So GDP grew at 3.5% in the third quarter? Are we out of the woods yet?
Maybe. But I wouldn't bet on it.
I think we have bottomed out; I don't foresee the economy starting to contract sharply again. But I'm not overimpressed by the growth figures, for a couple of reasons. First, we had a very sharp contraction, and as the traders like to say, even a dead cat will bounce if you drop it from a sufficiently large height. Second, there's the stimulus.
When we were considering the stimulus, I got asked frequently whether it would work. That very much depends on what you mean by "work". If the question is: "can I increase the size of a measured variable by boosting one of the components of that variable," then the answer is undoubtedly "yes"--but this is trivial. We borrowed a bunch of money from abroad, and that was going to show up as an increase in GDP. But as I wrote in our November issue, GDP is at best a proxy for our well-being, not a direct measure of it. It's often a good proxy. But it's never perfect, and it's very easy to manipulate with certain sorts of government actions, most notably borrowing a ton of money from the global capital markets.
The things I think we really want to know about the economy are:
1) Is it robust enough to withstand the large sectoral shifts away from housing and related goods?
2) Are employment and compensation growing?
3) Is productive capacity improving?
4) Are people willing to invest in the future?
The answers to those questions range from "no" to a wan "I sure hope so". So the third quarter growth numbers bring me only middling cheer.
Copyright © 2010 by The Atlantic Monthly Group. All rights reserved.
4) Are people willing to invest in the future?
A friend who had been laid off started a new job on Monday. The company is growing and they are about to lease more space. The idea being that there has never been a better time to lease office space.
There are many businesses that are running lean and they are beginnign to fear that if they wait too long all the good deals on talent, office space, equipment, etc. will be gone.
I have 2,000 friends who have been working.
Their layoff will begin soon. Today, Democrat Massachusetts Governor Deval Patrick today celebrated his efforts at job creation by announcing that he'll soon lay off 2,000 more state employees.
http://www.boston.com/news/local/massachusetts/articles/2009/10/16/patrick_warns_of_2000_job_cuts/
So, running total
Hires: +1
Layoffs: -2,000
Net: - 1,999
movertyperguy,
If I give you statistics you'll come back at me with anecdots, if I give you anecdots you'll come back with statistics. You won't be happy until you're working again. We know, and we certainly understand.
I didn't come at you with anything.
I linked you to the Boston Globe which provides you with independently verifiable information demonstrating, with no spin, what's actually occurring in our economy.
Democrat Missouri Governor Jay Nixon announces massive layoffs of state employees in an effort to trim $200 million from the state budget.
http://www.newstribune.com/articles/2009/10/29/news_local/063local04budget09.txt
Democrat Pennsylvania Governor Ed Rendell announces that he's not creating jobs ... instead, he's eliminating jobs.
Democrats throughout the nation are not creating jobs. They are eliminating thousands of jobs at a time.
http://www.wgal.com/money/20314911/detail.html
Democrats are actively hurting the economy by laying off thousands and thousands of workers, many of them card-carrying good union members.
Democrat Vermont Governor Jim Douglas drops the axe hardest oon law-abiding union members in the Department of Corrections.
http://www.benningtonbanner.com/ci_13581161
Democrat Governor Douglas isn't creating jobs in Vermont ... he's laying off hard working Democrats
They will be forced to survive on unemployment compensation ... assuming Harry Reid's Democrat Senate finds time to vote on unemployment extensions.
Democrat New York Governor Paterson isn't creating jobs in New York. His plan calls for 3,100 firings of unionized government employees in an effort to close a $15.4 billion deficit.
http://albany.bizjournals.com/albany/stories/2008/12/15/daily26.html
How do Democrats expect for the economy to recover when they are actively destroying thousands and thousands and thousands of jobs?
Isn't the government supposed to be stimulating the economy? How is it stimulative to lay off thousands and thousands of workers in state after state after state?
It seems to me that when Democrats lay off people that would tend to hurt the economy ... and yet Democrat after Democrat after Democrat is announcing that instead of creating jobs, they'll be destroying thousands of them at a time.
Democrat Virginia Governor Tim Kaine announces he'll soon be doing his part to crater the economy by laying off thousands of hard working Democrats in Virginia, many of them union members.
Democrat Tim Kaine said he plans to balance a $1.5 billion budget deficit on the backs of hard working Democrat state employees by destroying thousands of their jobs.
http://www.nbc12.com/global/story.asp?s=10855001
Economic experts say that destroying jobs does not stimulate an economy. Those experts confirm that when you destroy jobs, the economic impact is always negative.
Democrat Illinois Governor Pat Quinn is no friend to Democrats, union members or workers in general.
Rather than creating jobs, Quinn has announced he'll be destroying thousands of jobs.
Quinn has announced he'll be balancing the state budget on Democrats' backs, by destroying 2,600 of their jobs. He'll be attacking the corrections union the hardest, ridding the state of over 1,000 hard working Democrat corrections officers - destroying their livelihoods and damaging their families and careers.
http://www.sj-r.com/homepage/x1528809207/AFSCME-sues-over-job-cuts
Economists say destroying jobs is the opposite of stimulating the economy. They can't understand why Democrats from state after state after state are destroying jobs when the government is supposed to be stimulating the economy.
I'm going to take a wild guess and assume that movertyperguy in general supports:
a) shrinking the government
b) not raising taxes
c) not borrowing to pay for things
d) reducing government spending
Seems to me like firing a whole bunch of state workers succeeds on all four counts, but somehow I doubt he's made the connection between such beliefs and the direct consequences of such actions.
In short, isn't firing a whole bunch of state workers a teabagger's dream come true?
"Isn't firing a whole bunch of state workers a teabagger's dream come true?
How does firing people create jobs?
Democrats make the claim that they're creating jobs and stimulating the economy. Yet, Democrat Governors have announced that, in response to the continued economic crisis, they will destroy tens of thousands of jobs.
Wait, what?
How does destroying jobs stimulate the economy?
jmo3 seems to think you're unemployed. Not sure why that would be, when it's so obvious that you're a Republican staffer.
The government doesn't 'create' jobs, so much as re-allocate them from the private sector.
"The government doesn't 'create' jobs ..."
Barack Obama says he's created (or saved) 30,000 jobs by spending $16 billion tax dollars ... a cost of $533,000 per job. Although the AP calls Obama a liar on that score, let's take him at his word.
But Obama's corps of Democrat governors have quietly announced they'll destroy the livelihoods and jobs of 30,000 mostly Democrat, mostly union workers.
So, you may be right. Obama, it seems, is spending over half a million per job created, while his Governor buddies are destroying Democrat union jobs faster than he can create them.
My company is on track to grow about 35% year over year. In the past 6 months we doubled our leased office space and hired about 20% more employees...
It's a great time to be a small business that wants to grow quickly.
Joe, can you link the 20 million unemployed people searching for jobs to your website so they can apply for your open positions.
He's just being positive. You want to stop acting like a douchebag?
You want to stop acting like a douchebag?
On the contrary. I'm trying to link the unemployed with businesses who say they are hiring.
What have you done to help the unemployed today?
As a rule, the businesses themselves are pretty good at that. It's sort of what the hiring process entails, really.
Does short selling count as investing in the future?
So like the 1.66 percentage points that Cash for Clunkers contributed to the GDP (by time-shifting demand - auto sales have since cratered) don't limpen that stiffy, do they?
This is extremely important. Auto sales in the fourth quarter have, as all economists predicted before Cash For Clunkers was passed, cratered
This will cut fourth quarter GDP and probably be the leading cause of a double-dip recession.
It's not just that ... the Democrat Congress and President dithering on renewal of the $8,000 home buyer tax credit at the end of November caused a lot of home sales contracts to lapse. Additionally, Senate Democrats dithering on extending unemployment benefits has cost billions in consumer spending declines and resulted in thousands more foreclosures.
The Democrats' inability to manage the economy is now the problem.
You understand that the $8,000 home buyer tax credit is an even bigger boondoggle than Cash for Clunkers, right?
Obama and the Democrats believe that Cash For Clunkers worked very well and that the new home buyer tax credit works very well.
