Third Quarter GDP Growth Clocks In At 2.0%

Another mostly disappointing report on the state of the economy.

After second quarter GDP growth finally settled in at an incredibly anemic 1.3% growth, there wasn’t a whole lot of hope among analysts that the numbers for the third quarter would be any better. After all, the months of June through September had seen generally slow job growth, reports indicating that the manufacturing sector was slowing down from its previous levels of growth. At most, analysts were expecting that this first report on the third quarter would come in around 1.8%, and as it turned out it ended up just a little bit ahead of that:

The United States economy grew at an annual rate of 2 percent in the third quarter, slightly better than expected, with help from a healthier housing sector and a pickup in defense spending. But economists warn that growth could slow in the final quarter of the year if weakness in exports persists and businesses remain cautious because of fiscal uncertainty in Washington.

The new figure, released by the Commerce Department on Friday, is the government’s first estimate of growth in the third quarter. It compares with the 1.3 percent pace of growth in the second quarter. In the first quarter of 2012, the economy also grew by 2 percent.

The slow pace of growth since the end of the recession has been a dominant theme in the presidential race, with Republicans pointing to recent data as evidence that the economy is moving too slowly to make a meaningful dent in unemployment.

But there were several elements of good news for the White House in Friday’s report. Consumer spending rose at a seasonally adjusted annual rate of 2 percent, compared with 1.5 percent in the second quarter. Residential investment increased at an annual rate of 14.4 percent in the third quarter, versus 8.5 percent in the second quarter, a positive sign for the housing sector.

“All in, today’s report showed somewhat faster domestic demand driven by the household sector,” said Maury Harris, chief economist at UBS Securities.

The report comes amid fears that companies are clamping down on spending in the face of potential tax increases and spending cuts in the United States, a recession in parts of Europe and a deceleration in demand from China. Some economists fear that all these factors will keep a lid on any pickup in growth in the final quarter of 2012 and the first quarter of 2013.

Friday’s report, for example, showed that exports decreased by 1.6 percent in the latest quarter, compared with a 5.3percent increase in the second quarter. It was the first time exports had fallen since the first quarter of 2009, when the global economy was reeling from the collapse of Lehman Brothers and the ensuing financial crisis in the United States.

(…)

Among the biggest factors in the uptick of growth in the gross domestic product was a 13 percent jump in defense spending. On the other hand, a drop in farm inventories —fallout from the severe drought this summer — shaved 0.4 percent off overall growth.

Without the increase from defense spending, the economy would have grown at an annual rate of 1.4 percent, said Steve Blitz, chief economist at ITG Investment Research.

“The economy really just continues to churn at a very slow rate,” he said. Two big engines that initially powered the economy in the wake of the recession — exports and business investment — have both been fading recently, he said, and that does not bode well for growth.

Indeed, government spending played a large role in the third quarter numbers:

Real federal government consumption expenditures and gross investment increased 9.6 percent in the third quarter, in contrast to a decrease of 0.2 percent in the second. National defense increase 13.0 percent, in contrast to a decrease of 0.2 percent. Nondefense increased 3.0 percent, in contrast to a decrease of 0.4 percent. Real state and local government consumption expenditures and gross investment decreased 0.1 percent, compared with a decrease of 1.0 percent.

That huge increase in defense spending was enough to account for 6/10th of a point of growth, but it’s not something that will lead to sustained economic growth, largely because it isn’t sustainable. Indeed, as Brad Plumer explains, the increase is largely a function of the Federal Budget process:

[T]he huge uptick last quarter was unusual. So what happened? Here’s one explanation: “In the Pentagon, you have to use it or lose it by the end of the fiscal year in September,” says Lawrence Korb, a former assistant secretary of defense now at the Center for American Progress. “You see this a lot. ‘We’ve got to fly a lot this month for training, otherwise Congress will take back the money they gave us.’ ”

Michael O’Hanlon, a defense analyst at the Brookings Institution, concurs that defense expenditures often rise just before the end of the fiscal year in September. Every year, Congress provides the Pentagon with a certain amount of budget authority. If the militarydoesn’t spend the full amount, there’s the risk that lawmakers could come back the following year and reduce the defense budget. “The Pentagon wants to show that the money’s well spent,” says O’Hanlon. “But they can also fall out of favor with Congress if they spend too little.”

