Another Look at U.S. GDP Growth (pdf p. 6)
Jeremy Grantham, GMO Quarterly Letter, February 2014
U.S. GDP growth had a wonderfully long run on a remarkably steady 3.3% trend line, from about 1880 to 1980 (see Exhibit 2). Although admittedly nowhere near recent Chinese growth, the duration and consistency was remarkable. Annual growth of 3.3% for a hundred years will multiply your income by 26 times! But 1880 to 1980 appears, with hindsight, to have been the Golden Century. In the 20 years from 1980 to 2000 that followed the Golden Century, the growth of GDP slowed materially (and was skewed to the top 10% and 1% in a way that had not been seen for 70 years), but still the country was compounding at a solid enough 2.8% a year, a rate that in a century would still compound to 16 times. For the last 13 years, in contrast, the growth has really slowed – to only 1.4% a year, and this despite a considerable bounce-back in capacity utilization since the bottom of the financial crash in 2009. To put it into perspective, 1.4% a year turns a dollar of income in 100 years not into $26 or $16, but into $4!
And the referenced chart:
Note that even this "slow" 1.5% growth was done during a period of increased government (at the front and back end), business, and private debt. It is not clear how long the inflation-free version of that type of spending will be available to us.