Reuters reports that the program is rife with fraud and corruption, but Obama disagrees and Harry Reid just proposed in the Senate the extension of the program.
http://news.yahoo.com/s/nm/20091027/pl_nm/us_usa_congress_housing
"The economy's standing up on its own legs again, but for how long once the government stimulus starts to fade?" said Chris Rupkey, an economist with Bank of Tokyo-Mitsubishi in New York. "That's the million dollar question for the nation's unemployed -- all 15.1 million of them sitting idle, through no fault of their own."
What gives Rupkey and some other economists pause is that a large portion of the jump in consumption can be traced back to the government's "cash for clunkers" program that provided incentives to buy new cars.
Excluding motor vehicles, third-quarter GDP advanced at a more modest 1.9 percent pace.
http://www.forbes.com/feeds/reuters/2009/10/29/2009-10-29T133252Z_01_N29237920_RTRIDST_0_USA-ECONOMY-GDP-SNAP-ANALYSIS.html
Going through the motions, McArdle? This blog is getting fairly tedious.
What's fairly tedious is on the one hand the government announcing that things are hunky dorey, and then on Friday at about 6pm releasing the latest employment data showing massive layoffs and unemployment continuing its relentless climb.
Your government is lying to you about what it has done to stem the economic crisis gripping this nation. Do not for one fucking moment start your "shoot the messenger" bullshit.
Temper... temper... ;)
I generally agree with you, but we do disagree on a few things.
You, for example, believe that the administration (and congressional leadership) is more dishonest than it is incompetent. Given that we now have a whole glut of Chicago thugs running things, as well as the evidence that you and many others point out, it's a fair argument.
I, however, see more raw incompetence than I do dishonesty. Not that I disagree that these are thugs, for they most certainly are (Denver US Attorney, anyone?). Still, to me this is more about having a leader who, in large part, doesn't have a clue about what he is doing.
Hubris? Plenty.
Does he *believe* he knows what he's doing? Yes, because he's an idealogue and is steering us in a direction that he believes will work. Sort of like Jethro Bodine. Completely confident that he is going to be a brain surgeon - and actively pursuing that goal, as he understands it.
The man declared war on a News Organization, for crying out loud. We're not seeing brilliance and experience here...
You, for example, believe that the administration (and congressional leadership) is more dishonest than it is incompetent.
I believe that because the Associated Press reported that they're being dishonest.
They claim 30,000 jobs "created or saved" as a result of $16 billion in stimulus spending. However, the Associated Press looked at that claim and found that claim is total bullshit.
http://www.msnbc.msn.com/id/33522856/ns/business-stocks_and_economy/
So, yes, I get pretty angry when my government lies to me. That's dishonest. We don't pay them to lie to us. We pay them to work for us and to tell the truth to us. But they're lying to us.
Any time a government press release starts using counterfactual data to brag about that government's accomplishments(like "jobs saved"), you know right away that it's bullshit. Hardly unique to Obama's crew, though.
Then don't come here anymore. We don't need you.
"We"? Nice sense of community. Fortunately this is not a forum, meaning your idiotic comments are to be expected. Unlike the sub-par blog entries.
Seek better blog entries elswhere. There are thousands of blogs doing economic analysis. Why not go read those, since this one is so crappy according to you?
Yeah I never understood why the trolls leave their negative comment about the blog post. As if they couldn't just ignore or they think Megan will somehow "improve quality" because of their trollish comment. Idiots.
I never understood why the trolls leave their negative comment about the blog post.
It's part of a larger strategy being paid for by some Democrat donors.
It's a Saul Alinsky strategy (#13). They're trying to get Megan fired from the Atlantic (as a warning to others) and so they think that complaining about the quality of her blog posts will give The Atlantic a "reason" to fire her.
It's pure Alinsky politics. Anyone who doesn't toe their line they try to do economic harm to.
Hey, dumb and dumber, pay attention. Megan doesn't have to improve posts. She just has to get back on track.
Your lapdog loyalty is moving. But if you decide to blow my initial comment out of proportion and take it personally, it's no skin off my nose.
"Hey, dumb and dumber, pay attention."
I think you're name-calling precisely because we are paying attention. We noticed you're part of the Democrat Alinsky Corps trying to use Rules For Radicals even though you're the ones holding all the power.
Look, dude ... you're the man.
