2020 due to COVID-19 responses but appears to be expanding again in the third quarter with partial reopenings. The following data provide a comparison of real GDP and real private GDP (excluding the government sector) over time: 1) Q2:2009 for dated trough of the last recession in June, 2) Q1:2017 for start of Trump administration, 3) Q4:2019 for dated peak of the last expansion, 4) Q1:2020 for dated start of the recession in February, 5) Q2:2020 for latest reported data.

The average annualized growth per quarter during the last expansion (June 2009 to January 2020) was 2.3% in real GDP and 2.9% in real private GDP. Breaking this expansion into periods of the Obama (Q3:2009- Q4:2016) and Trump (Q1:2017-Q4:2019) administrations, the former averaged 2.3% in real GDP and 3.0% in real private GDP while the latter was 2.5% and 2.6%, respectively. Since the start of the current U.S. recession that was dated February 2020, the economy has contracted by $2 trillion in terms of either real GDP or real private GDP, which has reduced the economy to the lowest level since Q4:2014 for real GDP and since Q2:2014 for real private GDP. The Atlanta Fed’s GDPNow estimate of real GDP growth of 28.9% in Q3:2020 is a good sign.

Recommendations to improve the economy and the livelihoods of Americans:

Safely reopen society by ending state and local government-mandated lockdowns.
Get businesses operating and workers working again, such as with TPPF’s Recovery Act.
Rein in excessive government spending and end unnecessary regulations.

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Vance Ginn, Ph.D.

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