Free Markets, Free People

GDP Growth – Real or Memorex?

My guess is you’re looking at GDP numbers that are about as accurate as the stimulus saved and created job numbers the administration put out recently.  Or perhaps a better way of saying it is they’re as deceptive as those job numbers.

The GDP is the combination of consumer, investor and government spending.  We know pure consumer spending is down.  We know that investor spending is down.  And we also know that government spending is way up.  That spending has spending has urges some consumers to spend – cash for clunkers and the $8, 000 incentive for first time home buyers.  But a spurt of government spending which encouraged a spurt of consumer spending does not a recovery make:

The nation’s gross domestic product expanded at an annual rate of 3.5 percent in the three months ending in September, matching the economy’s average annual growth rate from the last 80 years. But the end of government programs to encourage spending on things like cars and houses, alongside employers’ continued reluctance to hire more workers, means the recovery may not last, economists say.

The recovery will happen when investors invest, businesses hire and finally, consumers buy – not for a quarter, but in a constant and increasing manner. Until that happens, until we see the job numbers begin to lessen considerably, this is just a lot of hoopla over a quarterly blip driven by government spending.



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5 Responses to GDP Growth – Real or Memorex?

  • The FHA loans and Cash for Clunkers fed into the GDP improvement figures for the quarter.  Call me contrary but government inflated taxpayer subsidized spending  to put the green into the rainbow doesn’t mean it’s better.
    Hey, but it DOES mesh with their theory that when you’re broke the way to overcome the problem is to spend more!  (What they meant by “overcome the problem” translates to “make the problem look better on paper by midterm election time….”)

  • The best part of this is the answer to where all the fund for that spending came from?
    Why, it was the deficit.
    So are we trading future growth for current growth?
    Pretty much.

  • It’s almost as if the government (i.e. TAO and the rest of the democrats), with the willing cooperation of MiniTru, are trying to convince us that the economy has recovered, that the future is brighter, that happy days are here again.

    Sort of like how the same group was trying to convince us a few years ago that the economy was crashing, that the future was bleak, and that the Great Depression was here again.

    If I didn’t know better, I’d say that these people are more interested in politics and wishful thinking than in truth.

    / sarc

  • It takes two consecutive quarters of GDP growth to be officially out of recession; just as it take two consecutive quarters of decline to be in recession.

  • I read elsewhere that the CARS (cash for clunkers) program accounted for 1.7% of that GDP growth.