Former Federal Reserve Chairman Alan Greenspan warned that U.S. economic growth has essentially stalled in the last half-decade under President Barack Obama.
“A necessary condition for economic growth is that output per hour grows at a rate probably close to 2 percent. We're now under 0.5 percent, meaning we're essentially for the last five years have been growing scarcely at all,” he told Bloomberg TV.
“”If you don't get output per hour growth, you will not get the type of GDP growth which the people who are talking about it, ‘we can now grow our way out of it,’ unless you change the fact that we've got this 9 percent average annual increase in entitlements, which is eating into the domestic savings of the economy, which in turn is a critical issue, which is required to get capital investment going and capital investment is the key element in productivity growth,” he said.
"So it's this entitlement issue, which nobody wants to discuss. The Democrats don't want to discuss it, the Republicans who actually have been spending more and faster rate than the Democrats in the last half century, nobody wants to touch it. It's the third rail of Americana politics,” he said.
“If you're running for office and you mention it, you lose. Unless and until that issue is addressed, I don't see we get the economy growing because we're borrowing savings from abroad, we're now up to $8 trillion debt net for the total system. You can't keep doing that and I doubt very much if we're going to be able to do very much more borrowing from abroad and if we can't do that and we don't have domestic savings because it's being crowded out by entitlements, where do you go from there?” he said.
“It's a nice idea to say, well we'll build our way out of it. Good luck.”
To be sure, Trump has said that Barack Obama has been "the first president in modern history not to have a single year of 3 percent growth." You can wonder about whether this is entirely fair, as Politifact did, but if you consult the Bureau of Economic Analysis's statistics on annual gross domestic product growth, which go back to 1930, it is undeniably true that there was at least one year of at least 3 percent growth during every presidency until the Obama years. And though 2016 isn't quite done yet, it will take a pretty spectacular fourth quarter to get growth over 3 percent for the year, Bloomberg reported.
Meanwhile, Greenspan himself does have his critics. For example, Newsmax Finance Insider Jeff Snider contends that "Greenspan’s credentials say nothing; his track record is all that should matter when judging the worth of his opinions."
Greenspan "doesn’t know what he is talking about and there is a mountain of evidence, including his own words, that show that he never did," Snider, in a recent blog, explained.
"We are stuck in this economic depression not just because of his past tenure, but more so now because constant reverence prevents acceptance of these facts. The recovery doesn’t start until the “maestro’s” legend dies, and with it all the confusion and misconstruction about how markets and the economy actually work," Snider wrote.