Federal Spending 2007 to 2010

Here's a graphical picture of the increase in government expenditure as a percentage of GDP from 2007 to 2010.

The Truth About Federal Spending

New Data: There Has Been No Recovery

Turns out, according to latest data from the Bureau of Economic Analysis, we haven't had a weak recovery for the past three years - our GDP actually decreased from 2007 to 2010 by 0.3% per year. One of the main contributing factors has been decreased state and local government expenditures.

Here's what the Washington Post's Ezra Klein has to say in his article "The Recovery-Less Recovery."

Slow Growth: Chicken or Egg?

Today's Commerce Department report shows the economy is growing at an annual rate of 1.3%. That is not enough to keep up with population growth.

The New York Times explains: "The economy’s slow growth rate is partly responsible for stubbornly high joblessness across the country. As of June, 14 million Americans were actively looking for work, and the average duration of unemployment has been reaching record highs month after month. Businesses are sitting on a lot of cash, but are still reluctant to hire because there is so much uncertainty about the future of the economy."

The Times has it backwards. The stubbornly high joblessness is causing the economy's slow growth rate. But cheer up, things could be worse. And if deficit hawks in Congress get their way and reduce government spending in the midst of joblessness, they will be.

Ideas and Words

"Where an idea is wanting, a word can always be found to take its place."

- Goethe

Into the Valley of Death

Into the Valley of Death Rode the Six Hundred. Theirs not to make reply, theirs not to reason why, theirs but to do and die.

What kind of romantic nonsense have the Tea Party types been reading? Are they like the colonels who ordered their troops into a suicide attack, because they had bought their commissions and were incompetent? Or are they like Sir Joseph. the "ruler of the Queen's Navy" in H.M.S. Pinafore, who never thought of thinking for himself at all.

None of these characters, however, had the power to drag a whole nation into disaster with them.

It must be a heady brew for eighty or so ignorant young idealogues.

Certitude unsupported by facts.

Where Are The Milk Jugs?

Remember a couple of years ago when local organizers in Oriental mailed empty milk jugs to Washington in opposition to President Obama's health care reform? Many of them were afraid the health care reform would harm their medicare. They were apparently influenced by "mediscare" reports.

I'm waiting for them to start up their protest again, mailing the jugs to Republican members of Congress. Turns out Republicans really want to reduce or abolish medicare, and are using the national debt limit to extort agreement.

Vicious Cycle

Here's a recent post by Robert Reich. I think he's absolutely spot on.

Let's Cut Spending and Follow Britain

Pentagon Staff Officers used to turn to each other after receiving particularly muddleheaded direction from on high and say:"that's dumb - let's do it."

In case we need current evidence that government austerity when a country is in a liquidity trap contracts the economy, just look to Britain.

Since invoking austerity, British GDP has shown no growth for the past nine months. The Tories have a number of excuses: it was the royal wedding of Prince William and Kate Middleton; no - it was the Japanese earthquake and tsunami; no - it was record high temperatures in April; no - it was advance ticket sales for the 2012 Olympics in London.

Really?

Might it be the result of reducing government spending, thus reducing demand when the economy is already weak?

Goldman Sachs seems to think that will happen here, according to a report quoted by economist Jared Bernstein. Goldman Sachs analysis:

“A review of the spending and tax data at the federal, state, and local level suggests that a significant part of the weakness in economic activity in 2011 so far is due to fiscal retrenchment. In the first quarter, the Commerce Department estimates that spending cuts at the federal, state, and local level subtracted 1.2 percentage points from the annualized pace of real GDP growth; moreover, the expiration of the “Making Work Pay” federal tax cut and hikes in state taxes probably offset most, if not all, of the boost to disposable income from the temporary payroll tax cut.

In the second quarter, the fiscal policy impact was probably smaller, but still negative. Indeed, monthly data on defense spending, state and local employment, and state and local construction all show a clear downward trend for 2011 so far.”

So don't be surprised if our next employment report looks bad.

In the meantime, I like this photo: