GDP Report: austerity failing in the US

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Here is a link on a reading of the latest economic numbers, written by Prof. Thoma.

http://www.cbsnews.com/8301-505123_162-57367498/gdp-report-austerity-is-stifling-the-recovery/

He breaks down the economy, and the latest GDP growth numbers. And he explains it in a fashion most Teabaggers can understand.

The most important paragraph is:

That leaves government spending. However, these numbers are moving in the wrong direction, and that is unlikely to change given the emphasis on reducing the long-run budget problem. In fact, premature austerity -- cutting spending before the economy is ready for it -- is taking a toll on the recovery. The fall in government spending reduced fourth-quarter growth by 0.93 percent; if government spending had remained constant, GDP growth would have been 3.7 percent, rather than 2.8 percent.

If you cut spending, you contract the economy. In the rebound from the worst recession in 80 years, austerity is not a smart play. But We had us some real gol' darned teapartiers, and theys cut at the Feds, and theys cut at the states, and theys cut at the local level.

And now they're policies are retarding growth, by 0.93% in the 4th quarter. Thanks, conservatives for wrecking the world economy.

Phaedrus76's picture
Phaedrus76
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Sep. 14, 2010 8:21 pm

Comments

Austerity is a really dumb answer to recession. It never works as its proponents say, and cannot. It is a matter of symbol and substance. Protecting the symbol instead of the substance is insane.

DRC's picture
DRC
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Jul. 31, 2007 4:01 pm

DRC..........It might work if you're trying to get rid of the current president. I personally think what the fleecebaggers and the rest of the republicans have done to this country the past 3 years is going to come back and bite them in the ass. I keep hoping people can't be that stupid to fall for their crap time after time. Maybe this will be the year they finally wake up from their 30 year slumber they have been in.

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Sprinklerfitter
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Sep. 1, 2011 6:49 am

Remember to listen for the phrase "at the rate of" when they publish/talk about quarterly GDP.

The news story was about a 4th Qtr preliminary 2.8% number being revised upward to 3.0%.

I think I heard about 100 statements that GDP for 2011 was 3.0% and that the GOP was doing all its crazy stuff to try and draw the attention away from such good economic news.

The fact is, yes, GDP was a positive number for 2011. But the number for the year is 1.7% as shown in the annualized part of the same report.

The quarterly (at the rate of) numbers from the same report are: 0.4 and 1.3 and 1.8 and 3.0 for quarters 1 thru 4 respectively.

Don't use the 3.0% number as an annual figure unless you want them throwing that back in your face later.

So it's clear, the GOP don't need a special reason to do their crazy crap.

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Rodger97321
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Jul. 31, 2007 4:01 pm

Rodger, the point is, using the quarterly gdp measure, growth was retarded by 0.93% directly because of teabaggers' austerity at the federal, state and local level. So over the whole year we would have grown 2.6% instead of 1.7%.

Phaedrus76's picture
Phaedrus76
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Sep. 14, 2010 8:21 pm

We should probably institute a little more austerity so we can get growth down to zero. Then we'd have a reasonable reason to eliminate the rest of our social safety nets.

Tax revenues would continue to plunge. Bankrupt cities, counties and states would demand safety nets be done away with.

Open up the parks for cardboard tents and dumpsters for cafeteria-style dining. Waste not, want not..

Retired Monk - "Ideology is a disease".

polycarp2
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Jul. 31, 2007 4:01 pm

Europeans are starting to wake up to this insane idea that austerity will get us out of this mess. Some have even admitted that what they need is economic stimulus. Help the working class. GASP!!

smilingcat
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Sep. 23, 2010 9:14 am

Think unit solidarity. Make the weakest link stronger. Even if it is military realism, it is socialism in practice. Suck on that one, cons.

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DRC
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Jul. 31, 2007 4:01 pm

Absolutely, DRC. Do more to strengthen the weakest members of the team. More education, stronger laws for stronger unions to raise wages, return to tarrifs to protect domestic jobs, and regulate the banks the way we did prior to Reagan.

