The Bureau of Economic Analysis released its first report for GDP growth in the first quarter of 2014 today. It showed the economy grew at an anemic 0.1 percent from January to March. The more meaningful measure of growth, private-sector GDP, rose by a still meager 0.2 percent.
This is a huge slowdown from the second half of 2013, when the private sector grew by 3.8 percent. Some of the slowdown was clearly a result of lost output due to the severe weather in the Midwest and Northeast. But we’ve seen this pattern before under President Obama: The economy starts the year strong and then slows in the spring and summer months.
The most worrisome sign in the new report was the steep falloff in business investment spending, which is usually a leading indicator of where the economy is headed. Investment tumbled by more than 6 percent, compared to an expansion of 2.5 percent the previous quarter. Higher taxes on investment as part of the 2013 Obama tax hike have clearly hurt investment.
We expect growth to be higher this quarter, but the big story of the U.S. economy is a 2 percent growth rut for the last five years—when we should be growing at about twice that pace. The Obama growth deficit (versus average recoveries) is $1.4 trillion and exceeds $2 trillion compared to the Reagan supply-side recovery. This has led to wage stagnation, high unemployment, and high economic anxiety for American families.