To Adjust Or Not To Adjust… (Calling Economists)
May 26, 2009
Sadly, not all problems can be solved by the careful application of mathematics.
I’m currently trying to figure out how to appropriately calculate the yearly increases in the GDP over the past 100 years. The reason is because, according to President Obama’s budget estimates, after we get out of the recession, we will have four consecutive years of +5% growth. I’m trying to compare that growth to economic growth we’ve had in the past.
What I need to know is that, when we calculate past growth, is it properly calculated using inflation adjusted dollars or with unadjusted dollars? I seems to me that adjusted is the only way to go, but if there is an economist out there somewhere who can help me answer that question, it would be helpful in getting the statistics right.
Of course, it makes all the difference in the calculations. If we don’t adjust for inflation, then the biggest sustained growth we’ve had in the last 50 years was 1971 – 1981 in which we had 10 years in a row of +8% growth. But inflation was so bad that for a couple of those years, it actually outpaced that growth and then some, turning 8.8% growth in Carter’s last year into -4.2%.
Ultimately, if we take Obama’s numbers as adjusted for inflation, he is predicting that his policies will bring the largest sustained growth this nation has seen since the Baby Boomers started entering the workforce in the early-to-mid sixties. This would be quite a trick, since it would be happening while the Baby Boomers are leaving the work force.
If we don’t adjust for inflation, he is predicting about the same kind of economic recovery we saw from 2003 – 2006.
I’d like to know which one it is.