Your side hold all the keys to power. You can't speak truth to power any more because YOU are the power. Your guy is bombing civilians in Pakistan. Your guy is bashing gays in the military. Your guy is issuing signing statements. Your guy is spying on Americans. Your guy is infiltrating mosques with secret agents. Your guy is doing renditions. Your guy is torturing people at Guantanamo.
Dow down 200+ today. Always trust content from McArdle!
The US is a currency issuer, and therefore does not need to borrow dollars, the very thing it has a unique monopoly on producing, from anyone else (including entities "abroad")
Would be great if you could get this right. Tedious indeed.
Hmm. What was happening at those treasury auctions again? Right...
What was happening at those treasury auctions again?
What was happening was the Federal Reserve buying its own T-bills with $100 bills that it printed. It had to do this because there is not enough demand for US debt to pay for Obama's deficit spending.
This is commonly known in economic circles as "debasing your currency."
Then I guess you should tell the Fed to stop borrowing money and start printing faster. I guess Ben Bernanke isn't as smart as winterspeak.
And the value of that currency is set by how much the market feels it is worth.
A decade ago it cost in my market around $120 /sq ft to build a house. Today it costs around $265.
The little pieces of paper from the currency issuer are, at least in that domain, felt to be worth less than half of what they were worth a decade ago.
Derek
For the love of god, cut it with this nonsense. What you advocate is financial suicide. It's like watching a doctor advise a patient that it's perfectly possible to survive without eating - which it is, for maybe a month. The time scales are fairly similar on both, really.
Good post, Megan.
There is also the very real worries over "is the 'cure' worse than the disease?"
I see a national debt that worried me five years ago, and is now snowballing - against a global economy that almost certainly can't continue to fund it much longer, at least not without inflation.
I see a government continues to throw money that we don't have at a "health care solution" that nobody even understands.
I see a stock market that appears to be where a large proportion of this loose money and bailout has gone. If you're asking "where's the inflation from all of this monetary growth?" I point you to Wall Street. Talk about over-valued...
I see an auto industry that is essentially British Leyland, and will continue to devour tax dollars until, like Vietnam, we finally grow so fatigued that we just give up. Probably under the next POTUS, since this one has too much wrapped up in it.
And I see few, if any, changes in the regulatory environment to make me believe that we are safe from more financial insanity. Can anyone explain why we don't want to bring back Glass Steagall? Do we really want our banks to double as Casinos? Anything different over at Fannie and Freddie? Etc.
What has improved, fundamentally, in this economy? Where is the engine of growth? I'm afraid "green energy" ain't it, unless you are looking forward to something like a 20 year recovery...
Well, to get a rise in GDP, all the government has to do is spend money, fund ever greater versions of "Cash for Clunkers" and the home buyer's credit. It isn't actually hard to do for a quarter or two.
"... fund ever greater versions of "Cash for Clunkers"..."
And of course, that's exactly what they're trying to do.
Welcome to
"Cash For Clunker Refrigerators"
http://usgovinfo.about.com/od/moneymatters/a/cashappliances.htm
The numbers you can obtain in every news site. The analysis itself is bland and generic. GDP is an imperfect proxy for well-being. Really? The stimulus trivially affects GDP growth. Get outta here!
As to the 4 questions, gee, thanks a lot! We know they're important. Just asking them doesn't add anything. Economic blogging should be a little more than this.
So far today we had: a Julian Sanchez re-post, a Greg Mankiw almost re-post, ridiculous domestic appliances, and now this.
Yawn. McArdle needs to try harder...
There are a thousand other places for you to obtain your economic news, should Megan not be cutting your mustard.
Rather, I think your post is an attempt to get the messenger fired from the Atlantic. Your Alinsky-ite tactics are quite transparent.
Paranoid much?
I know there are other places. But I like this one (usually).
By the way, feel free to follow your own advice and not reply to the comments who don't cut your mustard.
I know there are other places. But I like this one (usually).
Your comment history belies your assertions.
Your comments track nicely according to the political leaning of the post. You only complain when Megan isn't cheerleading for the administration.
Completely transparent.
"Are we finally Okay?" Not by a long shot. We were headed down into the deep abyss, but seem to have halted the free-fall. Sadly, that does not mean we are in good shape. Unemployment is still high, folks are still worried about spending in case they need the cash later for, well, eating. This is not a good time.
