- December 2011: Vol. 23 No. 11

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Pedal to the Metal: Congress Needs to Accelerate Demand in Order to Revitalize the Economy

by Claude Gruen

1 From the beginning of the recession during the fourth quarter of 2007 until the fourth quarter of 2009, U.S. gross domestic product (GDP) contracted at an average annual rate of 3.5 percent. Before the recession, GDP had been growing at an average annual rate of 2.6 percent. With the costs of two wars adding to federal expenditures, the taxes collected from this level of economic activity were too small to balance the pre-recession budget. The current GDP growth rate of under 1.4 percent is far too anemic to put the more than 9 percent of the labor force that is unemployed back to work, or provide the government with a revenue base big enough to avoid adding to the national debt. In order to bring the U.S. employment rate anything close to acceptable levels, and boost the nation’s output enough to afford the entitlement and other programs legislated by our elected leaders, the average annual rate of GDP growth will have to average closer to 5 percent. Achieving this rate of

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