As should surprise practically nobody who visits this blog, U. S. GDP shrank in the fourth quarter of 2012:
WASHINGTON—U.S. economic momentum screeched to a halt in the final months of 2012, as businesses pared back inventories and government spending fell sharply, while lawmakers struggled to reach a deal on tax increases and budget cuts.
The nation’s gross domestic product shrank for the first time in three and a half years during the fourth quarter, declining at an annual rate of 0.1% between October and December, the Commerce Department said Wednesday.
It’s the first time the broad measure of all goods and services produced by the economy contracted since the post-financial crisis recovery began. Economists surveyed by Dow Jones Newswires had expected a 1.0% annualized growth.
The economy reversed from a 3.1% pace in the third quarter largely because federal government spending fell by 15% and private business inventories also decreased. Those drags and others were too much for solid consumer spending to overcome.
Consumer spending won’t recover until the process of deleveraging has run its course, which doesn’t look like it will happen any time soon.
I know! We can borrow a lot more to pay for college and grad school!
Democratic party communication’s director is already spinning the contraction via twitter:
Gee, regime uncertainty had nothing to do with it.
As anyone here knows, I think Obama, intentionally or through incompetance or through ideological preference is simply the poorest economic steward of my lifetime. That includes Jimmy Carter. But hopefully the man can be held reasonably in check until his term is over, probably effectively two years from now, when he becomes even more lame. (heh)
The real question is one that has been posited at this site often: with the government broke, its fiscal stimulating effect highly suspect anyway, resources being disproportionately drawn to health care or pensions……..what the hell is going to give us real and sustainable growth? Throttling fossil fuel energy production? Regulation? Subsidizing weird things like solar energy? Taxing people to fund government workers?
In round numbers, the current president has increased the government claim on US economic activity from 20% to 25%. Before you dismiss that, that’s a 25% increase. 25% !! and he’s not done. If government is a less efficient machine – and I’m prepared to listen to arguments, because I need a few good belly laughs – that is a horrific turn of events.
I’m glad I’ve got my pile, and can pass some on to my daughter, because the Average Joe is hosed.
You know, Dave, I don’t know how old you are, but you never cease to amaze at the references you bring forth. Timeless bueaties from a bygone era.
Because of my affection for blues and jazz – and I ain’t talking Kenny G crap, I’m talking Miles and Coltrane etc – I have an irrational attraction to late 30’s 40’s and 50’s. For me, anyway, a golden era.
“In round numbers, the current president has increased the government claim on US economic activity from 20% to 25%. ”
Not really. I suspect you can analyze balance sheets better than that. Discretionary spending, the part that a POTUs has some influence on, has not changed that much. The big increase has, is and will be in entitlement spending. The Dems lost the 2010 election after trying to cut Medicare spending, which is what really needs to be cut. Your guy ran on not cutting Medicare any time soon.
When we had your party in charge, knowing that this debt was coming, we got Medicare Part D and wars that are already adding $100 billion/year to our budget, and that is likely to grow.
http://www.ft.com/intl/cms/s/0/da88f8fe-63e9-11e2-84d8-00144feab49a.html#axzz2JULIqpzz
Btw, we are surging in fossil fuel development. Regulation?** Sure, let’s deregulate the finance sector some more. What could go wrong? The reason to vote for Obama was to keep Romney and his advisors out of office. Same people Bush had. Same results. Since he had no new ideas, neither do you, might as well avoid war with Iran while we deleverage.
Steve
Again, I am all for deregulating small businesses, I think we misregulate large businesses (often at their own request) and I dont think it is actually possible to over regulate the financial sector.
Perhaps the 22.2% drop in DOD spending in the quarter has something to do with the lower number. Aren’t we supposed to applaud a decrease in government spending?
steve
In case you hadn’t noticed, I use the current occupant of the White House as a proxy for all grotesque government spending and policy initiatives. And if you think he wouldn’t like to increase it dramatically, I simply don’t know what to tell you. In fact, with ObamaCare, he has created the third leg on the stool of massive spending: SS, Medicare and now ObamaCare. Dismiss it if it makes you feel better. You appear to prefer to dance on the head of a pin than deal with the trajectory he advocates and is implementing.
As for financial regulation, you are just slobbering drivel. This man is bought and paid for by Wall Street. He speak with forked tongue. You won’t find me defending Wall Street, or the influence they have on government policy, or the fact that Obama is their puppet. The original bank bailouts, the ongoing bank bailout, GM, the attempt to reinflate the housing bubble and now the destruction of the term structure of interest rates are pure Obama, Bernanke and Geitner. In perspective, its nauseating, if not cruel and inhumane. And all for short term political gain. I don’t think, ahem, “my guy” would have continued such despicable policy.
You, like Reynolds, seem to view the world through a political prism of Republican vs Democrat. Hooray for “our guy” or “our party.” (Just look at the language in your comment) I view it through the prism of more or less government, and policy for the better of all, not just the rich, the powerful, the influential and those who make a living feeding at the trough of Big Government. You know where I stand on that; I come from humble roots. Liberty and freedom. I hold no brief for the Republicans when they, well, behave like Democrats. Tax and spend. I’ve never, ever seen anything from you but defense of the indefensible policies of the Dems, and currently Obama.
Speaking only for myself, I’m not anti-government. I care as much why GDP goes down as that it goes down at this point in the cycle. According to the NBER (the official scorekeeper), the average period from trough to peak in the post-war period is 59 months. The last trough ended in June 2009. Every month that passes brings us that much closer to the next cyclic downturn.
