The Economist reports, in America's economy: Distress signal, that the downward revision in economic statistics for the US, released this morning, shows that the economy is in much worse condition than we thought, and, also, that the last three years of downturn have been worse than we thought.
America's economy expanded at a 1.3% annual pace in the period from April to June of 2011. That was less than economists expected. ...
The Bureau of Economic Analysis initially pegged first-quarter growth at 1.9%, only to revise that figure down to 0.4% growth in the new release. Government represented a significant drag in the first quarter, chopping 1.23 percentage points off of growth, 0.41 precentage points of which were due to state and local cuts, and 0.74 percentage points of which can be chalked up to declining defence spending. Indeed, the new report reveals the extent to which government has been an obstacle to recovery. In five of the last seven quarters, government has contributed negatively to growth, again thanks mostly to large state- and local-government cuts that offset the federal government's modest attempts at stimulus.
I guess a lot of folks owe Paul Krugman an apology for being so critical of his warnings that the stimulus was no where near large enough. In a typical counter-cyclic strategy, we attempt to offset drops in consumer demand, and business investment, with increases to government spending.
Not only are we not discussing this, now, we see both political parties playing a game of "'who can cut government spending the most."
The agreements the US politicians are converging on, are to cut government spending by $1 trillion in the Boehner Bill, or $2.4 or more in the Reid Bill, both threatening to drive the economy down even lower.
The picture grows bleaker the farther back one looks. BEA revised its national accounts numbers back to 2007 for this release, and the picture revealed is far darker than anyone previously believed. From 2007 to 2010, real output declined by 0.3% per year on average. Previously, BEA had estimated annual growth of 0.1% over that period. The decline in output during the intense period of financial crisis was significantly more severe than economists had thought. In 2008, the economy shrank 0.3%, rather than holding flat, as earlier estimated. In 2009, the economy shrank 3.5%, worse than the earlier 2.6% projection. During the ugliest months of the crisis, in the fourth quarter of 2008 and the first quarter of 2009, output declined at a shocking 8.9% and 6.7% annual pace, respectively. It is now clear that the American economy has yet to reattain its previous peak in real output, achieved three full years ago.
Robert Reich, Paul Krugman, and Joseph Stiglitz warn that unless we provide a larger fiscal and job stimulus, instead of the bipartisan support for various degrees of spending cuts, we risk a double-dip recession, or lessor depression. The Economists warns that, "Washington should delay immediate fiscal cuts. Indeed, it ought to be spending more now and revisiting the possibility of a payroll tax cut."
But, sadly, this is not being discussed, as far as I can tell. It looks to me like history books will report this period in a way similar to the Smoot Hawley Tariff Act of 1930.
We are building a road to hell paved with good intentions, incompetence, and lack of courage.
The few who know what is going on, are not being listened to, but, also, we are not escalating our voices to more aggressively confront, and warn the majority, who are now, not just driving us into a ditch, but, are driving us off of a cliff.
Since movie metaphors are becoming the new fashion for making political arguments, we might say that instead of saying "enough is enough," like Samuel Jackson, on Snakes on a Plane, and invoking the 14th Amendment, or the Jumbo Sovereign Coinage Act, President Obama, and the Democrats, are choosing to join hands with the GOP, and channeling Thelma and Louise, as they drive our economy off a cliff, while holding hands, comforting each other, that no one can blame one party more than the other.
Fri Jul 29, 2011 at 11:41 PM PT: Even Fareed Zakaria says on Anderson Cooper tonight, that he hopes to goodness that President Obama is considering invoking the 14th Amendment in this national emergency.
We can only hope..
Well, we could also write diaries, call politicians, and raise heck, but I''m tired and almost all the diaries I write this late, drop off the recent list before dawn.
Maybe tomorrow we can get some folks to bang some pots together and make some noise.
Cheers, and good night.
Fri Jul 29, 2011 at 11:52 PM PT: Hey, thanks to all the kind people who put this on the Recommended List. I had decided to stop publishing this late, but I'm glad I mad an exception tonight.
I invite you all to use this as an OPEN THREAD. I'm going to try to sleep for a few hours, and if this is still up, I'll join back in. Until then I hope you all will keep the discussion going.
It may be too late for folks like us to have a positive impact on our common good, and Washington politicians. But, coming from, the Larry Bird generation of Boston Celtic fans, we never give up until after the game is over.
We've seen too many come from behind miracles.
Let's keep hope alive, as Jessie Jackson like to remind us.