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He may have served in the Senate for less than a year, but Sen. Ted Cruz. R-Texas, has already made enough waves to secure a guest appearance on the Tonight Show with Jay Leno. During the interview, Cruz took aim at the nation’s low rates of economic growth in recent years.
"You know," Cruz said, "in the last four years, our economy has grown on average 0.9 percent a year. It’s not working."
We knew that in recent years, economic growth has been weaker than usual. But has it really been as low as Cruz said?
Economic growth is measured by the change in gross domestic product (GDP) -- the sum of all economic activity for a nation -- over a given period of time. The two most common time periods for measuring GDP growth are over the course of one year and over the course of one quarter. (Quarterly growth measurements are typically multiplied by four so they can show how fast the economy would have grown if that expansion had continued all year long.)
We turned to the official data for the nation’s gross domestic product, which is compiled by the U.S. Department of Commerce’s Bureau of Economic Analysis.
Whether Cruz is correct depends -- heavily -- on what time frame is used.
One method uses data from the four most recent calendar years for which full-year data is available -- the full-year figures for 2008 through 2012.
The percentage change in inflation-adjusted GDP was -2.8 percentage points in 2009, +2.5 points in 2010, +1.8 points in 2011, and +2.8 points in 2012. If you average these, it works out to a 1.1 percentage-point increase per year. Cruz is fairly close, but he’s still understating growth by more than one-fifth.
Moreover, we have access to more current data. We now have quarterly data taking us through the first three-quarters of 2013. Measuring from the third quarter of 2009 through the third quarter of 2013 actually hews more closely to Cruz’s words -- "in the last four years."
Calculating it this way, inflation-adjusted GDP increased, on average, 2.3 percent per year over the last four years -- almost two and a half times as fast as what Cruz indicated.
When we checked with Cruz’s office, a spokeswoman explained that the figures they used "are calculated using annual data, which is the most accurate way to compare growth year to year. The updated info you refer to is quarterly data, which is a small snapshot in time and doesn't reflect an accurate picture when compared to annual data from a previous year."
Several economists we checked with, however, disagreed, saying the difference between using annual figures and quarterly figures would be minimal, limited only to possible changes in the final quarter as soon as the current number, which is preliminary, is adjusted to account for late data. The economists we asked said that any change from using an adjusted figure for one quarter would be small, drowned out by data from the other 15 quarters used in the calculation.
A much bigger factor is the time frame used. To use annual figures means that the calculation includes the disastrous first half of 2009, when the recession was still under way. By contrast, using the quarterly data replaces those three weak quarters of 2009 with three quarters of modest but positive economic growth from 2013.
Given the stark differences between the two methods, there’s a temptation to choose the method that bolsters your own preferences. However, the experts said that, given these two choices, the most appropriate way to calculate data for "the last four years" would be to use data that’s current, not nine months old. And this data shows growth of 2.3 percent.
Cruz said that "in the last four years, our economy has grown on average 0.9 percent a year." Cruz has a point that economic growth has been below historical standards in recent years, but his estimates are low compared to both the calculations we did -- slightly low in one case, significantly lower in the other. We rate his claim Mostly False.
Ted Cruz, interview on NBC’s The Tonight Show with Jay Leno, Nov. 8, 2013
Bureau of Economic Analysis, "Table 1.1.1. Percent Change From Preceding Period in Real Gross Domestic Product," accessed Nov. 11, 2013
Federal Reserve Bank of St. Louis, "Accounting for U.S. Growth: Is There a New Normal?" October 2012
New York Times, "United States’ 2nd-Quarter Growth Is Revised Up to 2.5%, From 1.7%," Aug. 29, 2013
Email interview with Gary Burtless, senior fellow at the Brookings Institution, Nov. 11, 2013
Email interview with Tara Sinclair, George Washington University economist, Nov. 11, 2013
Email interview with Bruce Sacerdote, economist at Dartmouth College, Nov. 11, 2013
Email interview with Catherine Frazier, spokeswoman for Ted Cruz, Nov. 12, 2013
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