Stagnant Economy And Growth In Spending Is A Super Failure
November 22, 2011
Our economy needs to grow at a rate of 2.5% per quarter in order to grow the economy and bring the unemployment down. The Commerce Department reported a 2.5% growth rate for Quarter 3 and the Democrats couldn’t wait to hit the talk shows to tout this as a sign that their policies are working. It’s too bad that the Commerce Department revised their estimates back down to a measly 2.0%. The economy is not growing at a rate to sustain government spending. When you pair this with the Supercommittee’s failure to reach a deal that “cuts” $1.2 trillion from the budget, it is a super fail for all of us.
“Despite the downward revision, last quarter's growth is still a step-up from the April-June period's 1.3 percent pace. Part of the pick-up in output during the last quarter reflects a reversal of factors that held back growth earlier in the year.”
That may be a “step up” when you compare these numbers to the recession. Our average GDP is 2.0% and economists predict it will be less than 2.0% when we close out the year. The fact we went up .5% in GDP after a recession means our economy is not recovering.
We are stabilizing, not growing. Only in Washington will you hear politicians hailing that a stagnant economy is a success and a decrease in a standard growth rate is a cut. The Supercommittee was tasked with cutting $1.2 trillion from the budget in 10 years; a task they failed to complete. This will now cause a “trigger” of $1.2 trillion in cuts across the board. The trigger is not really a cut. Instead, it’s a reduction in overall spending growth, not cuts from current spending levels.
There’s a public misconception that Congress is making cuts, but they aren’t cuts. Let’s say a family of four’s budget for 2011 is $100,000 and their predicted budget for 2012 is $160,000 because they’re expecting a raise. They end up not getting a raise as high as they thought, so their budget for 2012 is $130,000 – that is not a cut, just a reduction in what they thought they would get. They are still spending more.
See this graph courtesy of Veronique de Rugy from the Mercatus Center at George Mason University:
The economy is not growing and government is not cutting. Do not let them fool you.
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