Fact: GDP growth in the United States has been confined to a narrow corridor for over 30 years. This figure depicts the growth of U.S. real GDP. The two curved lines bracket the narrow corridor within which GDP has been confined for more than 30 years. Real GDP has grown at the average rate of 3% per year and has oscillated within a narrow corridor that is plus or minus 3% wide. That’s the 3–3 rule of U.S. GDP. With the U.S. presidential election upon us, the CEO (currently Mr. Bush) and CFO (Mr. Greenspan) of U.S.A. Incorporated should recognize that, rhetoric notwithstanding, the change in the nation’s management every four or eight years has had no discernible effect on the long-run rate of GDP growth. Nor have oil shocks, foreign conflicts, tax cuts, expanding deficits, market bubbles, or record-low interest rates. Regardless of environmental stimuli, GDP has grown—with some downs (recessions) and ups (recoveries)—within a narrow corridor. Faced with that reality, the president and chairman should focus on minimizing the damage that short-term volatility causes. Pursuing higher long-term growth through political and economic manipulation hasn’t worked and probably has increased volatility, not decreased it. Note that the graph indicates another down and up in this current decade. Looking forward to the next dip, governments and companies with cyclical revenues should mind their debt loads today to make debt servicing manageable down the road. Like the CEO and CFO of U.S.A. Incorporated, business executives should heed this graph’s broad message. Keep the facts on the table. Base decisions on broad trends, not temporary bumps. And stand vigilant against rhetoric that masquerades as truth and distorts decision making. Data source: Bureau of Economic Analysis, U.S. Department of Commerce
