Towards the end of 2011, projections showed sluggish economic growth in the first quarter of 2012, and most analysts expected output to grow at around an annualized rate of 1.8 percent. However, when the economy appeared to pick up steam in the late winter, expectations shifted, and most believed we'd see GDP growth around 2.7 percent.
The newly released GDP numbers, then, are not at all welcome. They're better than we expected in December, but far short of what we expected this morning.
The U.S. economy slowed more than expected in the first quarter, the Commerce Department reported Friday. Real gross domestic product rose at a 2.2% annualized rate in the first quarter, down from a 3.0% increase in the fourth quarter. Economists had expected a stronger 2.7% growth rate. The big story for the first quarter was the slowdown in business spending and inventory investment. The government sector also dampened growth. This weakness was partially offset by stronger consumer spending and exports.
Growth at 2.2 percent is better than what we saw in most of 2011, but that's not saying much -- 2011 was a major disappointment. What's more, while 2.2 percent wouldn't be an awful number under normal circumstances, the point is the status quo isn't normal at all. Given the severity of the Great Recession, and how much ground there is to make up, we need to see a significantly higher number.
More jarring still is the realization that we can do little more than hope conditions improve on their own. The Federal Reserve appears completely unwilling to take additional steps, and Congress simply lacks the ability to pass effective economic legislation given the Republican agenda. Even if Americans wanted to see policymakers take action to grow the economy and create jobs, Americans' choices in the 2010 midterms mean there's very little that can be done.
With that, here's a chart showing GDP numbers by quarter since the Great Recession began. The red columns show the economy under the Bush administration; the blue columns show the economy under the Obama administration.
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It takes $2.52 in new debt to increase $1 of GDP.
http://www.zerohedge.com/news/chart-day-change-q1-american-debt-and-gdp
This continues only if one has no intention of paying said borrowing back.
The same can be said for money used to finance an investment which pays off more than the original debt plus the debt service.
I agree, though, let's not increase debt to raise gdp, let's raise revenue, and in order to do that, you must go where the revenue is (those making more than $1mil/year etc...)
How do those numbers compare to the European and Chinese numbers? I bet we are ahead of the Europeans and the Chinese are feeling some disappointment.
Let's be honest, the world is becoming one economy. When one trading block, say the Europeans, enact severe austerity, it hurts everybody. Our numbers don't look as good as we would like, but they look a whole lot better than we should expect considering the dive the Europeans took off the austerity cliff.
Europe is in the toilet, but China is trying engineer a slowdown and reported 8.1% for the latest quarter from 8.9% in the previous quarter. China is doing very well Ron.
Shooter242, the classic ways to get out of debt are to (1) raise revenues by raising taxes, (2) increase the size of the economy by increasing markets for domestic goods and services (which also raises revenues) and (3) let the inflation genie out of the bottle which is very dangerous.
Enacting a severe austerity plan like the Ryan budget merely hurts helps the economy spiral down the drain faster. To use the lame family analogy, you don't get out of debt faster by not buying food. Instead you and your family starve to death so you don't care about your debt. Austerity is sort of like treating a tummy ache by hitting yourself in the head. You just don't notice the tummy ache so much because your head hurts.
Ron ; Please don't feed the trolls
Krugman has a nice article out today. It's right up the alley for TRMS, it includes fun phrases like the "confidence fairy" and "austerians".
http://www.nytimes.com/2012/04/27/opinion/krugman-death-of-a-fairy-tale.html?_r=1&hp
Is it would be better (and admitedly much more painful) to just let the economy recover at a 2-3% rate? Would it create a more stable long term economy?
If the government or fed push a lot of stimulus, it will probably just create a bubble of one sort or another that will pop 5-10 years down the road and we'll be back in the same position.
I don't know, but I wonder what an economist would say.