To movertyperguy - please take your head out of wherever you are pulling it from... This situation, this recession/depression, is NOT President Obama's fault. It is the results of many year of mismanagement of the economy and the national budget. Try reading some of Ms. McArdle's entries of the past weeks - she nailed down the situation pretty well by stating the current deficit spending is an ugly necessity SHORT TERM. Now, if nothing is done about the huge deficit in the next year or so, then we have real trouble.
It would be easy for me to blame W and his cronies for the mess, but the answer is never that easy. It is true that W destroyed the budget via large tax breaks without related long term spending cuts, along with unfunded wars, along with other spending increases without appropriate revenue increases. That is the easy part... But the mess is worse than that - both parties were involved in the Medicare Part D giveaway to Big Pharma. Both parties were involved in the dirge in Iraq (although even without the Dems blessing, that would have happened). Both have been involved in in the bastardization of our tax laws and system (read David Cay Johnston's "Perfectly Legal" and "Free Lunch" to bone up on that...).
Oh, and one more little bit of information that has probably not sunk into that head of yours yet... President Obama was not born in Kenya - he was born in Hawaii. (yeah - you didn't say anything related to birthers, but just about every time I have heard right-wing drivel like yours in response to any question or comment, it has been accompanied by some sort of "Obama is not even a citizen" malarkey.)
You forgot to call him a racist also.
Well, he sort of did, in a back-handed way...
Try reading some of Ms. McArdle's entries of the past weeks - she nailed down the situation pretty well by stating the current deficit spending is an ugly necessity SHORT TERM. Now, if nothing is done about the huge deficit in the next year or so, then we have real trouble.
Next year? Try in three or four years(if even that early). I'll bet you dollars to donuts that "B-52" Ben won't raise rates at all until 2011 at the earliest. If unemployment is still 10% or higher at the end of next year, do you think anyone is going to give a damn about the deficit? How do you suggest to bring it down? Tax increases? Cuts in spending? Ending the Iraq and Afghanistan messes? All of the above?
People will care about the deficit if it leads to inflation, which is entirely possible.
Or when the creditors come a calling, as in Canada in the late 80s.
If B-52 Ben ever raises taxes, we have bigger issues in society than a deficit, like why a Fed chairman is writing tax law.
More seriously, I'm always in favour of spending cuts. It's not like there's any shortage of departments you could shutter with no great loss.
Just call him a czar, that will make the rules not apply to him.
I'll bet you dollars to donuts that "B-52" Ben won't raise rates at all until 2011 at the earliest.
He may not be able to avoid it forever. At some point, investors may want higher rates before they buy treasuries.
Iraq seems to be taking care of itself pretty well these days. Our military poosture resemables more and more that in South Korea: advice, training, tripwire.
If we abandon Afghanistan, we have to assume the attacks that have largely abated over the last eight years will start up again. 9/11 cost us trillions of dollars, so the only way it we get out free is if the Mideast spontaneously converts to Christianity or Buddhism overnight.
This situation, this recession/depression, is NOT President Obama's fault.
I agree with you.
However, I have a question: How is laying off thousands of people helping the economy? Barack Obama and his corps of Democrat governors have announced they will destroy tens of thousands of jobs in state after state.
How does Democrats destroying jobs stimulate the economy? Why are Democrat politicians throughout the nation destroying jobs?
Why has Harry Reid not allowed a vote on unemployment compensation extensions? Wouldn't that stimulate the economy? Why are they dithering?
Why did the Congress dither on credits for homebuyers? Don't Democrats want to stimulate home sales? Because if so, they could have voted 60 days ago on this extension.
They're mismanaging the continuing economic crisis on their watch by dithering and destroying jobs.
Bush isn't destroying these jobs. Obama and his corps of Democrat governors are destroying these jobs.
I doubt it is just Democratic Governors. And some of those states probably have Republican controlled legislatures(PA has a House and Senate .. of which the Senate is Republican controlled).
Missouri as well...
You didn't answer the question:
How does laying off Democrat union state workers help the economy?
Democrat governors have decided that, in response to the economic crisis, they'll fire people. There are many other ways to balance budgets, but this is the method they've all chosen ... to fire workers.