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Phaedrus76
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Sep. 14, 2010 8:21 pm

Actually, it's regulate the banks as we did prior to Dem Pres. Clinton.

Reagan did away with Savings and Loan regulations and watched them fall like dominos. . It was the Outsourcing King Clinton who eliminated the critical regulation for banking.

Retired Monk - "Ideology is a disease"

polycarp2
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Jul. 31, 2007 4:01 pm

No question that Mr. DLC Triangulator was the best Republican Emperor in the line before Obama. But, the free trade, GTO philosophy did not come from Democrats, they only bought into it and enabled it. I blame Clinton along with the rest, but the brand is not something Democrats have to own equally.

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DRC
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Jul. 31, 2007 4:01 pm

But the banks now control the world economy and are FORCING austerity in Greece and now Spain. The republicans with their constituents in the religious cult of born agains in the tea party are helping the elimination of the middle class here and slowly the republcians will deny them their government assistance. Then they will.......

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Liberal and Proud
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Mar. 12, 2012 5:32 pm

Go Iceland! Go Argentina! There is a better way to let the banksters use their money for wallpaper.

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DRC
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Jul. 31, 2007 4:01 pm

Really liking RT, caught Thom's show for the first time. I don't know where to begin, so I'll try to sum up why you're all wrong-about most everything.

1. All public money comes from private profit.

2. Profit is good. It means something was taken from lower value, and made more valuable.

3. When government takes people's profit, they move it's value down, it doesn't matter what they spend it on. Remember the government can't pay for anything, they have nothing, except what they take from people (which ultimately originated from the profit of private activites)

If you believe the government can help the economy by doing anything besides going away, you've been reading the wrong books, watching the wrong show, talking to the wrong people.

Hope these facts help you all in understanding how the government can fix the economy, and why they can't.

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Claymoet
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Mar. 13, 2012 6:57 pm

Is it really worth my time to even respond? probably not.

Government spending on infrastructure allows for private corporation to conduct business. Whether clean water, roadway to transport raw material/supplies and to ship final product. The externalities most right wingers conveniently disregard.

This aspect was true in Roman times. the middle ages, and today. And it was the government speding on public works program to pull the economy out of the 1930's depression. Money was created through issuance of bonds which people purchased. But then you'll claim that it is the private profit that went to pay for the bonds... This again ignores the externalities which made the whole thing possible.

You think clean water, well educated populace, stable source of power, and utilities are all free for the taking. This happens only because of the government regulations. And the regulations and government intervention in many cases, allows for smoother and more efficient commerce.

I'm tired of stupid idiotic comments by those who are willing to parrot the garbage they hear, "fair and balanced" propaganda.

smilingcat
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Sep. 23, 2010 9:14 am

http://delong.typepad.com/sdj/2012/03/real-government-spending-in-two-recoveries.html

For those who propose we do the "conservative" thing, and follow the lead of St Ronnie Reagan.

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Phaedrus76
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Sep. 14, 2010 8:21 pm

I think that austerity can work, if applied in the right places. Cut defense spending and take half of what you cut and apply it to where it's needed most. Whether that is infrastructure or social programs. Whatever makes the most sense at the time. If it were your home you wouldn't spend all your money on guns in order to protect your family while they are starving to death in the basement. You wouldn't spend all of your money on guns and new door locks if your roof was leaking and the furnace went out. Just saying.

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Bush_Wacker
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Jun. 25, 2011 7:53 am

Sure, I'll bite. Let's see what we have here.

Quote Claymoet:

1. All public money comes from private profit.

Wrong. Wrong, wrong and wrong again. When speaking of the Federal Gov't, they are the source of money. When the Federal gov't spends, it does not have to take anything from private profit. It just adjusts numbers in someone's account. All gov't spending is doing is moving resources. If the resources are not being used to begin with, no one looses anything. (The same is not true of state gov'ts.)

Quote Claymoet:

2. Profit is good. It means something was taken from lower value, and made more valuable.

Sure, I'll buy that. Sort of.

