on the GDP…
The world’s largest economy expanded at a 3.5 percent pace from July through September, exceeding the median estimate of economists surveyed by Bloomberg News, after shrinking the previous four quarters, figures from the Commerce Department showed today in Washington. Household purchases climbed 3.4 percent, the most in more than two years.
Policy makers will now focus on whether the recovery, supported by federal assistance to the housing and auto industries, can be sustained into 2010 and generate jobs. The record $1.4 trillion budget deficit limits President Barack Obama’s options for more aid, while Federal Reserve officials try to convince investors that the central bank will exit emergency programs in time to prevent a pickup in inflation.
“A lot of this is thanks to government support,” Kathleen Stephansen, chief economist at Aladdin Capital Holdings LLC in Stamford, Connecticut, said in an interview on Bloomberg Television. “We still have major headwinds for the consumer. That worries me. The consumer, in fact private demand in general, is not ready yet to pick up the growth baton from the government.”
Which is exactly why I question the sustainability of this number. Nor do I think we should declare The Great Recession a thing of the past. Barry Ritholtz writes:
If we look at the 5 factors NBER considers — GDP, real income, employment, industrial production, and wholesale-retail sales — its somewhat ambiguous to say unequivocally that the recession is over. We are still losing an inordinate number of jobs (250k+ / mo), industrial production has improved, but is soft, retail sales have been mostly flat, and real income has been negative for a decade.
I’ll add a few more factors – the problems with financial institutions and troubled loans have not gone away, home prices have yet to stabilize, business inventories are still being cut, consumers are still overleveraged, business investment is still relatively weak and access to credit is still constrained. Yes, Cash For Clunkers, the $8,000 home buyers tax credit and other federal measures contributed to the GDP growth and in no small amount (excluding auto sales, GDP growth was approximately 1.9%); however it is hard to be optimistic when growth in the private sector, the growth required for long-term sustainability, is weak if not non-existent.
GDP is up. The other metrics suck. That’s where we are.
More at Memeorandum
The only thing causing the GDP to increase is all of the stimulus money. Once that is gone so will any increase in the GDP. Like gas on a camp fire it causes a big flare up but no real substance. However, I’m sure the Obots will claim that this is proof that the Dear Leader has fixed Bush’s mistakes.Report
I do recall reading somewhere that Christina Romer mentioned something about stimulus spending contributing 3 to 4 percentage points of GDP growth. If that’s the case, then what you are saying is absolutely correct.
However, I can’t find the quote so I could be wrong.Report
Here is the Romer quote:
http://www.swamppolitics.com/news/politics/blog/2009/10/recession_ending_gdp_rises_3rd.html
It is funny how Obama screamed bloody murder about Bush’s deficits until he became pres and then it became ok to run them up even more.Report
Obots????????? Sorry my programming does not recognize that term. Does not compute.
the idea of a stimulus is to goose the economy, even with the knowledge that is may not fix all the problems. it gets things going when there is no movement. Some of the stimulus money is aimed at things that promote long term growth. So building roads and infrastructure improvements do a body good in the long term.
So you basically are saying the stim has got the economy moving, which is exactly what is was aimed at. When I go to the next United Church of Obama meeting I will tell my cell leader that you have admitted the stim worked.Report
You could, in theory, buy a toaster for one million dollars.
Giving the defense “hey, it toasts bread, that’s what we bought it for” is to miss the point of the critique of “you spent *HOW* much???”Report
But if it is a million slice toaster with good temp control it just might be worth it.Report
Is it?Report
Hrm. Accepting, for the moment, Keynesian economics as valid, it seems to me that the two quotes Dave points to help prove one of the bigger complaints about the stimulus package, namely that it was very poorly structured. Yes, it has increased GDP, but then again, any additional government domestic spending does this almost by definition in the short-run. The question is whether that additional spending spurs private-sector growth above and beyond what would have happened without the spending such that it pulls the country out of the recession more quickly.
But the evidence is that most of the stimulus money that’s been spent so far merely went to purchases that people were going to purchase with or without the spending, at best pushing those purchases up a few months but not really creating any significant increase in net aggregate demand.
See, e.g., here: http://features.csmonitor.com/economyrebuild/2009/10/28/report-cash-for-clunkers-was-a-lemon/
The infrastructure spending could, I suppose, do good over the long haul, as long as it is generally spent on areas where infrastructure improvements are useful. But there the problem is that the spending takes so long to kick in that it is likely to be too late to do much by way of resolving the current problems.Report
The composition of the stimulus was horrible. It wasn’t particularly well focused and seriously underfunded some rather important things. More emphasis should have been placed on alleviating state fiscal gaps, especially going forward. The way the money went out to states placed most of the emphasis on closing FY09 shortfalls, essentially kicking the can down the road. FY10 looks horrible for most states. And let’s not forget that state revenues won’t be rosy for FY11, either.
Also, more effort could have gone towards unemployment assistance. It could have been benchmarked/triggered/whatever your preferred term of art to some measure of unemployment to ensure that people who ran out of extensions would not have to wait for Congress to act yet again. (Unless, of course, you’re Casey Mulligan and think these people are just on unpaid vacations.)Report
Why should the fed gov alleviate state fiscal gaps? Isn’t is the states job to fund themselves? If Uncle Sugar keeps bailing the states out then they will never become responsible for themselves. If a state needs more funds then they should cut their budget or raise taxes. For example, why should I pay more in fed taxes to support Cal. social spending?Report
And why should Cal. pay for everyone else? What if they just got dollar for dollar value of what they put in rather than pitching in to cover other states? Perhaps they could actually start to fund the programs that are important to them.Report
“For example, why should I pay more in fed taxes to support Cal. social spending?”
You’re almost there. Run with that feeling. Take it to its conclusion.Report
I can’t quite get to the individual level, if that’s what you’re reffering to. I think that some sort of State is necessary for infrastructure, defense, what not. Modern city states may be sufficient but I think there has to be some sort of communtiy of size, just not as large and unresponsive as the current formulation of the US.Report
Mark – I heard this yesterday, too – all those automobile purchases were going to happen anyway. I didn’t understand. Is it being proposed that there just happened to be a huge spike in auto purchases at the same moment that we had the cash for clunkers program? All that buying was just poised to happen at that moment, and it’s a coincidence that it happened at the same time as C4C?Report
mark,
What contributed to the huge spike was car purchases that were made by individuals who were in the market to purchase cars but C4C incentivized them to accelerate their decisions from some future date to the present. Given that dynamic, as those sales will not be counted for in future periods, I don’t expect to see the same level of auto sales to sustain itself in the 4th Quarter.
Therefore, the buying was not necessarily poised to happen “at that moment” but, at the very least, in the near future.Report
No, it’s that people just moved up their purchasing decisions by a few months to take advantage of the program. That sales have dropped off a cliff since the program ended is pretty solid proof of this.Report
Additionally, those people who were planning on buying a car in early 2010 rather than late 2009 were instead planning on spending money on this, that, or the other. They instead said “honey, instead of buying this, that, or the other, let’s put it off until 2010 and buy the car now.”
Stuff that was going to be bought was pushed off, stuff that was going to be bought later was moved up, there was a lot of reshuffling, but no one really saw a benefit except the folks who could afford a discounted new car.
Additionally, the cars that they traded in were arguably better than a great many cars being driven by people who are, let’s come out and say it, “poor”.
Instead of these (still quite decent) cars going to, say, the poor (or the lower middle class in the form of flooded used car lots), they got destroyed.Report
I feel sorry for you kids.Report
Can I get a hug?Report
Dude!Report
Try to contain yourself. I know that me being in someone’s presence causes them to get all sappy and overwhelmed.
It’s ok Bob.Report
Where’s my hug?Report
It’s early yet to claim victory or failure. We’re going to have to wait and see.Report
Never fear, North, my palsy. If this commie-dem thing doesn’t work for out for you, you can come with us paleo-cons. I just found out that we’ve been marginalized too!Report
You just found that out now?Report
Yes, I read Paul Gottfried! It’s thrown me off my feed. Two fingers of Maker’s Mark over ice, tonight.Report
You need to get you some decent la-froyg. I think it’s Spanish for “the frog”. It’s got more of a kick than the Maker’s Mark (though, for a Mexican booze, the margaritas sure suck).Report
I don’t know if it could work out Bob. Being a neoliberal lets me have my social acceptance of my very existance cake and also lets me be cheap on the economic front (eat it too so to speak). I don’t think I could stand the stress of being a self loathing gay. I’d probably have to go Catholic, though in balance the gay Catholics have some of the coolest ceremonies and get ups. Have you seen the lace on the bishops and the Pope wears a lot of Prada I’m told… nice.Report
It is funny how Obama screamed bloody murder about Bush’s deficits until he became pres and then it became ok to run them up even more.
