The Rebuttal

Keith Hennessey provides a rebuttal argument to Jay Carney’s damage control on the bad news about GDP growth of yesterday, the basic contours of which have become today’s talking points. Note the guest appearance in Mr. Carney’s remarks of folk Keynesianism, about which he appears to be somewhat confused. The only way that the president’s plan can count as stimulus in that view is if you assume that the president’s lying about offsetting spending cuts and tax increases. Note that I don’t make that assumption but Mr. Carney apparently does. With friends like this, etc.

To repeat my basic position: GDP decline bad. At this point in the business cycle I’m relatively indifferent to why it went down. Any decline at this late phase of a phlegmatic recovery could kick its wobbly legs out from under it.

22 comments… add one

  • jan

    Obama’s economical view is guided by ideology, rather than any shred of real fiscal acumen. Just like his administration is putting a smiley face on the recent GDP growth number, a similar stance was taken on jobs creation, as he quietly doesn’t renew the charter on his tacky Jobs Council — a worthless group that was more symbolic of intent than anything else, as it’s last meeting was a year ago! Apparently Obama must now feel the country is swimming in business investment and new jobs.

    I wonder if Obama is even aware of the latest ‘surge’ in applications for unemployment benefits? Hmmmm… oh well, never mind, we mustn’t upset the fuzzy mirage of hope and change Obama has constructed for his base.

  • PD Shaw

    Since Caterpillar initiated_ actual_ furloughs and plant idles in the fourth quarter because of a slowing worldwide economy, I’m more inclined to think the economy sucks than the political finger-pointing.

  • PD Shaw

    BTW/ I don’t think Hennessey understands the argument being made about defense spending (because it appears to be off the Democratic reservation).

    Carney is saying that the threat of sequester created uncertainty in the economy, which magnified the effects of defense cuts. Since government nondefense spending actually increased in the fourth quarter (and defense spending was up substantially in the third quarter), it would appear to be an implicit support of defense hawks’ belief that defense spending, since it is uniquely domestic, has a more profound effect on the economy than spending on butter. Meanwhile, Obama plans to cut $1.1 trillion from defense through a drawdown from Iraq and Afghanstan over the next 23 months.

    In sum, the Democratic talking points are uncertainty, the importance of defense multipliers, and Romney was right about the need to repeal the defense freeze and build lots of war ships.

  • Icepick

    In sum, the Democratic talking points are uncertainty, the importance of defense multipliers, and Romney was right about the need to repeal the defense freeze and build lots of war ships.

    LOL, which explains why this is the best contraction you could ever hope to see – because Romney was right! Bwahahahaha!

  • jan

    PD

    That was an interesting summation — kind of follows the adage of “for every action there is a reaction.” Unfortunately, political deductions, relating to their actions, don’t seem to follow this thread of thought.

  • Icepick

    BTW, six trillion in stimulus, and the economy can’t even withstand a slight slowdown at the DOD. Some economy you got there. It would be a shame if something happened to it.

    PD, note how the DoD spending was timed to prime the GDP numbers right before the election, with the necessary result that they would tank after the election. THere’s the Obama Admin’s standard MO. (Cue Drew bringing up energy prices about to spike in the Mid-West….)

  • jan

    “LOL, which explains why this is the best contraction you could ever hope to see – because Romney was right! Bwahahahaha!”

    I think you’re going to see more and more evidence that Romney’s fiscal analysis and projections were right. And that Obama’s public mocking and flogging Romney’s positions were all a part of his successful smoke screen.

  • PD Shaw

    I’m self amused and a little scared. Had the sequestration gone through, the Pentagon would still have been spending more in 2013 than it did in 2006, at the height of the Iraq war.

  • jan

    …..one politician’s account seems to only contradict and/or defy another’s. Who do you believe?

  • Icepick

    PD, the sums involved are staggering. I remember when a billion was considered an “astronomical sum”. That’s not even walking around money for the government these days. With several trillion more coming just this year!

  • steve

    Ok, I read this twice and fail to see the rebuttal. I read Hennessey saying that Carney was partisan and a demagogue. He doesnt address the general argument that investment was up, consumer spending was up, but defense spending was way down and exports down. If defense spending stayed even, we would still have the slow growth we have been having.

    @PD- Since the sequester was going to especially hit defense, it kind of makes sense that it would slow down, not knowing if people would get paid or get cut.

    “PD, note how the DoD spending was timed to prime the GDP numbers right before the election”

    No doubt that is why the GOP planned for the fiscal cliff in January in order to help Obama.