Quote Claymoet:

3. When government takes people's profit, they move it's value down, it doesn't matter what they spend it on. Remember the government can't pay for anything, they have nothing, except what they take from people (which ultimately originated from the profit of private activites)

See above. The gov't can pay anything they want. Money is no object. Only resources are. If the gov't gives someone money to do something (build a road, a bridge, a jet fighter, whatever) wealth is created when they do that work. Before there wasn't a bridge, now there is. This is what you refer to as 'profit' in your second point. The construction companies will make a profit - the gov't is the customer. The gov't has only taken some steel, concrete and workers form the private sector. But, since the uneployment rate is (nominally) around 9%, they are not really taking workers from the private sector. Since the construction industry is in a slump, they are not really taking concrete and steel from the private sector that is not using it.

Because we are essentially in a depression - resources are being under-utilized, and people are unemployed - the gov't can put those people and resources to use without taking from private 'profit' or without triggering inflation. In fact, it would be adding to private profit by employing those resources.

Quote Claymoet:

If you believe the government can help the economy by doing anything besides going away, you've been reading the wrong books, watching the wrong show, talking to the wrong people.

I'm afraid you have been reading the wrong books, watching the wrong shows, talking to the wrong people. You can just watch the news. Austerity (Europe) is catastrophic to an under-performing economy. It's great for people who want to buy up everything cheaply. It's called looting. Greece is being looted by the banks.

Quote Claymoet:

Hope these facts help you all in understanding how the government can fix the economy, and why they can't.

Your 'facts' are based on a premise that long ago fell apart and was cast aside. What you say may hold true in an economy that uses the gold standard, but ours (nor any current economy) does not. The gov't does not need from you what it can freely create, US dollars. The economy, on the other hand, needs US dollars to put things to work. That is the way money works today. That is why austerity does not, and has never worked. The gov't can and must fix the economy. Nothing else will.

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planetxan
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Jul. 31, 2007 4:01 pm
Quote Bush_Wacker:

I think that austerity can work, if applied in the right places. Cut defense spending and take half of what you cut and apply it to where it's needed most. Whether that is infrastructure or social programs. Whatever makes the most sense at the time. If it were your home you wouldn't spend all your money on guns in order to protect your family while they are starving to death in the basement. You wouldn't spend all of your money on guns and new door locks if your roof was leaking and the furnace went out. Just saying.

That is not austerity if the gov't just shifts spending.

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planetxan
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Jul. 31, 2007 4:01 pm

Planetxan wrote: The gov't can pay anything they want. Money is no object. Only resources are. If the gov't gives someone money to do something (build a road, a bridge, a jet fighter, whatever) wealth is created when they do that work. Before there wasn't a bridge, now there is. This is what you refer to as 'profit' in your second point. The construction companies will make a profit - the gov't is the customer. The gov't has only taken some steel, concrete and workers form the private sector. But, since the uneployment rate is (nominally) around 9%, they are not really taking workers from the private sector. Since the construction industry is in a slump, they are not really taking concrete and steel from the private sector that is not using it.

Because we are essentially in a depression - resources are being under-utilized, and people are unemployed - the gov't can put those people and resources to use without taking from private 'profit' or without triggering inflation. In fact, it would be adding to private profit by employing those resources.

poly replies: Always glad to see someone with an understanding of how things function.

When there is idle capacity, and idle workers, government can simply create and spend the money into existence to rectify it. It needn't borrow a dime. It can simply create the money and spend it to utilize idle capacity.The money it spends creates the wealth (real stuff) to back it.

When the economy is functioning at full capacity, then government has to utiize existing money already within the economy through borrowing, otherwise it generates inflation..Then and only then, is it re-directing money/resources within the private sector. .

However, if a government borrows through fractional reserve banking, it isn't utilizing existing money within the economy. It's borrowing more money into existence. Inflationary.That's been the preferred borrowing proceedure for a long time.

Retired Monk - "Ideology is a disease".

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