For example, I noticed that Harvard still has a $30 billion endowment that is untaxed. All that money just sitting there. And yet Deval Patrick is firing hard-working Democrats instead of tapping into all that money just sitting there. Why?
Here's another example: I noticed that Barack Obama's buddy Warren Buffett is still only paying a 15% capital gains tax rate. Why would that be? He's got so much money he's giving it away ... and yet Barack Obama has broke the promise to tax Warren Buffett at the same rate he taxes Warren's secretary.
I also noticed that Buffett is advising Obama on economic policy.
Isn't that a weird coincidence?
There are lots of ways the government could respond to an economic crisis ... but the Democrats have responded - not by going after free money just sitting there in Harvard's ginormous trust fund, not by raising Warren Buffet's taxes ... but by firing good hard-working Democrat union members.
I find that troubling.
my big theme take on the economy:
one year ago, business was freaked out. Will the banks go down? What will happen with credit? Unemployment? Is this the next great depression?
Business battened down the hatches. These was a presentation done by Sequoia Capital for its portfolio companies (and then endlessly forwarded) that basically said: do whatever it takes to get cash flow positive; its not investment time, its survival time. Business cut quickly to the very bone to make sure it was ready to survive financially. I was stunned by how quickly I saw businesses go from "everything is okay and i am investing for growth" to laying off 15% of headcount and heading to the bunker.
I think this bump in GDP is caused by business coming out of the bunker. People feel like this is simply a bad recession rather than the next depression. Many have hired back a portion, but not all, of the folks they cut. The feeling is one of caution.
I also know that there is a great deal of uncertainty about the future environment. The administration is not helping --- on taxes, regulation and capital -- Obama has an ambitious agenda but no specifics. As a business, its hard to invest in your business when the uncertainty is so high.
For example -- if you run a medical devices business, would you feel confident about investing right now to grow your business? I wouldn't without a better idea of what "medical reform" will mean. Thus, 17% of the economy is on the sidelines waiting for the new rules to be written(and as importantly, knowing how they will be applied in practice) before they know if they should invest in their business or not.
Thus -- I think until the administration gets the specifics out on what it will do on medical reform, cap and trade, financial reform, and taxation -- we will have an economy that muddles along and produces few new jobs.
That's a pretty good analysis; and explains why the current economic problems are being caused, not by George W. Bush, but by Barack Obama.
Uncertainty is an enemy; and Barack Obama and the Democrats are creating the uncertainty.
It doesn't help matters much when Barack Obama and his corps of Democrat governors are laying off tens of thousands of hard-working people in state after state after state. That alone will probably cost GDP to tank in the fourth quarter.
Economic historians agree that a big reason why the Great Depression occurred is that the government withdrew stimulus too soon. And that's exactly what the Democrats are doing when they destroy tens of thousands of jobs in state after state. It's exactly what they're doing when they dither on unemployment compensation. It's exactly what they're doing when they dither on home buyer credits.
They're causing a regular recession to become a Depression by the actions they are taking, and the ones they're dithering on.
I wonder how much the media obsession with every single piece of economic data is a product of the 60 second news cycle and the modern day 24/7 cable news/internet feeding of news stories (unless there is no such obsession and I'm just a nerd). I'm not criticizing Megan or the media for picking apart a piece of data, that is helpful in important ways. But I am just wondering how much people obsessed over GDP numbers in 1974.
And my bigger point is, it seems to me that unlike the 1987 market crash, or LTCM, or even the last two recessions, we are in for a long period of economic instability. Looking at numbers from a single quarter is not as important now as it might have been in 2001 (although I would say it was important last quarter since we saw the end of the cliff diving). The next decade or so might look like the 1970s (unstable inflation), or 1990s Japan (liquidity trap), or something else entirely different. But however it develops, I think the best view is the big picture look at all the fundamental problems in the US and global economy (from crashing commercial real estate, to significant deleveraging by the consumer and businesses, to long-term restructuring in the financial sector, to either the unwinding of Bretton Woods II or (alternatively) the growth of global imbalances through the continuance of BW II, etc)) and realizing the possibility that we're in for a long and unfortunate ride.
"... the possibility that we're in for a long and unfortunate ride."
If Democrats make the same mistakes as they did in 1929, then yes, we are in for a very unfortunate ride.