But then why was the surge in military so unusually large this past quarter, compared with previous Septembers? Two reasons. First, the Pentagon is facing the prospect of sharp budget cuts at the end of the year as part of the looming sequester. There’s been some talk that the military could even lose money that’s already been budgeted but hasn’t been spent yet — so the Pentagon has additional incentive to spend funds now that have been budgeted over multiple years.

The other factor, Korb and O’Hanlon note, is that Congress was late in setting the defense budget for fiscal year 2012: The budget was finally patched together through continuing resolutions in the winter. So, for a significant period, the Pentagon was unsure exactly how much it could actually spend. That could help explain why defense expenditures and investments were relatively anemic earlier this year and then skyrocketed right before the fiscal year ended in September.

“It looks like what we’re seeing is a confluence of budget and political factors,” says O’Hanlon.

In other words, the increase in the defense spending was a fluke that isn’t going to be repeated. If you look deeper into the numbers, there’s not really anything there to feel good about. Yes, consumer spending did go up, and that’s generally a good thing, but it’s still very anemic and 1.4% growth (not including defense spending) is pretty much just as anemic as what we’ve seen throughout the year. Yes, it’s better than a situation where the economy is contracting, but we’re talking about a growth rate that is so pathetically slow that it would take years for us to get back to where we were before this recession started, and it’s certainly not going to be sufficient to generate significant job growth.

Politically, I’m not sure that these numbers are going to have much of an impact. The Obama camp will cite the fact that the economy has been growing, albeit anemically, for thirteen consecutive quarters, but the fact that it is in fact so anemic means that they aren’t going to be able to put very much lipstick on this pig. The Romney campaign will point out how slow the growth actually is, of course, but it strikes me that GDP growth isn’t exactly a statistic that voters pay much attention to. If any economic statistic is going to motivate voters, it’s going to be the unemployment number that gets released one week from today, a mere four days before the Presidential election. Given how close the race remains, that number could end up pushing undecided voters into one camp or the other and, potentially, deciding the election.

Update: Dylan Matthews reminds us not to put too much heed in this report. This is the BEA’s first estimate, additional revisions will be released in November and December. In all likelihood, we’ll see the growth number revised downward.

FILED UNDER: Campaign 2012, Economics and Business, US Politics
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook

Comments

  1. mantis says:

    If any economic statistic is going to motivate voters, it’s going to be the unemployment number that gets released one week from today, a mere four days before the Presidential election. Given how close the race remains, that number could end up pushing undecided voters into one camp or the other and, potentially, deciding the election.

    I don’t think voters really base their vote on whether a monthly unemployment report ticks up or down a tenth of a percent or two.




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  2. Dave Schuler says:

    According to the Bureau of Labor Statistics, the annualized rate of inflation is about 2%. Or, in other words, the economy isn’t growing at all. We’re just rearranging the deck chairs.




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  3. mantis says:

    @Dave Schuler:

    We’re just re-shuffling the deck chairs.

    On a ship that is not sinking.




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  4. J-Dub says:

    Actual quote from Rmoney today: “This is not the time to double down on the trickle-down government policies that have failed us,”




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  5. john personna says:

    Romney has no plan for a global slowdown.




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  6. C. Clavin says:

    “…The Romney campaign will point out how slow the growth actually is…”

    …which of course is belied by the growth in Mass during his tenure…which was even slower. I would not expect you to mention that as a Romney supporter.

    A couple points:
    First; beyond an increase in military spending there was a slowdown of State and Local government austerity.
    Second; a healthier housing sector is key to getting out of this slow recovery.

    Government spending and housing always lead the way out of recessions. A reversal of the trend of shrinking Government, combined with an uptick in housing is fantastic news. After spending most of the summer spreading gloom and doom about a double dip recession, and being proven wrong, you might show a little humility.




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  7. mantis says:

    @C. Clavin:

    …which of course is belied by the growth in Mass during his tenure…which was even slower. I would not expect you to mention that as a Romney supporter.

    Doug isn’t actually a Romney supporter. Just sayin…




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  8. @C. Clavin:

    1. I am well aware of the other government spending, but if you take out the 13% increase in military spending, GDP growth would have been 1.4%.