Bush blew the nation’s money on an ill-thought out war he decided to wage and the ridiculous pill bill. Otoh, Obama spent money to prevent a massive economic meltdown. It’s the difference between, say, life-saving heart surgery and a million-slice toaster.Report
Oh, well then. I guess since Bush did it first, we have to put up with it.
How many presidencies will we have to be quiet for before we are allowed to complain about spending? Two?
Or will we have to endure bullshit like “you didn’t complain when Obama did it” when Jeb Bush is in the White House and “you didn’t complain when Bush III did it!” when Chelsea Clinton is in there if we do that?Report
Personally Jay I’ll start my complaining at the 1 year mark and ramp up to flat out screaming about fiscal discipline by year 4 just in time for his re-election.
But come on, he hasn’t even been in office for 12 months yet. Is ten months even enough time to get your hands on the damn budget?Report
If I don’t complain this year, next year people will ask me why I didn’t complain last year.Report
Not me. But you’re a libertarian so you can complain whenever you want. It’s not like you <3'd W anyhow.Report
You can complain whenever you want to. Its in the constitution.
I think when debating deficits and spending its not reasonable to just say “look at those numbers”. We have to ask what we got for the $$$$. If we got a stupid enlargement of medicaid , a really poorly thought out war and tax cuts for the richest, then maybe that wasn’t wise. If we have to increase the debt to throw a bandage on our economy so I doesn’t bleed out, then that may be a useful expenditure.
So in a nutshell, if we buy a million slice toaster and feeds people threw a long hard winter when they had nothing= good. If that toaster only goes to make gold and platinum croissants for richy rich elites= bad.Report
And if the toaster does not do anything that, say, not taking the money in the first place might have accomplished, what then?
Because here’s what’s going to happen:
Soon people will be screaming that we needed to buy a three million dollar toaster and it was listening to the wreckers in the first place that made them hold back and “only” buy the million dollar one that ended up not feeding anybody.Report
I guess since Bush did it first, we have to put up with it.
Thank you for completely overlooking the point of what “it” was Bush did. Unless you really think critical surgery and the Cadillac of toasters are the same thing.Report
I don’t see the surgery as having been critical. I see the money as having been wasted. I see that anything bad that hasn’t happened due to the “stimulus” as being merely something that hasn’t happened *YET* and a can was kicked down the road rather than cleaned up. Moreover, the can was kicked nowhere near as far down the road as those who support the kicking think it has.
But this is stuff that I said to supporters of Bush’s bailouts at the time as well.
There ain’t no such thing as “too big to fail”.
Some lessons, I see, will only be learned the hard way.Report
Not only wasn’t the surgery critical, they amputated the wrong limb. Far from kicking any cans down the road they’ve squandered the last bit of credit making the problem oh so much worse. I hope I have a safe view of the aftermath.Report
Well there shouldn’t be “to big to fail.” But I think we were in a situation where if some big corps failed, we all we were in far deeper doodoo then we are now. You can disagree, and that’s fine, but a lot of people from all over the spectrum thought this way.Report
There ain’t no such thing as “too big to fail”.
Jaybird, there most certainly is.Report
Zeta-1 Scorpii ain’t even too big to fail.
You want sustainable, you need small to medium.
You want something that’s going to last forever, you need something more like Detroit.Report
I thought we were getting out of Af and Iraq? Whas up wid dat?
How many Americans have to shed their blood for BO to feel like a man?Report
The point is that is it is hypocritical of Obama to bash Bush for deficits and then then add to those very same deficits with spending programs of dubious economic value. Wasn’t it Obama that went on C-SPAN and stated that the US was out of money? But now the Dems want to spend $894 billion on health care overhaul?Report
it depends on what the spending is for. bush ran up deficits that gave us nothing.
if you think the total bill of the healthcare plan will just be tacked on the deficit, then you aren’t paying attention. the bill is paid for threw various cuts and increases. you can argue that those things won’t be enough and costs are still rising. but it is simply untrue that the healthcare plan is all deficit spending.Report
Isn’t US health care one of the more inefficient models around? It makes sense to switch to a less expensive model. On the other hand bailing out wall street and the banks with little to show to main street while burdening future generations with an amazing debt seems beyond the pale.Report
The “bailouts” as you call them were loans and are expected to be paid back, and in some cases have already been paid back with interest.Report
“The auto industry, AIG and other struggling recipients of the government’s $700 billion Wall Street bailout will make it “extremely unlikely” that taxpayers will receive a full return on their investments, says a new report by the Treasury Department’s independent watchdog.
