Analysis shows 2011 economic slump

Growth in the U.S. gross domestic product has slowed from 2010 to 2011, according to an industry analysis conducted by the U.S. Department of Commerce.

After increasing 2.4 percent in 2010, the GDP growth increased by 1.8 percent in 2011.

The analysis outlined that the manufacturing results of retail and durable goods were among the major causes of the slowed economic growth.

Furthermore, the decreased success of 12 of 22 industry groups contributed to the slowdown of GDP within the span of one year, according to the analysis. 

While the analysis addressed the larger economic problems of the U.S., University of Wisconsin economics professor Menzie Chinn said Wisconsin’s economic challenges are likely to be influenced by state policies.

Chinn specifically addressed the economic policies of Gov. Scott Walker in an email to The Badger Herald.

“Employment in Wisconsin has lagged behind the rest of the U.S. and the other Midwestern states since Walker has been governor,” Chinn said. “This is not surprising, given his determination to reduce spending and using an aggressive and uncertainty-raising approach to implementing his policies.”

Executive Director of Wisconsin Common Cause Jay Heck said these policies reflect a larger economic problem of a lack of disposable income.

“When Walker campaigned, he gave this notion that he would create 250,000 jobs, and he hasn’t come anywhere close to that target,” Heck said. “In 2001, he really focused on destroying his political opposition and this is what caused Wisconsin to fall behind other states.”

Chinn warned if federal tax increases are allowed to expire, the U.S. economy would go through more hardship in the years to come.

Chinn said if only a third of total tax increases and spending cuts associated with the fiscal cliff are implemented, the U.S. might manage to sustain growth of about 2 percent in 2013.

“If all tax increases are allowed to expire and sequester-related spending cuts go through, we will definitely go in recession,” Chinn said.

Heck said the only tax that is really an issue is that making a return of $50,000. When Democrats challenge this, Republicans would say small businesses would take the fall for it, Heck said.

According to Heck, it appears asking the wealthiest to pay more will not cause less growth, but the contribution of the wealthy toward the deficit may help stimulate growth.

Heck further said the lack of job growth is further influenced by the differences in tax rates between the wealthy and the middle class. 

“Giving tax cuts to the very wealthy doesn’t stimulate more demand,” Heck said. “Whenever they give the rich more money, what they really do is just keep it and not create jobs.”

According to Chinn, the job growth problems of the U.S. are rooted in a lack of investment. Companies in the U.S. have few difficulties in finding skilled workers, but without demand for U.S. products and services, the economy has little to stand on.

Chinn said the fact that growth in most sectors was unchanged is consistent with the view that the key problem facing the U.S. economy is “deficient aggregate demand for U.S.-produced goods and services.”

Heck said although the public may be impatient about economic growth, the recovery is going to be much longer than many expect.

“It’s ridiculous to presume that the economy will turn around in two years,” Heck said. “A majority of the American people have faith that the economy is getting better, but it is certainly going to take a long time.”