Economic historians agree that the big mistake made in the Great Depression was the pulling back of government support. And that is exactly the same mistake that Democrats are again making today.
Democrat governors from state after state have announced that, in response to the continued economic crisis, they will destroy tens of thousands of high paying jobs.
Wait, what?
How is destroying jobs going to help the economy? Where do they find these dolts? How does firing people stimulate the economy? Answer: It doesn't. Firing people has the exact opposite effect. It destroys the economy. And yet, that's what Democrat politicians have announced they are doing ... destroying jobs.
That is the wrong strategy and it will lead us into a Depression.
Democrats, in response to the economic crisis, have refused to vote on an extension of unemployment insurance benefits that cost the government nothing. Billions of dollars of quickly spent stimulus, therefore, has been removed from the economy while they dither on this issue.
They can't blame George W. Bush for dithering on unemployment extensions that cost nothing - that are paid for by insurance premiums.
That's the Democrats' fault.
Raising taxes, increasing government regulation, devaluing the currency, restricting international trade and trying to prevent prices from falling. These were all done in the early 30s and helped create the great depression. and they are all be talked about and or done by the government today. Obama is Hoover not Roosevelt!
I'm not sure who the Democrats are trying to emulate.
They're paying an $8,000 bounty for first-time homebuyers ... but they haven't passed an $8,000 bounty for businesses to hire people.
Don't you find that strange? Seems to me that if they really wanted to solve the economic crisis, they'd provide some incentives for people to be hired.
Democrat governors are firing people faster than Barack Obama can make work for them. They think, apparently, that the way to respond to an economic crisis is to destroy high-paying jobs.
Wait, what?
Don't workers buy things? Don't workers spend their paychecks supporting the economy? Don't they pay their mortgages with that money?
As for 4th quarter GDP, I have heard from good sources that a positive number will be pretty much a given due to a massive increase in paper production. No idea why.
Would this, by any chance, be funny-looking green paper with pictures of dead guys on it?
Well, immediately after I submitted that comment, I realized that your interpretation would be the dominate one. I had 2000 page health care bills in mind.
You see, you made a mistake there. You're assuming that there'll actually be more than one copy printed.
GDP for Q3, although strong from a "headline" perspective, is actually quite weak if you back out the government generated drivers of GDP growth - principally the "cash for clunkers" deal and support for residential investment. Quick analysis this evening:
http://www.rationalwalk.com/?p=3120
I'm more convinced than ever that the consumer isn't going to lead us out of this recession. The government can hardly continue to "invest" in stimulus spending forever. Equilibrium will be achieved eventually - how soon depends on whether common sense prevails here inside the beltway. We could start on this path to reality by not renewing the "first time" homebuyer credit and allowing it a peaceful death on November 30.
The most important question is, "Is it sustainable?" If you pump blood into a corpse the cheeks will turn rosy red but it's still a corpse. The fundamentals of the economy have gotten, if anything, worse since last spring. Among other things the Bush tax cuts are set to expire in 2010 and there's no sign that the Democrats are going to renew them. Housing is stalled and unemployment is still rising. Deficit spending is through the roof and there's no sign the Democrats are going to come to their senses any time soon - if anything they're going to spend even MORE in a vain attempt to stave off the inevitable beyond the next election.
I'd like to be wrong but I don't think I am.
I think you're right.
While Barack Obama says he's creating jobs on the one hand ... on the other hand Democrat governors are announcing daily the destruction of tens of thousands of jobs.
I can't get a single Democrat commenter to explain to me the economic rationale behind the Governors' theory that the way you help the economy is to destroy jobs.
Democrat Governors are destroying more jobs than Obama claims he's creating.
How is that helping the economy to rebound? Isn't that hurting the economy? Isn't that destroying people's livelihoods? Isn't that undermining their families? Isn't that busting the unions?
What was happening in those auctions were reserve accounts at the Fed being debited, and Treasury accounts being credited. It's like moving money from your checking account to your savings account.
The purpose of Treasury issuance is to drain excess reserves from the banking system, so there will be an overnight interbank lending market, and therefore an interest rate above zero.
It isn't borrowing. Which makes sense -- why would a currency issuer need to borrow (it's own currency!)?
