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More at the siteThe weakest recovery on record continued in 2012's first quarter, with the Commerce Department's Friday report of 2.2% growth. That's down from 3% at the end of last year, but closer to the 1.7% for all of 2011. It's enough to give the word recovery a bad name.
The economy has been growing for 11 quarters since the recession officially ended in mid-2009, and quarterly growth has averaged 2.4%. That's slower growth than in every modern expansion, and about half the growth rate of all recoveries since World War II, according to Congress's Joint Economic Committee. The first 11 quarters of the Reagan expansion in the 1980s, by notable contrast, grew an average of 6.1%.
The details in the first quarter report help explain the growth deficit. Consumers have been spending (up 2.9%), but businesses weren't investing (down 2.1%). Car and truck sales riding pent-up demand from the recession accounted for half of the increase in GDP.
This suggests more consumer confidence, but an upside-down recovery with questionable durability. Business capital investment in big ticket items such as plants, equipment and computers is one of the best forward-looking economic indicators. Consumers can't keep up this spending pace if businesses aren't investing to create new technologies or improve productivity.
Consumers also can't continue to spend faster than their incomes are rising. Real disposable income rose by 0.4% in the quarter, but real disposable income is only up 0.6% in the last 12 months, as higher food and energy prices have sapped middle-class purchasing power.
Enlarge Image
Consumers can?t continue to spend faster than their incomes are rising. Bloomberg
The growth numbers were also somewhat inflated by businesses building up inventories, which accounted for about 0.6 percentage points of GDP growth. Over the last six months businesses have stocked up by more than $120 billion, which could presage less spending in the months ahead to move those products off the shelf.
The good news in the report is that government spending receded for the fifth straight quarter, down 3.1% in the last three months. Remember this is coming off the gigantic rise in the base level of government in 2009 and 2010. Private growth was a more respectable 2.8%.
Keynesians decry this decline in government spending, but they're the ones who said we needed the "temporary, targeted" demand-side spending blitz. Flood the economy with government spending for two years, then pull back when the recovery is underway, they said. The problem is we never got the roaring recovery they promised.
Economist David Malpass reports the startling fact that over the last year U.S. GDP has grown by roughly $600 billion but federal debt has climbed by $1.3 trillion. This is hardly "austerity," and it explains why the U.S. debt to GDP ratio is climbing so fast.
The big picture is that this has been a traditional debt and spending demand-driven recovery, which typically has less staying power. The Obama Administration rejected supply-side incentives of lower tax rates and fewer regulatory burdens to boost noninflationary private output.
For each $1.00 the Treasury brought in during October as it set the new record for taxes collection for that month, the federal government spent $1.57. This continues a trend seen through fiscal 2014, which ended on Sept. 30, when the federal government took in a record $3,020,809,000,000 in revenue but still ran a deficit of $483,336,000,000.
In October, the first month of fiscal 2015, total federal revenues were $212,719,000,000, according to data released by the Treasury. Federal spending was 334,432,000,000 for the month. That left a deficit of $121,713,000,000. According to the Census Bureau’s latest estimate, there are 115,831,000 households in the United States. The federal government’s $121,713,000,000 deficit for the month equals $1,050.78 per each of those households.
In constant 2014 dollars, the $212,719,000,000 in tax receipts the federal Treasury raked in during October is the most revenue ever for that month of the year. The next closest year was 2001. That October, the Treasury took in $211,234,700,000 in constant 2014 dollars. The biggest source of federal tax revenue during October was the individual income tax. During the month, taxpayers forked over $106,661,000,000 in these taxes to the Treasury. Taxpayers also handed over $73,581,000,000 in payroll taxes to cover Social Security, Medicare, and unemployment insurance.
Tax Revenues Set Record for October Feds Still Run Monthly Deficit of 1 050 Per Household CNS News
Obama's policies have produced a growth deficit--the economy should be growing much faster than it has been. This deficit is exacerbating problems like underemployment among college grads and will eventually cause problems for the government as revenues fail to rise.
More at the siteThe weakest recovery on record continued in 2012's first quarter, with the Commerce Department's Friday report of 2.2% growth. That's down from 3% at the end of last year, but closer to the 1.7% for all of 2011. It's enough to give the word recovery a bad name.
The economy has been growing for 11 quarters since the recession officially ended in mid-2009, and quarterly growth has averaged 2.4%. That's slower growth than in every modern expansion, and about half the growth rate of all recoveries since World War II, according to Congress's Joint Economic Committee. The first 11 quarters of the Reagan expansion in the 1980s, by notable contrast, grew an average of 6.1%.
The details in the first quarter report help explain the growth deficit. Consumers have been spending (up 2.9%), but businesses weren't investing (down 2.1%). Car and truck sales riding pent-up demand from the recession accounted for half of the increase in GDP.
This suggests more consumer confidence, but an upside-down recovery with questionable durability. Business capital investment in big ticket items such as plants, equipment and computers is one of the best forward-looking economic indicators. Consumers can't keep up this spending pace if businesses aren't investing to create new technologies or improve productivity.
Consumers also can't continue to spend faster than their incomes are rising. Real disposable income rose by 0.4% in the quarter, but real disposable income is only up 0.6% in the last 12 months, as higher food and energy prices have sapped middle-class purchasing power.
Enlarge Image
Consumers can?t continue to spend faster than their incomes are rising. Bloomberg
The growth numbers were also somewhat inflated by businesses building up inventories, which accounted for about 0.6 percentage points of GDP growth. Over the last six months businesses have stocked up by more than $120 billion, which could presage less spending in the months ahead to move those products off the shelf.
The good news in the report is that government spending receded for the fifth straight quarter, down 3.1% in the last three months. Remember this is coming off the gigantic rise in the base level of government in 2009 and 2010. Private growth was a more respectable 2.8%.
Keynesians decry this decline in government spending, but they're the ones who said we needed the "temporary, targeted" demand-side spending blitz. Flood the economy with government spending for two years, then pull back when the recovery is underway, they said. The problem is we never got the roaring recovery they promised.
Economist David Malpass reports the startling fact that over the last year U.S. GDP has grown by roughly $600 billion but federal debt has climbed by $1.3 trillion. This is hardly "austerity," and it explains why the U.S. debt to GDP ratio is climbing so fast.
The big picture is that this has been a traditional debt and spending demand-driven recovery, which typically has less staying power. The Obama Administration rejected supply-side incentives of lower tax rates and fewer regulatory burdens to boost noninflationary private output.
Review & Outlook: The Growth Deficit - WSJ.com
Ah yes. A growth deficit. And we all remember the wonderful economy the GOP left us in 2008. 500,000+ jobs going down the drain a month. People losing their homes, people that had never even been behind in their payments prior to that. The market going straight down. I am sure you would like to return to that. It was so good.
