The Reckoner

How fast is the U.S. economy growing?

The answer to that key question has long been a subject of controversy because most Government and private statistics do not take into account such factors as price rises, and because they are based on arbitrarily selected short periods of years. Last week the privately financed Committee for Economic Development announced a new set of charts called the Growth Reckoner, boldly designed to avoid the error possibilities inherent in most official U.S. statistics.

To avoid the illusion that the economy is growing faster than it really is when prices are rising, the C.E.D. plotted the gross national product back to 1909 in terms of a "constant dollar" based on the value of the dollar in 1954, when it was considered comparatively stable. Only in this way, said C.E.D., is it possible to "answer such questions as whether our general growth rate has recently been higher, or lower, or about the same as in the past." The C.E.D.'s basic findings:

Gross National Product. Since 1947, the nation's real gross national product has expanded at an average annual rate of 3.6%, a rate of growth that if sustained would double U.S. production in 22 years. This increase compares with an average rise of 2.9% for the 1909-57 period. Using 1954 dollars, the C.E.D. got a result substantially different from the Council of Economic Advisers' recent report that the G.N.P. rate in the third quarter of 1959 was $481 billion. In the C.E.D.'s 1954 dollars it was only $431 billion.

Industrial Production. Since 1947, the volume of production from U.S. factories and mines has been through three separate phases. Up until 1953, the period influenced by the Korean war, it expanded at a rate of 5% a year. From then until mid-1957 it grew less rapidly--at a rate of less than 2% a year. But from mid-1957 until mid-1959 it expanded at a rate of 3.5% a year. This last rate corresponds precisely to an average increase from 1909 to 1957 of 3.5% a year.

Labor Force. In employment, the C.E.D. found that for 30 years there has been a remarkably uniform 1.3% increase in the labor force year after year, with the only big bulge above the trend line in World War II due to the influx of the old, the young, and married women.

Productivity. The Government has long shied from making any calculations as to the productivity of labor lest it get tangled in the argument between labor and management as to whether the gain was due to harder work or more capital and machines. C.E.D., venturing in, divided the real G.N.P. by the total production force, computed a 1929-57 productivity trend line showing an average 1.6% rise. The difference between a 1.3% labor-force rise and a 1.6% productivity rise, said C.E.D., produced "well over half of the growth in production in recent decades." In 1959 output per man is 60% greater than in 1929 despite shorter hours.

Disposable Income. After allowing for prices and higher taxes, has real income kept pace with productivity? Yes, said C.E.D. Using its 1954 constant-dollar test, and allowing for steeper taxes, C.E.D. found that from 1929 to 1957 per capita disposable income also rose 1.6% a year. Since 1947, the rise has been almost 2% and gave the average U.S. citizen in mid-1959 a real income 26% higher than in 1947 and 60% higher than in 1929.

Prices. Charting the course of inflation, the C.E.D. took goods and services price indexes and converted them into 1954 prices all the way back to 1909. When plotted out, the trend line showed prices overall have gone up by 2.5% a year. Despite all the worry over price increases in the 1950s, the increase in this decade just about matched the rise from 1910 up to the outbreak of World War I.

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