Monthly Archives: June 2013

Sequester Drag add

And today we highlight Ed Dolan’s take on 1st quarter growth. He too points to the government as a major impact:

“Shrinkage of the government sector, which has had a negative impact on growth throughout the recovery, was more rapid than previously reported. Every sector of government—federal defense and nondefense, state and local—made a negative contribution to growth in Q1.”

Take a look here for the impact, positive-negative, of different sectors contribution to growth:

Not sure how the belief that cutting government right now is good for the economy is staying alive. Or maybe it’s just that our representation has vowed not to agree to the “other guys” idea. But the data is pretty strong. My hunch is we’ll see the impacts of this slowdown in next months labor data. If there is goodness here…it’ll likely be the Fed easing off the QE taper talk. Then at least someone will still be pushing money into the system.

The Sequester Drag

I’ve mentioned several times how poor a time this is to cut government spending, but our representation is doing it anyway. Yes I too am concerned about the deficit and agree spending may be reduced at some point, however not now.

Sequestration has set in and with the impacts now manifesting themselves we are getting a measure of the drag these cuts are putting on the economy. Billy Mitchel provides a great (perhaps a bit too detailed for some) breakout of these impacts in his blog today. He details the output gap between the actual and potential real GDP and the rate of growth in the gap given the spending cuts pointing out the “massive on-going permanent national income loss”…”The danger is that the US will head towards zero growth as the sequester impacts become more pronounced” His data demonstrates a rapid slowdown of the economy over the first quarter this year with the drag coming from the government, primarily the federal government. A line from his conclusion:

The US government is choosing to allow long-term unemployment to continue to rise. There is no fiscal justification for that. They should explain why they consider undermining growth and deliberately maintaining people in a state of unemployment is a sensible option for their nation.

Pretty disappointing this is continuing now that we all know the data supporting these cuts was known to be false by many, now proven to be false. Even the IMF has critiqued the US in the past couple weeks for continuing to reduce spending while economic growth is faltering.

 

 

We’re Back

Back from our break sailing north. Short stop in Bermuda, then on north, now have been catching up with friends and fellow co-conspirators in Massachusetts. Very nice.

Meanwhile not much has happened. Congress is stall haggling over unnecessary budget cuts in spite of everything Rogoff and Reinhart being proven false and worrying about the debt which is going away through growth and employment. Meanwhile doing nothing to resolve the sequester cuts of which all of them were so up in arms they spent weeks (and $millions) attempting to convince us it was all the other party’s fault. We are and will continue to see employment/unemployment impacts from the sequester and unnecessary drag on economic growth, I’ll get to more of that later.

On the other hand, this blog has been found. Not that it’s always good but the search engines seem to plucking it from the electronosphere ( I may have just made that up) within whatever search criteria seems to be the trend of late. How am I sure? Spam. Like political jargon, is on the upswing. So—if you’re posting comments on this blog with the intent to publish a link to your site selling purses, backpacks, calculators and whatever. Please don’t. If you actually read…you’ll see that they are not getting published. I welcome comments, agree or not both are ok. I would welcome occasional guest bloggers provided your points can be and are backed up up with facts not just opinion or worse yet “jaded” research from some politically waaaaay off center think tank. Meanwhile, I sift through them all. I post all the ones that are in English, stand on facts, and contribute to this discussion. The rest of you, sorry. Buy an ad somewhere. Maybe I’d even sell you one, but forget the spam and hope method…at least for this site.

If you like reading and want to contribute, click that little follow-me button and you’ll see when we’re working to break out some truths from the lies. Even become part of the solution if you want. I’ll buckle down to more meaty issues.