    2. I am not a Romney supporter, no matter how much you want to pretend otherwise.




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  9. @mantis:

    It also isn’t moving anywhere. We’re stagnating.




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  10. mantis says:

    @Doug Mataconis:

    It also isn’t moving anywhere. We’re stagnating.

    No argument here. The “shuffling the deck chairs” phrase usually implies a sinking ship. This ship is still floating, despite the wishes of many on the right.




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  11. Dave Schuler says:

    It means that those who’ve lost their jobs and haven’t been able to find them or those who are just now entering the labor force will have problems finding jobs. To the extent that more of GDP is comprised of healthcare and defense spending, both areas in which the dollars per job are higher than the median, it actually means fewer jobs are being created per dollar GDP.




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  12. The question ought to be, I think, not whether 2% is good enough or not (as we would all like higher levels of growth).

    The questions should be: could we/should we have expected better, and why/how?




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  13. @Steven L. Taylor:

    The recovery after the 1981 recession, which in many ways was just as bad as what happened from 2007-2009 considering the fact that it occurred less than two years after a previous recession and was accompanied by sky high interest rates and inflation, suggests that we should expect better .




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  14. mantis says:

    @Steven L. Taylor:

    The question should be: could we/should we have expected better, and why/how?

    We could have expected better, if we had a real economic policy. However, we have a House of Representatives run by teabaggers, so there’s no chance of that happening. We’d be in much better shape right now if we were able to provide additional stimulus and jobs programs. The government can and does create jobs, especially in certain circumstances.




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  15. john personna says:

    @Doug Mataconis:

    A shallow assessment for a shallow argument?

    I’d really like to be generous here, but I’m burned out by “it’s still bad” posts which absolutely ignore the nature of the 2006-2007 contraction, the global impact, and the difficulty of recovery when all major trading partners are suffering.

    It is an incredibly shallow argument that Obama, by executive order, should have “done something” about the global economy.

    It is incredibly shallow to ignore all those plans he submitted that Republicans rejected in congress.

    It is incredibly shallow to note that Republicans passed no better plans, and did not force Obama to sign or veto.

    It is incredibly shallow to suggest that Romney, doing it all once more with feeling, would change the global equation.




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  16. C. Clavin says:

    “…I am not a Romney supporter, no matter how much you want to pretend otherwise…”

    Actions speak louder than words.




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  17. @Doug Mataconis:

    The recovery after the 1981 recession, which in many ways was just as bad as what happened from 2007-2009 considering the fact that it occurred less than two years after a previous recession and was accompanied by sky high interest rates and inflation, suggests that we should expect better .

    Really, that begs the question because it does not answer why or how.

    And, further, you can’t just pick another semi-comparable historical occurrence and then assume that which happened then should happen now. The recession in 1981 was a different than the current one, and the general structural conditions are different.




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  18. @john personna:

    Funny, I haven’t made any of those suggestions.




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  19. Ben Wolf says:

    @mantis: The President’s position on the budget embraces strong deficit reduction measures, so blame can’t be heaped solely on “teabaggers”. If the Republicans had agreed to every measure the President asked for in 2010, we’d be well into the Obama recession which would have resulted.




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  20. mantis says:

    @Doug Mataconis:

    The recovery after the 1981 recession, which in many ways was just as bad as what happened from 2007-2009 considering the fact that it occurred less than two years after a previous recession and was accompanied by sky high interest rates and inflation, suggests that we should expect better .

    Please. 1981 recession was not just as bad in any way except maybe it’s initial speed. That recession was caused by Volcker jacking up interest rates to curb inflation, and was quickly turned around through deficit spending, lowering the rates, and raising taxes (including tax hikes specifically for the rich).

    The current recession is infinitely more complex, coming as it did following the bursting of the housing bubble, a total financial catastrophe brought on by the banks, and the reality of some fundamental shifts in our economy solidifying in the wake.




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  21. john personna says:

    @Doug Mataconis:

    I think you do all those things here:

    The Obama camp will cite the fact that the economy has been growing, albeit anemically, for thirteen consecutive quarters, but the fact that it is in fact so anemic means that they aren’t going to be able to put very much lipstick on this pig.

