Economic Growth Not as Robust as it Appears

by Sal on February 1, 2010

in Economy,Election 2010,Election 2012,Politics

Last week, economic data came out that showed a robust 5.7 growth rate in GDP in the fourth quarter of 2009.  While many of us rightly celebrated the return of American prosperity, it appears that the number may be slightly misleading.  Investors Business Daily has done an analysis on the GDP growth, and shows it is actually the result of economic weakness, not strength.  It appears that much of the growth was the result of the clearing of inventories, a contributor to output certainly, but more a sign of underlying weakness rather than strength.  IBD looks at other indicators in the economy and paints a very bleak picture of where we are at.

Another piece worth noting is an analysis of the economy and the stimulus bill by economist Peter Morici, entitled “The Economy is in Shambles” describes how our economic situation is even weaker than conventional wisdom dictates, and that the stimulus is doing nothing to promote growth.  Morici looks at the fundamentals of the economy and how the policies of this administration have led to a situation where real economic output is being displaced by government, causing an inflated GDP figure that doesn’t have any real sustaining power.

In the end, Obama’s economic policies will hurt the U.S. economy.  Even the rosiest of economic predictions don’t see much improvement in the unemployment rate in 2010, and only modest growth in GDP.  Yet it’s what may happen in 2011 that gives cause for concern.  On December 31 of this year, the Bush tax cuts expire, costing individuals and businesses a huge sum of money that could otherwise be invested back into the economy.  The fallout from the tax cuts expiring could well be felt in mid-to late 2011 and into 2012 as we gear up for another presidential election.  The improvements being seen in the economy today, although modest, are welcome.  The economic outlook going forward, however, is not so bright.  As long as our elected officials in Washington look at Government as the solution to this current crisis instead of the problem that created it, the economy is doomed to sputter along at best, and at worst, crash really hard.

{ 3 comments… read them below or add one }

Mike February 1, 2010 at 1:14 pm

Hold on a minute. My post on this topic never “celebrated the return of American prosperity.” I merely stated that a quarter of economic growth is a good thing.

My point was that Obama shouldn’t overhype the news precisely because the numbers don’t appear as strong beneath the surface and because the President’s policies would have a negative effect on the economy.

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Sal February 1, 2010 at 2:48 pm

Sorry – poor phrasing of words on my part. Wasn’t criticizing you of anything. You’re right that a quarter of economic growth is a good thing, as I pointed out that you “rightly” celebrated it. I was just adding some color to some analysis that I found on the numbers.

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Mike February 1, 2010 at 4:16 pm

lol.

I was afraid I was about to see some doctored footage of myself singing “Yes We Can Mmm Mmm Mmm.”

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