The economy fell more in the 1st quarter than at any time since 1960 (other than in times of recession). Was it just a bad winter? Obviously not. You can't fall from plus 4% growth to minus 3% growth in six months just because of bad weather. The fall was due to many factors other than the winter. It was due to how we measure inventories, exports, and influenced by disinflation here and deflation abroad which reduces nominal GDP.

What wasn't reported widely is the effects of Obamacare and Dodd-Frank legislation, and increased regulation in general on the economy. We have just undergone the imposition of the greatest amount of government controls and regulations on this economy in memorable history. It wasn't the severe winter that caused the economy to freeze; the economy froze due to the thousands of new laws, rules, and regulations that were put into effect. When people can't understand what the law is or how it works, they tend to become extremely cautious. And that I believe explains the real reason we had such a huge fall-off in GDP: uncertainty among businesses and consumers led to a virtual freeze in economic activity in the first quarter.

Fortunately this country adapts quickly. And that's why I suspect we will see a "thaw" and better growth as the year progresses. You see, many of the new laws have since been postponed or are being largely ignored by businesses and consumers.

Government enforcement of the new laws has been spotty at best because of ambiguity. It's one thing to write a law -- it's another thing to enforce it. Obamacare is a perfect example: the government decrees that everyone should have affordable health careā€¦but then they have to implement it. The Administration soon found themselves waiving, amending, or postponing their decree. The system almost totally broke down.

With most of the chaos and confusion behind us, I expect the US will move ahead at more normal growth rates from now until after the election, then re-assess the future at that point. We will either have another two years of gridlock, or the literally dozens of bills that have emanated from the House and are lying dormant in the Senate will be voted on and sent to President Obama to sign or veto. The result of the election will have some effect on the economy for better or for worse. That's yet to be determined.

But I want to come back to a point I made earlier. This country adapts quicker than any other country in the world to a change in laws and a change in conditions. It's the most resilient economy in the world because of our adaptive capacity. That's because we are still free to act to a large extent. We can move from one state to another if we don't like the laws, or if the economy in one state turns sluggish while another ramps up. It's called freedom, and we still have some.

We can choose not to comply with laws and regulations, and many Americans do just that and ignore them, unafraid of prosecution since the government has voluntarily overwhelmed itself, and it's impossible to enforce all of them. Others go to court and fight the laws, thereby suspending their enforcement until the courts decide the case, which could take years due to backlogs. And many others hire lawyers to advise them on how to legally sidestep and evade laws, new taxes and fees, let alone new controls, and regulations.

Three trillion dollars suddenly found its way overseas as the conditions and laws changed here in America abruptly. That money will not return until confidence and fairness is restored. We and our money are no longer confined to a government controlled economy; we're in a wide-open global economy. Individuals can vote with their feet and choose to leave states or countries if governments get too intrusive. (See France). Or with the touch of a computer key transfer their money to a more friendly tax region.

This country is made up of a lot of very smart, resourceful, and independent minded individuals. I don't think we properly give credit to the ability of Americans to find ways around the thousands of laws, controls, and regulations that governments pass in their attempt to control our behavior. For every intrusive action by government there are a hundred individual responses, mostly figuring out ways to evade government control. This explains how an economy can keep on moving ahead in spite of policies that are anti-economic growth.

So, even though this nation has been brought to a near stand-still by bad government policy, and is going through the worst economic recovery ever recorded, we have probably seen the worst of government legislation and it is very likely behind us. As we deal with the reality of the new laws, rules, edicts, and controls, we as Americans will adjust and find a way to move ahead in spite of them. And as the amount of new legislation dwindles to a trickle, as it has recently, the economy very likely will begin to grow again in spite of government intervention.

Certainly we won't grow as we did prior to the Obama era. Enough damage has been done to the economy to be beyond repair any time soon. But we still can grow in the 2.5 to 3.5% area as the adjustment process proceeds and pent-up demand leads to final demand and growth. Americans are not the kind of people that just lie down and die. They fight for a better life each and every day.

A good concrete example of this is our energy boom. Government, mostly in the form of the EPA, has done everything within their power to stop oil and gas production. The government increased the amount of government-leased land that private interests could not touch. They stopped all new exploration and development on federal lands. They stopped all oil drilling in the Gulf. And they stopped all new pipe lines and any new refineries from being built.

And what happened? Private enterprise devised a better way to extract oil and gas without the use of federal lands. And they switched to transporting their new production by rail. They bypassed the government edicts. They concentrated on what government didn't control. And what happened is the biggest oil and gas boom in a hundred years. That's what America is all about.

Look at the Silicon Valley as another example. The innovation and production coming out of that one area continues unabated. It is a fountainhead of creativity. Apple, just one company in this country, is financially richer than many governments in the world and is debt free! And the hi-tech industry as a whole supplies the world with new products and raises everyone's standard of living.

Just look at our agriculture industry which supplies the entire world with an abundance of food. And the auto industry is making better cars that last longer due to the great achievements in US technology. Private enterprise has even bypassed government in space and is shooting for the stars without them. And the bio-tech industry, hitting on all cylinders producing life savings drugs and medical devices makes Obamacare look like a system from the dark ages.

So let's not give too much credit to the damage government can do to this nation. It's down...but not out. It's easy to see the bad things we're going through, but not always so easy to see the good. Better days are still ahead for America. It won't be the 25 years of growth that followed Reaganomics, but Obamanomics won't kill the economy either.

It's still the greatest nation on earth.

Paul Nathan