PS – steve
That would be an income statement, not a balance sheet, genius.
I’m a big Vernon Duke fan. Taking a Chance on Love. April in Paris. Autumn in New York. I Like the Likes of You. Just to name his most famous songs. I can’t remember the name of the artist (woman) but a couple of years ago there was a CD released of covers of Vernon Duke songs. Wonderful.
The original bank bailouts, the ongoing bank bailout, GM, the attempt to reinflate the housing bubble and now the destruction of the term structure of interest rates are pure Obama, Bernanke and Geitner.
W. and Paulson were behind the TARP. Obama and his crew came in to take over administration and extensions, but let’s not forget that this started with the (R)-tards and isn’t limited to (D)-mwits.
I’m all in favor of the decrease in government spending. However, I’m not in favor of the government choosing to cut back on spending (and refusing to acknowledge that they’re doing so) at a point in time so that they can reap maximal benefit from the spending, and pay no costs for the cuts. Deficit spending has been the only thing propping up this shit-heap of an economy the last several years. Take that away and see what you’ve got left. That’s the real economy, the one those bastards in Washington should have run on.
“According to the NBER (the official scorekeeper), the average period from trough to peak in the post-war period is 59 months. The last trough ended in June 2009. Every month that passes brings us that much closer to the next cyclic downturn.”
The news wasn’t all bad. It does seem that the big downturn in DOD outlays was in large measure what brought down the 4th quarter number. The question is, why the reduction in DOD spending? I’ve not found an answer anywhere for that.
And private inventories are shrinking, and exports are down. But we’re going to grow our way out of this mess with a surge in exports!
Icepick, I think the theory they’re working on is that housing will pull the economy out of its slump. This despite the fact that housing prices are about where they were at the trough of the last recession and have been guttering along there for the last four years. I guess they figure we’re due. I don’t think it works that way.
BTW, those are nominal prices. If you look at real prices, they’re continuing to fall.
“. Hooray for “our guy†or “our party.†(Just look at the language in your comment)”
Nope. Find one Hooray. I do often bring up the partisan issue because that is how we have to end up voting. It is fine, and I suppose necessary, to talk in the abstract, but in the end we need to choose a party that will carry out policy.
“As for financial regulation, you are just slobbering drivel. This man is bought and paid for by Wall Street.”
I think this is largely true. ie that Obama is owned by Wall Street. Romney was Wall Street. Not much of a difference I will admit. As Ice has pointed out, the bank bailouts were put into action by Paulson and W. The way the banks were handled would have been little different if they had stayed in power.
“In fact, with ObamaCare, he has created the third leg on the stool of massive spending: SS, Medicare and now ObamaCare.”
Dont forget Medicare Part D. At least Obamacare is paid for. A novel concept. I wish you guys would try it. Anyway, Obamacare is much, much smaller than the other two. I have always said it is flawed, that it is the first step of many needed. But what is the alternative? What health reform has the GOP pursued? Nada. The aforementioned part D, to buy votes. Other than that?
I voted for the GOP for 30 years. I will gladly do so again when they address issues like health care and entitlements. Tax cuts doesnt cut it anymore.
Steve
I’m pretty sure the first 4 started under Bush/Paulson…hence I agree with Icepick. Not sure about the last one.
Still this is why I find the vitriol in our politics so amusing…Obama and Bush…the only real differences are extremely small policy wise.
Here’s an answer to the question of the 22.2% decrease in DOD outlays:
Brad Plummer, Why defense spending plunged 22% last quarter — and killed GDP
It would be nice if we could dispense with the partisan blame-game, even if it is kindlier and gentler than the comments at OTB….
Anyway, if what I’ve read is to be believed, growth decreased by well over 1% due to reduced defense spending. If that’s the case, then it seems like we are well and truly screwed. On the one hand, that just shows that huge deficits are the only thing keeping us out of recession. On the other hand, the debt from those deficits can’t keep increasing like it has forever. Something’s either got to change or got to give.
And what’s going to happen the rest of this year? I’m fairly confident that defense spending for this quarter will probably be the same as last or possibly even be lower. The DoD is spending less because of the expectation of the sequestration cuts, not to mention the CRA is less than expected – I see it everyday. After March it looks even worse since furloughs are almost certain. Then there is the recent tax increases.
Meanwhile the partisans count coup and point fingers. I guess that’s all they can do since neither side as much of anything in terms of actual solutions, much less an intellectually coherent viewpoint.
I’m pretty sure the auto-bailouts were suggested by the Obama team after the election, and that Bush & Co started work along that line in December 2008 in light of the inevitable change in government. Call that one a split responsibility. I don’t recall Bush trying to re-inflate the housing bubble in 2008, but that’s probably a failure of memory on my part.
Hey! A black person realized that black people aren’t doing that well under Obama:
Needless to say, he voted for more of the same.
The younger man’s tap riff doesn’t jive with the music at all, by my lights.
It’s choreographed for something much more rhythmic. Did they change the music midstream in the film?
Have I missed something?
Steve V
“Still this is why I find the vitriol in our politics so amusing…Obama and Bush…the only real differences are extremely small policy wise.”
This is why I continually make the same point (probably to the point of total boredom now) that the issue isn’t Dem vs Republican, (woo-hoo for our guy) its more and bigger government vs less and smaller. I sincerely believe Romney could have made a difference. I really do. He gets it. Now we have pure crap for 4 more years.