The "G" in GDP
GDP = C + Inv + G + (Ex - I). Gross Domestic Product (GDP) is calculated as the sum of private consumption (C), gross investment (Inv), government spending (G), and the net of exports minus imports (Ex - I).C_TADM51_70 Having already exhausted "job-killing" sloganeering, there is scant mention that reducing government spending will, by definition, take a toll on GDP. We can only hope the economy is sufficiently recovered to withstand retraction of stimulus.
The Fed doesn't think so. If the Fed were confident in the sustainability of the recovery, rates would be raised or at the least, Chairman Bernanke would be talking about the end of quantitative easing.
Recent forecasts of a 4+ percent expansion in GDP for 2011, now appear overly optimistic in part due to budget austerity and debt brinkmanship. Also weighing on estimates are world events like the Japanese earthquake, euro-zone malaise (austerity has not led to robust recoveries), and higher oil prices, the result of continued chaos in the mid-east and increased global demand.
The unemployment rate is now 8.8%, down from 10.6% a year ago. If those working part-time or temporary jobs, but desiring full-time employment, were included in that statistic, the number would probably be closer to 18%. Creating a couple hundred thousand new jobs a month is not a rate fast enough to bring unemployment down to desired levels.
The battle between the Keynesians and the Hawks warms up. Last June, at Wimbledon, JohnC_TADM53_70 Isner and Nicolas Mahut played a single match that lasted over eleven hours. At the time, I likened that eternity to the matchup between the Keynesians who wanted to stimulate an economy deep in recession and the deficit hawks who instead called for deep cuts in the federal budget.
The party for whom "deficits don't matter" (as long as they have the White House) has successfully moved the conversation from the economy to the deficit. The agreement that narrowly avoided shutting down government may merely be one more game in the set that includes next month's battle over the debt ceiling and then the 2012 budget hearings.
We have seen this before. In the 90's we went from deficit to surplus with higher taxes and a strong economy. In the 30's the US descended back into depression when government prematurely addressed deficit spending before the economy was back on its feet.
Ultimately all Parties in the match are rooting for a growing and vibrant economy in which all Americans participate and benefit.
Meanwhile it is earnings season again. Estimates have been raised. C_TADM56_70Year over year, earnings are expected to grow over 17% this year and almost 13% next. Hopefully the plus of strong earnings in a growing economy can overcome the negatives of less G (Government spending) and the possible end of quantitative easing.
The Fed doesn't think so. If the Fed were confident in the sustainability of the recovery, rates would be raised or at the least, Chairman Bernanke would be talking about the end of quantitative easing.
Recent forecasts of a 4+ percent expansion in GDP for 2011, now appear overly optimistic in part due to budget austerity and debt brinkmanship. Also weighing on estimates are world events like the Japanese earthquake, euro-zone malaise (austerity has not led to robust recoveries), and higher oil prices, the result of continued chaos in the mid-east and increased global demand.
The unemployment rate is now 8.8%, down from 10.6% a year ago. If those working part-time or temporary jobs, but desiring full-time employment, were included in that statistic, the number would probably be closer to 18%. Creating a couple hundred thousand new jobs a month is not a rate fast enough to bring unemployment down to desired levels.
The battle between the Keynesians and the Hawks warms up. Last June, at Wimbledon, JohnC_TADM53_70 Isner and Nicolas Mahut played a single match that lasted over eleven hours. At the time, I likened that eternity to the matchup between the Keynesians who wanted to stimulate an economy deep in recession and the deficit hawks who instead called for deep cuts in the federal budget.
The party for whom "deficits don't matter" (as long as they have the White House) has successfully moved the conversation from the economy to the deficit. The agreement that narrowly avoided shutting down government may merely be one more game in the set that includes next month's battle over the debt ceiling and then the 2012 budget hearings.
We have seen this before. In the 90's we went from deficit to surplus with higher taxes and a strong economy. In the 30's the US descended back into depression when government prematurely addressed deficit spending before the economy was back on its feet.
Ultimately all Parties in the match are rooting for a growing and vibrant economy in which all Americans participate and benefit.
Meanwhile it is earnings season again. Estimates have been raised. C_TADM56_70Year over year, earnings are expected to grow over 17% this year and almost 13% next. Hopefully the plus of strong earnings in a growing economy can overcome the negatives of less G (Government spending) and the possible end of quantitative easing.
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