    The only way to make this a shallow critique of “The Obama camp” is to ignore every one of the realities I named.




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  22. anjin-san says:

    The recovery after the 1981 recession, which in many ways was just as bad as what happened from 2007-2009

    You are showing your age, or lack of it. Those of us who were there know better.




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  23. mantis says:

    @Ben Wolf:

    If the Republicans had agreed to every measure the President asked for in 2010

    The President never would have gone down that road if it weren’t for the composition of the House and total intransigence of Republicans. He was trying to get something–anything–going, and as a result went too far IMO. I’m glad he did not succeed in getting Republicans to agree to his very Republican compromises.




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  24. Mikey says:

    @mantis:

    I don’t think voters really base their vote on whether a monthly unemployment report ticks up or down a tenth of a percent or two.

    Probably not, but perhaps if it ticks down again there could be a perception of things moving in the right direction that would benefit Obama.

    A thin straw, for sure, but in an election this close you never know.




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  25. @Steven L. Taylor:

    Of course it was different, but to simply say “Oh there’s nothing we can do about it so we might as well just accept it” doesn’t make much sense to me.




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  26. Ben Wolf says:

    @mantis: I don’t agree. The President was publicly discussing the need for entitlement reform and deficit reduction only days after his election, as was his economic team. I think the evidence is the President has been captured by neo-liberal ideas of fiscal discipline and will likely pursue that goal in his next term.




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  27. Rafer Janders says:

    @Doug Mataconis:

    The recovery after the 1981 recession, which in many ways was just as bad as what happened from 2007-2009 considering the fact that it occurred less than two years after a previous recession and was accompanied by sky high interest rates and inflation, suggests that we should expect better .

    No. No. No. That’s just shallow, stupid and uninformed. The 2007-2009 crash was magnitudes worse than 1981, and recessions driven by a financial sector collapse are always far, far worse and take much longer to recover from than “normal” business cycle recessions.




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  28. mantis says:

    @Ben Wolf:

    The President was publicly discussing the need for entitlement reform and deficit reduction only days after his election, as was his economic team.

    This is different from specific proposals in 2010, which is what you referenced. Stop moving the goalposts around, Ben.

    And I agree there is a need for entitlement reform and deficit reduction. But those are long term problems and short term solutions to the stagnant economy are more urgent.




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  29. Rafer Janders says:

    @Doug Mataconis:

    Of course it was different, but to simply say “Oh there’s nothing we can do about it so we might as well just accept it” doesn’t make much sense to me.

    Of course there’s something we can do about it — massive government stimulus. Unfortunately, the right wing will do its best to block that, since they’d rather defeat Obama than have a healthy American economy.




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  30. mantis says:

    @Doug Mataconis:

    “Oh there’s nothing we can do about it so we might as well just accept it” doesn’t make much sense to me.

    Well, nobody said that, so what’s your point?




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  31. @Doug Mataconis:

    Of course it was different, but to simply say “Oh there’s nothing we can do about it so we might as well just accept it” doesn’t make much sense to me.

    Indeed, so it is a good that I didn’t say that.

    I asked whether we should expect better and why we think think and how we might achieve it. This is rather different than saying “Oh there’s nothing we can do about it so we might as well just accept it”

    To cast these as disappointing numbers is to suggest that they could (and should) be better. How is the next logical question not: how?




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  32. @Steven L. Taylor:

    Yes we can do better, and we can start by getting the Federal Budget under control (which means cutting spending and comprehensive tax reform), reducing the uncertainty in the business community created by a wide variety of government policies, ending subsidies that divert revenue to politically favored industries, considering the wisdom of making our Corporate Tax Rate more competitive with the rest of the world, and, (at the state and local level) rethinking the many regulations that act as barriers to entry for new businesses.

    And that’s just for a start




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  33. @Steven L. Taylor:

    Also, I’d suggest they are disappointing because, if this is the future, then we are heading into a world of high unemployment and very slow economic growth. That sounds pretty disappointing to me.




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  34. @Doug Mataconis:

    Also, I’d suggest they are disappointing because, if this is the future, then we are heading into a world of high unemployment and very slow economic growth. That sounds pretty disappointing to me.

    Indeed. Of course, it could also be worse.

    Still: given the depth of the collapse, I am not surprised that it is taking a long time to emerge from it.