About 17 percent of Troubled Asset Relief Program (TARP) loans issued since the program began a year ago have been repaid, according to a 252-page report released Wednesdayby TARP’s Special Inspector General Neil Barofsky.”
http://www.bostonherald.com/news/us_politics/view/20091021tarp_watchdog_full_repayment_unlikely/Report
True, some corps may not be able to pay it back but that doesn’t change the fact that TARP was not just a “bailout”. The gov’t never should have loaned money to the corps that couldn’t pay it back. Besides are you going to blame Bush or Obama for TARP?Report
OOH! OOH!!!! CAN WE BLAME BOTH OF THEM!!!!!!Report
It’s an “and” world. The ship is sinking; all I care about is who I can blame?Report
Sure, but isn’t it more popular to say that everything is Bush’s fault?Report
I like to blame the people that blindly supported him.Report
Back when Clinton was in office, a lot of stuff happened. Like, a lot a lot.
Towards the tail end, something weird happened. Clinton pardoned Mark (Marc?) Rich.
The righty folks started yelling about this sort of thing and the folks who, to this point, had been such staunch defenders of Clinton (seriously, some of the stuff they were willing to defend made me knit my brow) sort of deflated.
I don’t think I encountered anybody willing to give a full-throated defense of the pardon. Sure, there were the “it’s a presidential power given him in the Constitution” defenses, but the argument wasn’t that Clinton didn’t have the power to pardon the guy. It’s that he shouldn’t have pardoned *THIS* guy. As I said, the Clinton defenders visibly deflated.
I encountered Republicans who gave full-throated defenses of the bailouts under Bush. They even made references to “the children”.Report
TARP was a bailout, if not a gift. It was also necessary.Report
Not the gift part but the intervention.
Personally, I’d have wiped out the stockholders and given the bondholders a haircut and a half, if not wiped them out too depending on the severity of the situation.Report
I can buy that some sort of stimulus was/is necessary. What I question is the one we have. Why would I spend my child’s future on a company whose products aren’t fit for me to buy (GM)? Why should I want to maintain asset prices that were inflated to begin with (Housing bubble)? Why should I pay for bonuses for execs who argued for tougher bankruptcy laws then ran their own firms into the ground on speculation? It’s not that I don’t think that surgery was necessary per a previous example, it’s that the surgery we got was not only unnecessary but the wrong one. We are worse off than if nothing had been done.Report
It is much easier to start a war than end one. The logistics and politics are tougher.
We have traditionally gotten out of recessions with some form of deficit spending, be it tax cutting or spending. Up until the 80s we then either increased taxes, grew the economy or held down spending when the economy improved. This led to a steady decrease in the deficit as a per cent of GDP. That ended with the era of conservative presidents. I am encouraged that at least the debt is a topic of concern now, unlike it was for 20 of the last 29 years. As a deficit hawk I will have to wait and see if that concern translates into action.
SteveReport
Scott
“It is funny how Obama screamed bloody murder about Bush’s deficits until he became pres and then it became ok to run them up even more.”
Perhaps you should understand the context – running up the deficit in good times, and spending the money on largely destructive activities, is different from running up the deficit in bad times.
Mark Thompson
“Hrm. Accepting, for the moment, Keynesian economics as valid, it seems to me that the two quotes Dave points to help prove one of the bigger complaints about the stimulus package, namely that it was very poorly structured.”
Yes, it was. Much more of it should have been put into unemployment assistance, money to states, and infrastructure.
You can thank the GOP and right-wing Democratic Senators for screwing it up.Report
So defending this country is a waste of money? I might agree that Iraq was/is a waste (although I think we may have to wait 5-10 years to really know the answer) but not much else.Report
“You can thank the GOP and right-wing Democratic Senators for screwing it up.”
I don’t think this is quite right. For the most part, no one was opposed to stronger unemployment assistance, and comparatively few people were opposed to the money to the states. The principle GOP objection to the structure of the stimulus (as opposed to whether stimulus was appropriate in the first place, which was a different objection) was always that it was basically a grab-bag of giveaways for long-time Dem pet projects (hence the derogatory name “Porkulus”).Report
Jaybird
“There ain’t no such thing as “too big to fail”.”
Except for the whole human misery part, it’d have been nice if the GOP took that line, and didn’t do the bailout. We’d have had the US economy in the tank by the end of October, with the lights visibly turning off all over. The GOP would have been out of business for a decade.Report
The Buddha talked about this.Report
The skinny Buddha did, but the fat Buddha turned out to be too big to fail.Report
damn
what do the kids say in this situation? Win?Report