We’re Not Done with Bad Economic News
Mollie Hemingway noted this story earlier, but I feel like throwing my two cents in. It might, after all, help the economy. Link:
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.
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Comments:
Mar '11
Re: We’re Not Done with Bad Economic News
I believe this is what they call the peace dividend.
Oh, wait... more a peace recession.
Just as well we have peace in our time.
Oh, wait... this means it will be permanent.
Re: We’re Not Done with Bad Economic News
Indeed, the bad news is just starting. As Art Laffer might put it, growth numbers for 2012 were goosed by borrowing economic activity from 2013. Since corporate executives, entrepreneurs and basically everyone--with the notable exception of those quoted by the press in recent days--knew that taxes were set to skyrocket this past January 1st, they rationally moved as much income ahead into last year as possible.
So 2013 is bound to be a lower growth year than it otherwise would have been.
Think I am overstating matters? Just ask stalwart liberals like Al Gore or George Lucas.
Jan '11
Re: We’re Not Done with Bad Economic News
Other than ideological PR victories on social issues ... just exactly what does this administration have to brag about?
Is there anything that they can point to, that they actually did, that's a positive story? Economy? Foreign policy? We didn't win Iraq and Afghanistan, but we weren't defeated, either. We just stopped caring about it. Syria? Egypt? Benghazi?
bin Laden? Oh right, when Obama personally killed the ... well, he ordered the attack ... after Valerie Jarrett advised him three times not to go because it might backfire politically.
Healthcare? Nah, let's not even go there.
Forget Romney and the November victory. What triumph does this Gang have to point to?
May '12
Re: We’re Not Done with Bad Economic News
Because if stimulus can get us to -0.1 percent, more stimulus can get us ... where, exactly?
Mar '11
Re: We’re Not Done with Bad Economic News
Hmmm, what might have happened in October, November, December that might have directly dampened growth. Hard to think of anything.
It certainly couldn't have been that November Tuesday, could it?
Mar '11
Re: We’re Not Done with Bad Economic News
It is Cash for Clunkers writ large. While the program was in place, anyone who thought they might buy a car in the near future took advantage of the subsidy and made the purchase right away. When the program ended, car sales fell like a stone – all the demand had been sucked up already. Oh, and since the supply of used cars was reduced, the price of used cars went up, and those sales went down too.
On the bright side, this means we'll have to have another Recovery Summer! Just like the other ones.
(we are so screwed.)
Aug '10
Re: We’re Not Done with Bad Economic News
Gosh. That's some pretty bad news. Think it will handicap his re-election chances in 2016 ?
Oct '10
Re: We’re Not Done with Bad Economic News
Let us all hope Obama doesn't demand the return of what was, let me remind everyone, his payroll tax stimulus. We simply don't have the money to pay for it; we just don't.
May '11
Re: We’re Not Done with Bad Economic News
Deduct another 2% due to the undercounting of inflation and the only thing keeping our economy even remotely alive was the run on firearms and ammunition.
Dec '12
Re: We’re Not Done with Bad Economic News
I am concerned that Americans (including Republicans) have become too addicted stimulative measures whether from tax cuts, Federal Reserve easing, or borrowed government spending. We are like cocaine addicts that can't function without stimulus. You don't treat an addict by giving them another hit every time they start to feel bad. You have to let them crash, suffer, and then you can start the recovery.
The focus on short term economics is how we got where we are. If we are ever going to get to growth again, we have to squeeze out the expectations on Wall Street that the Fed and the government is going to bail us out every time the economy suffers a boo boo. That includes tax cuts!
Edited on January 31, 2013 at 5:51amMay '10
Re: We’re Not Done with Bad Economic News
Hey, it's obviously Bush's fault. And we also blame global warming.
Re: We’re Not Done with Bad Economic News
From the perspective of this president, the beauty of the 22nd Amendment is that life is consequence-free now.