    Steve

  • Andy

    PD, note how the DoD spending was timed to prime the GDP numbers right before the election, with the necessary result that they would tank after the election. THere’s the Obama Admin’s standard MO. (Cue Drew bringing up energy prices about to spike in the Mid-West….)

    That didn’t have anything to do with the President actually. There’s always a big spending spree in September as various parts of the DoD tries to spend all its money. With the new FY, though, the department was slow-rolling spending because of the sequester, and potential for the fiscal cliff. It’s still going on – my organization is trying to spend as little as possible because we realize the money that we have now will probably have to last us next October.

  • Icepick

    No doubt that is why the GOP planned for the fiscal cliff in January in order to help Obama.

    Sure, the GOP alone was responsible for the deadlines. Dems had nothing to do with it. Additionally, Reps weren’t trying to win their own elections.

  • Icepick

    If defense spending stayed even, we would still have the slow growth we have been having.

    Yes, because slow growth backed by unsustainable levels of deficit spending is clearly something we should all aspire to.

    The economy sucks, and it is being propped up by humongous debts. Return the deficit levels to the Bush years (that you and every other Democrat claim was so irresponsible) and how bad does the economy look? Ho good does that consumer spending and business investment look then?

  • PD Shaw

    The defense budget surged 13 percent in July and August, doubling purchases of ammunition for one thing.

    The political reason is Obama was juicing the economy for the elections. The non-political alternative is that the DOD is under a budget freeze, which requires cuts to balance out other expense increases. Governments respond to freezes by delaying payments and hires. September was the end of the fiscal year, so DOD caught up by spending everything in the budget it could. Use it or lose it.

    Under either scenario (and they may not be mutually exclusive), the DOD spending was going to tank in the Fourth Quarter. Its time-shifting.

  • PD Shaw

    Andy, last September’s spending spree was much larger than any for the last several years. I think its because of the freeze, but it also suggests the declines will probably be greater as they try three quarters of austerity and then see what they can spend in the last.

  • PD Shaw

    The pattern the last couple of years means we should expect further reductions in defense spending in the first quarter.

    2010
    Q3 Up 7 percent
    Q4 Down 6 percent
    Q1 Down 14 percent

    2011
    Q3 Up 3 percent
    Q4 Down 10.5 percent
    Q1 Down 7 percent

    2012
    Q3 Up 13 percent
    Q4 Down 22 percent
    Q1 ? ? ?

    I’m betting Q1 will be down, and Jay Carney will blame Republicans.

  • jan

    “The political reason is Obama was juicing the economy for the elections. “

    Obama staged everything he could to present the best (but deceitful) rendition of the economy, in order to reinforce the ruse that his 4-year reign as POTUS wasn’t as bad as it really was.

  • steve

    “I’m betting Q1 will be down, and Jay Carney will blame Republicans.”

    Did he do that in the past? I dont remember him doing so.

    Steve

  • PD Shaw

    Carney: “our economy is facing a major headwind . . . and that’s Republicans in Congress.”

  • jan

    PD

    As long as Obama is in office, the Republicans will be their safety net excuse as to why things aren’t going better in the country. Whether they are called ‘headwinds,’ ‘obstructionists,’ or ‘liars,’ it will be a chorus line at the end of a democratic sentence in which they are called upon to explain any negative event or downward economic statistic that arises in the next 4 years.

  • Andy

    Andy, last September’s spending spree was much larger than any for the last several years. I think its because of the freeze, but it also suggests the declines will probably be greater as they try three quarters of austerity and then see what they can spend in the last.

    I think that’s right – the budget is fixed for the FY, so the big increase in the last quarter was because of reduced spending in the other three quarters. A lot of this was due to the lack of an actual budget and the reliance on CRA’s and the general uncertainty about the budget. So the DoD hedged its bets until the last quarter, when it spent the remainder of its budget authority.

    I would not be surprised to see the same thing happen this year. I know my organization (a reserve unit), is no longer recruiting, is not sending anyone to basic training or technical training of any kind, and our HQ pulled almost all money from us for everything but readiness. Some reserve units went further cut out one of their monthly training assemblies, which is a pretty BFD actually. All this is in preparation for sequestration, so that money will be available to maintain readiness for the rest of the FY. The sequestration will also cause, in all likelihood, a 1-day-a-week furlough for most DoD civilians.

    My organization will probably get some additional funds near the end of the FY because we’re scheduled to deploy again at the end of this year and we’ll need to prepare.

    I’ve long argued that we need to cut defense, but this is not a coherent or rational way to do it. The archaic and bloated DoD bureaucracy doesn’t handle it well, to say the least. It’s incapable of making rational and coherent choices regarding resource allocation, so reduced spending is not allocated efficiently, quite the opposite….

Leave a Comment