Monthly Archives: November 2009
Despite all the happy talk from the administration and the lap-dog press eagerly parroting the “good news” that the recession is over, the numbers just don’t support the talking point. Liam Halligan delivers the news:
So I was pleased last week when I heard that, after four successive quarters of contraction, America’s economy grew by an impressive 3.5pc between July and September, compared to the quarter before. “The US is out of recession” numerous newspaper headlines screamed. No wonder share prices surged.
As ever, the numbers warrant a closer look. For one thing, this is annualised data. So the US economy actually expanded by only 0.9pc during the third quarter – a fact most newspaper reports ignored. What growth we did see resulted from a 3.4pc annualised rise in US consumption between July and September, which was in turn caused by a 22.3pc spike in spending on consumer durables.
As mentioned here that “spike” was driven by “cash for clunkers” and the $8,000 first time homeowners tax exemption. Halligan agrees. It wasn’t a trend, it was exactly what Halligan reported – a spike. So digging into it, what are the real numbers?
In other words, this latest US growth spasm stemmed from one-off government “giveaways” – with the public only able to take advantage of such gimmicks by going deeper into debt. The rise in US consumption coincided with a 3.4pc fall in household disposable income and a plunging savings rate too. With government and household debt spiralling anew, America’s so-called “return to growth” is nothing but a return to higher leverage. [emphasis mine]
Not quite what the administration cracked it up to be, is it? And Halligan reminds us:
Over the last 40 years, all US slumps have been interrupted by at least one quarter of positive growth, followed by a renewed downturn.
Of course, with an administration desperate for any good news, ignoring history is to be expected. After all, they’re quite the masters at ignoring the laws of economics and expecting results which run counter to them, aren’t they? Why shouldn’t they believe that one quarter of government give-aways equals pulling out of the recession? Can’t wait to hear the excuses when we’re back in the negative GDP growth trend next quarter. And you can also expect to hear the inevitable cries for a second stimulus (Porkulus II) crescendo.
Who was it who said “the government powerful enough to give you things is powerful enough to take things away”?
Well that has never been more true than in California where the state has decided to arbitrarily increase withholding by 10% because it couldn’t manage its debt. IOW, Californians take less home so the state can pay its debt:
Starting Sunday, cash-strapped California will dig deeper into the pocketbooks of wage earners — holding back 10% more than it already does in state income taxes just as the biggest shopping season of the year kicks into gear.
Technically, it’s not a tax increase, even though it may feel like one when your next paycheck arrives. As part of a bundle of budget patches adopted in the summer, the state is taking more money now in withholding, even though workers’ annual tax bills won’t change.
Think of it as a forced, interest-free loan: You’ll be repaid any extra withholding in April. Those who would receive a refund anyway will receive a larger one, and those who owe taxes will owe less.
You’ll get a “larger” refund if the state has the money to pay refunds. Weren’t they issuing IOUs not long ago? But that’s not the point. The state has just made it clear that it has first claim on what Californians earn. If that doesn’t scare the bejesus out of them, I’m not sure what will.
And if that doesn’t increase the emigration to less oppressive climes I’m not sure what would.