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  35. john personna says:

    @Ben Wolf:

    Technically, the spending cuts and tax increases they were talking about would only be starting to hit about now. They were all back-end loaded.




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  36. @Doug Mataconis: While i agree that there are long-term issue with the debt and yearly deficits that have to be addressed, it was clearly impossible to cut the deficit, let alone pay down the debt, in the wake of the Great Recession. As such, these are not policy proposals that could have been undertaken in the last several years.




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  37. Steven,

    Well, we also know that spending $800 billion on Democratic Party pet projects didn’t accomplish anything either




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  38. john personna says:

    @Doug Mataconis:

    You understand that every one of those changes would be recessionary in the short term, right?

    I mean you talk “fiscal cliff” up top as a recession trigger and then you say “cutting spending and comprehensive tax reform” – that would be a milder form of the same thing.




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  39. C. Clavin says:

    “…Well, we also know that spending $800 billion on Democratic Party pet projects didn’t accomplish anything either…”

    Please provide a link showing when/where we spent $800B on Democratic Party pet projects?




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  40. john personna says:

    @Doug Mataconis:

    I think the plan was not purely Democratic, but I also think “accomplished nothing” is a complete economic fail.

    One simply cannot spend money in an economy without it then circulating and becoming many people’s income.

    One simply cannot.




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  41. @Doug Mataconis:

    Well, we also know that spending $800 billion on Democratic Party pet projects didn’t accomplish anything either

    Well, two thoughts:

    1. While I would have preferred a different priority list, I don;t think you can assert that it did nothing, This is actually part of the point: what woudl GDP growth be if there had been no stimulus and we had engaged in true austerity (which would have been the only way to achieve your goal of deficit reduction).

    2. There would have been a stimulus under President McCain and a GOP Congress in 2009. As such, as far as conterfactuals go, this isn’t all that helpful.




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  42. stonetools says:

    @Doug Mataconis: @Doug Mataconis:

    The recovery after the 1981 recession, which in many ways was just as bad as what happened from 2007-2009 considering the fact that it occurred less than two years after a previous recession and was accompanied by sky high interest rates and inflation, suggests that we should expect better .

    Er, no. It was a completely different kind of recession, caused mostly by the Federal Reserve Bank’s hiking the interest rates in an attempt to stop runaway inflation. This recession , which was occasioned by a financial overreach then collapse, looks a lot more like the Great Depression, which lasted over a decade. The government then tried to conquer the Great Depression by the same kind of austerity measures that the Republicans are clamoring for-which made it worse. The Great Depression finally began to abate when FDR implemented monetary and fiscal expansion measures, including programs like the CCC and WPA. The Depression was finally ended when the government engaged in that truly massive spending and jobs program that we now know as WW2.
    The lesson of the Great Depression is clear: when you have a recession accompanied by a financial collapse, recovery will be slow and uncertain. Also too,government has to lead the way out of the recovery through fiscal and monetary stimulus.
    Conservatives, of course, have tried to obscure the lesson, practically since the end of the GD. It seems we have to relearn the lesson every 60 years.




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  43. john personna says:

    I suggest anyone interested ignore the political spin sites and just subscribe to:

    Tim Duy’s Fed Watch

    Loads of graphs and a stead stream of informed commentary.




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  44. @Steven L. Taylor:

    Our own Dave Schuler has pointed out for three years now that the Stimulus was completely misdirected in terms of the types of projects it was funding. As it turned out, all those infrastructure dollars didn’t result in much new hiring because the companies that do that kind of work just utilized the workers they already had. The other projects were even more inane in terms of actually being aimed at things that would get the economy moving. Then, instead of focusing on fixing the damage from the recession after the Stimulus passed, Obama shifted focus to a health care bill that burned up all his political capital and, in large part, caused his party to lose control of the House and much of its majority in the Senate.




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  45. Davebo says:

    “What if Doug went on strike? What if all the creative minds of the world went on strike?”

    Doug would starve and a few fifteen year old kids would wonder “what the hell was I thinking”.




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  46. john personna says:

    @Doug Mataconis:

    There is no hope for you.




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  47. @john personna:

    Because I dared to criticize The Great Barack Obama, obviously.




