After hearing all the good news about an improving economy from the President on Tuesday in his State of the Union address, it was somewhat disconcerting to find out on Friday when the GDP numbers were released that it just isn’t so. While the GDP numbers improved throughout last year and ended with the fourth quarter growing at 2.8% annual rate, the year as a whole could manage just 1.7% growth, well below the prior year’s 3.0%.

What may be even worse is the composition of growth, with over half coming from rapid inventory rebuilding. While there is certainly nothing wrong with inventories, they often presage a future slowdown, especially when they are accompanied by weak consumption and investment as they were in this report. Many forecasters are calling for GDP growth to slow to about 2% in the current quarter, well below our potential and not enough to generate significant job growth. There is nothing in this report to suggest that those forecasts will be wrong.

To build on the economic momentum we experienced in the 4^th quarter, we cannot afford to levy additional taxes on successful individuals, oil companies and U.S. companies that compete abroad and add layers of unnecessary government bureaucracy, as the president proposed in his speech.  Instead, we need to reduce burdensome regulation, implement a quicker permitting process, build the Keystone pipeline, get our fiscal house in order, and comprehensively reform our tax code.