The U.S. economy posted a stunning drop of 0.1 percent in the fourth quarter, defying expectations for slow growth and possibly providing incentive for more Federal Reserve stimulus.
The economy shrank from October through December for the first time since the recession ended, hurt by the biggest cut in defense spending in 40 years, fewer exports and sluggish growth in company stockpiles.
The Commerce Department said Wednesday that the economy contracted at an annual rate of 0.1 percent in the fourth quarter. That’s a sharp slowdown from the 3.1 percent growth rate in the July-September quarter.
The surprise contraction could raise fears about the economy’s ability to handle tax increases that took effect in January and looming spending cuts.
The story does mention that “one-time factors” might be responsible for the economic contraction. One certainly hopes that the contraction is not part of some broader trend that might herald yet another recession. However, it would be a good idea—you know, just in case we are in the midst of some larger economic slowdown—to reverse the tax increases that became part of the fiscal cliff deal. Of course, this would mean that we would have to get the approval of Democrats to lower taxes and let people keep more of their money; always a tricky enterprise.
Still, it is worth it to have Republicans push to lower recently raised taxes—including the payroll tax, which is hitting the middle class hard. It ought to go without saying that in this case, good economic policy is also good politics; by trying to repeal the payroll tax increase, Republicans will be able to get more money in the hands of middle class voters and counteract the perception that they only favor tax cuts for the rich. Note the story’s reference to the fact that “a key measure of consumer confidence plummeted this month after Americans noticed the reduction in their paychecks, the Conference Board reported Tuesday.” That alone ought to raise alarms and prompt an effort to bring an immediate end to the payroll tax increase.
If news about an economic contraction alarms you, and makes you wonder whether your ability to provide for yourself and your family, to keep a roof over your heads and put food on your tables—not to mention enjoying the occasional indulgence like, say, eating out, going to a movie, or having a decent vacation—is put at risk, well, that’s just because you don’t see the beauty in the entire situation:
In response to the news today that the economy contracted -.1 percent in the final quarter of last year, Democrats are touting the claim that this is “the best-looking contraction in U.S. GDP you’ll ever see.” The claim was originally made by chief U.S. economist for Capital Economics Paul Ashworth.
“The drag from defense spending and inventories is a one-off. The rest of the report is all encouraging,” Ashworth also claimed.
The claim was quickly seized upon by Democrats, looking to share good news about a contracting economy.
There. You see now, gentle readers? Once you learn to appreciate the aesthetic delights of our current economic predicament, all of your troubles will melt away. Until the collection agencies call, of course.
Mind you, in the event that the aesthetics of the situation stubbornly refuse to appeal to you, the Democrat-in-Chief has another excuse handy:
White House press secretary Jay Carney laid the blame for a surprise economic contraction squarely at the feet of congressional Republicans Wednesday, saying economic threats during the “fiscal cliff” negotiations had prevented important defense spending.
“Our economy is facing a major headwinds, and that’s Republicans in Congress,” Carney said.
Recall that during the election campaign, Barack Obama told us that the economy was improving, that it would continue to improve and that he deserved the credit for the improvement. Now that we learn that the economy has contracted, we also learn that Barack Obama has suddenly and magically lost his powers of economic omnipotence and that the downturn is all the fault of Republicans. One wonder when this administration will be mature enough to concede that bad things can and do happen on their watch—things for which they are responsible. At the very least, I suppose that we have to give thanks to a merciful God for the fact that the administration has not blamed George W. Bush for the downturn.
At least, not yet.
I recognize that this has been something of a downer as far as blog posts go, so let’s end it on a high note:
The IRS is doing a better job at getting new employees on board quickly, a new federal audit has found.
The Treasury Department’s inspector general for tax administration found that the IRS has almost met the goal, set by the Office of Personnel Management, to bring on new hires in 80 days or less.
By contrast, the agency said in 2009 that it was taking an average of 157 days – or roughly five months – to hire staffers.
I guess the jobs are where the action’s at.