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  48. john personna says:

    @this:

    Let me amplify that a bit with a story. I was a software engineer, hanging out at a company party, when one of our sales staff told us this one:

    Q: “What’s the difference between a software salesman and a used car salesman?”
    A: “The used car salesman knows when he’s lying.”

    We groaned, but true.

    Doug, do you know when you are lying about economics?




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  49. LaMont says:

    @Doug Mataconis:

    Dave Schuler has pointed out for three years now that the Stimulus was completely misdirected in terms of the types of projects it was funding.

    Even so, can you really say the stimulus absolutely did not work in stopping the economic melt-down? If so, how did we end up with a now gowing (though slowly) economy from where we were? And what actions do you think would have put us in better shape? This is what I feel that Steve is asking?




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  50. C. Clavin says:

    “…Because I dared to criticize The Great Barack Obama, obviously…”
    You are so cute when you pout.




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  51. Coop says:

    @Doug Mataconis:

    What is with this weird obsession that the current economic malaise is somehow related to government spending and our federal debt? The fiscal policies that boost economic growth (i.e. tax cuts and increased spending) are the very same ones that add to the debt, not reduce the debt,

    Unemployment is the urgent problem, not the debt. They’re separate. I’m not saying that we can ignore our debt forever, but this notion that debt reduction, via either cutting spending and/or raising taxes (as Mittens likes to say “closing loopholes”) will actually help the economy is absurd. The UK tried it by implementing a combination of tax increases and spending cuts, and their economy is getting hammered b/c of it.




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  52. mantis says:

    @Doug Mataconis:

    Well, we also know that spending $800 billion on Democratic Party pet projects didn’t accomplish anything either

    Well, the stimulus accomplished a great deal, but what you wrote doesn’t describe that, so who the hell knows what you are talking about.




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  53. @Doug Mataconis:

    the Stimulus was completely misdirected in terms of the types of projects it was funding.

    I am more than willing to say that the stimulus could have been better directed. But you seem to now be making an argument for a different, better stimulus, not for “getting the Federal Budget under control (which means cutting spending and comprehensive tax reform), reducing the uncertainty in the business community created by a wide variety of government policies, ending subsidies that divert revenue to politically favored industries, considering the wisdom of making our Corporate Tax Rate more competitive with the rest of the world, and, (at the state and local level) rethinking the many regulations that act as barriers to entry for new businesses.”




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  54. @LaMont:

    Even so, can you really say the stimulus absolutely did not work in stopping the economic melt-down? If so, how did we end up with a now gowing (though slowly) economy from where we were? And what actions do you think would have put us in better shape? This is what I feel that Steve is asking?

    Pretty much, yes.

    It seems that slow growth beats no growth, so there is that.

    From there it is legitimate to ask what could have been done to create more robust growth, which is the heart of my question. I can see how a better designed stimulus might have helped, but I cannot see how cutting spending and trying to fix the deficit would have done anything other than caused and even deeper recession.




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  55. john personna says:

    For a contrast, from a smart guy with good market knowledge:

    Barry Ritholtz – A Closer Look GDP Data




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  56. anjin-san says:

    Because I dared to criticize The Great Barack Obama, obviously.

    No, it’s acting like a petulant 20 year old on a more or less daily basis that does it…




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  57. Steve Verdon says:

    @mantis:

    Being stuck in the doldrums is not good either though.




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  58. anjin-san says:

    Well, the stimulus accomplished a great deal

    There is a major infrastructure project a few miles from where I live that will reap huge benefits for about a quarter of a million people a day for the next 75 years or so. A few miles out, there are two even more important projects heading towards completion with stimulus funding.

    How much of part did stimulus dollars play in heading off a collapse? I really don’t know, I’m not an economist. I can say for sure that I am pleased to see our taxpayer dollars at work building things here in America, instead of in Iraq, which is where the focus of the previous administration lay.




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  59. Tsar Nicholas says:

    2.0% is better than 1.3%, assuming the former holds up after the upcoming revisions, but that’s sort of like saying that leukemia is better than melanoma.