Maybe they want to create another non-existent "trust fund" like they did 70 years ago?
"What was happening in those auctions were reserve accounts at the Fed being debited, and Treasury accounts being credited. It's like moving money from your checking account to your savings account."
No-Its more like writing checks and not caring whether or not you have the money in your account.
I agree and GDP numbers lie or do not tell entirely the truth about well being. In fact if you break down the national accounts GDP numbers are not that good and it could not be otherwise.
http://mgiannini.blogspot.com/2009/10/helpless-recovery-beware-of-gdp-numbers.html
Megan,
You should already know this, but your post doesn't really reflect it, so its time for the remedial econometrics review.
GDP is a leading indicator, you list a bunch of trailing indicators. I'm not a huge fan of GDP, but you haven't suggested any reason why the economy won't follow its normal trend with employment, compensation, and investment increases trailing GDP increases.
Beyond that, last quarter's growth was larger than all of 2007. But remember, derivatives of economic aggregates normally have fairly limited maximum magnitudes. If this represents a positive trend, next quarter's GDP growth will be probably be even larger. This is exactly what we would expect from an economic rebound as unused preexisting capacity is put back into use.
As to what significance the stimulus has had in this, it isn't easy to answer this question. It's probably going to take a bit of effort to separate cause and effect. That said, there really isn't any downside to borrowing from global capital markets during a recession when interest rates are tiny. This isn't government "manipulation" of GDP, they're actually spending real money which helps real people.
I doubt the people who got the unemployment insurance they needed to weather this downturn or the people who got jobs because of the stimulus or a competent economist would take such a cavalier attitude with the consequences of this policy.
"... or the people who got jobs because of the stimulus or a competent economist would take such a cavalier attitude with the consequences of this policy."
What about all those jobs Democrat governors are destroying? Is that helpful to the economy? Is the way to solve an economic crisis to fire people.
Democrat governors across the United States have uniformly announced that they will balance their budgets on the backs of working men and women by destroying tens of thousands of jobs. Where is the logic that leads Democrat Party governors to conclude that the way to help the economy is to fire hard working men and women in their states?
Is that approach stimulative of the economy?
Democrat governors across the United States have uniformly announced that they will balance their budgets on the backs of working men and women by destroying tens of thousands of jobs. Where is the logic that leads Democrat Party governors to conclude that the way to help the economy is to fire hard working men and women in their states?
Do you really think they have a choice? States cannot print money, which means they need to limit their deficit spending. Tax revenues are down drastically, since sales, income, and property tax bases have all fallen. At the same time, demands for social benefits are quickly rising, and public safety and public works demands never go away.
State legislatures (and Governors, since you seem to be obsessed with them at the moment) are stuck. Revenues are down, and the "easy" cuts were made in past years. That leaves painful cuts as the only answer.
Do you really believe any Democratic legislature (or Governor) would lay off thousands of their fellows if they had another choice?
And that's all without getting into the argument that the hard-working men and women you're rending your garments over are somehow worth more than all the hard-working men and women who've lost their private-sector jobs to pay for those State workers in the first place.
Lets see, the dollar is worth about 10% less, and we had 3.5% growth, so that puts us pretty far behind.
LOL! Alsadius -- instead of resorting to colorful metaphors, why don't you go through the actual accounting transactions that take place when a Treasury is bought (ie. a reserve account is debited, and a Treasury account is credited). Or read Mervyn King on suspending debt auctions in the UK. Or read anything by Warren Mosler or Randall Wray.
Everyone agrees that the US is no longer on a gold standard, and that the Govt is a currency issuer, and then they make all kinds of claims that apply for currency users, but not issuers. American Airlines is the monopoly issuer of american airline miles, why should they need to "borrow" them from anyone? Don't you think it's a little weird that an entity which can uniquely create and uncreate something at will (through spending and taxes) needs to go and "borrow" it from third parties who cannot produce it at all? Does that make sense to you?
You simply cannot understand financial or monetary operations without going through the accounting.
Again, go through the mandatory readings on Moslereconomics, or some recent posts on Naked Capitalism, or read Billy Blog. Lots of good sources out there, I think you will find them interesting.
You forgot
5) Will the trillions in new taxes Dems have on the table smother this recovery in the cradle?