    That aside, the real concern about the moribund economy is twofold: (1) that the Feds tossed three trillion of our dollars at it over the past few years and have gone pretty much nowhere bodes enormously ill for the future, (2) related to point No. 1, if we’re basically marching in place with rock bottom interest rates and still benign inflation what the hell is going to happen when interest rates rise and when inflation inevitably rears its ugly head? It’s difficult to be optimistic. If the upcoming generation were a stock I’d be short selling it, on margin.




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  60. john personna says:

    @Tsar Nicholas:

    That aside, the real concern about the moribund economy is twofold: (1) that the Feds tossed three trillion of our dollars at it over the past few years and have gone pretty much nowhere bodes enormously ill for the future, (2) related to point No. 1, if we’re basically marching in place with rock bottom interest rates and still benign inflation what the hell is going to happen when interest rates rise and when inflation inevitably rears its ugly head? It’s difficult to be optimistic. If the upcoming generation were a stock I’d be short selling it, on margin.

    Not a bad comment. Inflation doesn’t always come (Japan) but it does sometimes.

    Beyond that though, as some have asked above, what are you going to do, elect people who promise to cut spending AND clamp down at the Fed?

    From your own analysis that would lead to a bit of a nose dive.




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  61. marginoerra says:

    Stimulus $$ were spent on pet Democratic Party projects?? Really?? Shouldn’t we expect a more intelligent analysis than this?? You can claim funds were misdirected and could have had a greater impact, but to say the stimulus didn’t work just flies in the face of reality.

    http://www.economist.com/blogs/democracyinamerica/2012/06/stimulus

    http://www.businessinsider.com/charts-that-should-get-obama-reelected-2012-10?op=1




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  62. Rafer Janders says:

    @Doug Mataconis:

    reducing the uncertainty in the business community created by a wide variety of government policies,

    I’m part of the business community. And every time I hear someone claim that “uncertainty in the face of government policies”, rather than lack of demand, is inhibiting growth, I have confirmation that I’m dealing with a hack.




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  63. Rafer Janders says:

    @Doug Mataconis:

    Well, we also know that spending $800 billion on Democratic Party pet projects didn’t accomplish anything either

    Of course it didn’t, since it never happened outside of the fever swamps of the crazed right wing imagination. Again, mark of the hack.

    Also, too, even if it had, that actually would have boosted the economy, as long as people took that money and then spent it on goods and services. As Keynes noted, in a demand shortfall, even paying people to dig holes and then fill them in again is stimulative, since people will take those wages and spend them.




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  64. Rafer Janders says:

    @Doug Mataconis:

    Because I dared to criticize The Great Barack Obama, obviously.

    No, because you are incapable of analytical thought.




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  65. bk says:

    @Doug Mataconis: the uncertainty in the business community created by a wide variety of government policies

    Oh, horsebleep. That is pure Redstate crap.




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  66. bk says:

    The same “uncertainty” that has resulted in record corporate profits, right?




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  67. bk says:

    Although maybe without the “uncertainty”, corporate profits would be more recordy.




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  68. Rafer Janders says:

    @bk:

    The S&P 500 is up 75% since Obama took office. Clearly, without the uncertainty, it would have been 100%!




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  69. John D'Geek says:

    @mantis:

    On a ship that is not sinking.

    A sailor on a ship who’s deck is two inches above the water line does not say “everything’s fine!”.




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  70. Rafer Janders says:

    @Doug Mataconis:

    As it turned out, all those infrastructure dollars didn’t result in much new hiring because the companies that do that kind of work just utilized the workers they already had.

    Um, even without new hiring, they still paid the workers they already had, right? Workers who without those projects might have been laid off themselves and added to the unemployment stats? And then those existing workers took their pay and spent it at grocery stores, garages, clothing stores, furniture stores, concerts, doctor’s offices, etc., thereby letting that money circulate in the economy, right?

    Boom: stimulus worked as intended.




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  71. Rafer Janders says:

    @Doug Mataconis:

    The other projects were even more inane in terms of actually being aimed at things that would get the economy moving.

    Like wasting it on tax cuts? Agreed, but that was the price of getting Republican support. If only we hadn’t pandered to the conservative morons the stimulative effect would have been much more effective. You make an excellent case for Democratic Party policies.




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  72. bk says:

    @anjin-san: I’m trying to think how anyone could “dislike” your comment about the two infrastructure projects near you.




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  73. anjin-san says:

    @ bk

    It’s a mystery, especially considering the urgent need for infrastructure upgrades in this country.




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  74. The Q says:

    Doug this statement is utter tripe and its repeated like a mantra on the right: getting the Federal Budget under control (which means cutting spending and comprehensive tax reform), reducing the uncertainty in the business community created by a wide variety of government policies,

    So, lets stop and analyze this incredibly inane point – if the business community has been so uncertain the last four years, why the record corporate profits and the Dow Jones Industrial Average DOUBLING under the Kenyan socialist?

    After all, the stock market is a forward looking evaluation of expectations. And these expectations soared under Obama as did corporate profits.

    I am disgusted with the bullshite that passes as policy on the part of the wingnuts who defy reality with their ignorant dreck.

    And as for the first sentence of getting the budget under control, see Britain and their double dip when they tried the exact same austerity/deregulation wingnut policies currently in vogue by the morons on the right. They have had NEGATIVE growth the last year.

    I have listened to the foolish idiots who have clamored that inflation etc would ensue with such borrowing, only to find the interest rates for bonds at record low levels.

    We needed the massive stimulus that was advocated by true New Deal economists and that was not done and we see the sluggish results.




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  75. bill says:

    @mantis: just adrift with no engine!




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  76. stonetools says:

    Let’s face it, Doug doesn’t even know what he doesn’t know about economics. It’s as opaque to him as quantum mechanics is to me.
    Its what happens when you learn your economics from Rush Limbaugh and Eric Erickson.




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  77. Ben Wolf says:

    @Steven L. Taylor:

    I can see how a better designed stimulus might have helped, but I cannot see how cutting spending and trying to fix the deficit would have done anything other than caused and even deeper recession.

    The evidence is that the cyclical component of deficits is largely outside the government’s control, because the savings desires of the non-government sector are what drives it. Those who continue to push the austerity/fiscal discipline meme are simply ignoring that
    spending = incomes = employment = output.

    Reduce spending and you reduce the others as well.




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  78. stonetools says:

    Contrast Republican (and Doug’s ) talking points with Republican Treasury Secretary Andrew Mellon’s advice to Herbert Hoover during the Great Depression :

    He advised President Herbert Hoover to “liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.”[8] Additionally, he advocated weeding out “weak” banks as a harsh but necessary prerequisite to the recovery of the banking system. This “weeding out” was accomplished through refusing to lend cash to banks (taking loans and other investments as collateral), and by refusing to put more cash in circulation. He advocated spending cuts to keep the federal budget balanced, and opposed fiscal stimulus measures.

    Its almost word for word the same as today. Conservatives haven’t learned a thing. Let me guess, Doug opposed the TARP bailout and would have let the banks go belly up , amirite?




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  79. An Interested Party says:

    Yes we can do better, and we can start by getting the Federal Budget under control (which means cutting spending and comprehensive tax reform)…

    Perhaps you could name any country in history that was able to recover from a recession through austerity measures…

    …reducing the uncertainty in the business community created by a wide variety of government policies…

    Cutting through this conservative/libertarian boilerplate, which policies are you referring to?

    …ending subsidies that divert revenue to politically favored industries…

    Absolutely! Perhaps we could include the defense industry in that calculation…

    …considering the wisdom of making our Corporate Tax Rate more competitive with the rest of the world…

    Which corporations pay the actual 35% Corporate Tax Rate?

    …and, (at the state and local level) rethinking the many regulations that act as barriers to entry for new businesses.

    See above about conservative/libertarian boilerplate…




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  80. Hoyticus says:

    I’ve said it before and I’ll say it again. There is no reason to bother talking about economics with Doug. He is a laissez-faire libertarian and his orientation towards that is immutable. He claims both logical and moral opposition to most if not all the policies that anyone here will propose. No amount of exhortations will move him, stop wasting your time trying to debate him.




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  81. Ben Wolf says:

    @Hoyticus: I’d actually like discussing Doug’s thoughts on this, but OTB isn’t the right place for it. Too much flaming.




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  82. john personna says:

    @Ben Wolf:

    Steven’s post here repeated concerns we’ve all raised repeatedly for a year or more. When questions like that do nothing, and only have to be asked again, to be ignored again … well, maybe that’s why flames attract the votes.




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