The blue line on the chart above shows the 5-day average of total Treasury deposits (recepits) minus withdrawals (expenditures), something that I call, "net spending." A declining blue line indicates that net spending is falling. Not only has it been falling, but it has been running negative for nearly the past three weeks, suggesting that deficit hawks at Treasury are firmly in control and are quietly "siphoning off" stimulus and private savings (taking in more than they are recycling back).
The pink line is the S&P 500 close. A policy of negative net spending will make it harder for the stock market and the economy to rise and improve, respectively. That's not to say they can't (there are record private savings of $620 billion, so plenty of fuel to run on), however, it will take a sustained upward trend in confidence. The government is quietly shifting the burden of recovery to the private sector because of sensitivity over deficits. It can work because as I said there are sufficient private savings to power it, however, as I said, the rally now has limits by definition.
It could be those automatic stabilizers slowing down in reaction to some improvement.
ReplyDeleteI would agree with you except revenues are not rising vis-a-vis prior months. That would be a sign of improvement. This looks more like the word has been passed down through the halls of the Administration--cut spending wherever you can. I would fit with Obama's recent rhetoric about deficits, government being out of money, having to make sacrifices, etc.
ReplyDeleteI was hoping that was just rhetoric to calm people down, and that the cuts would be minor things to make deficit hawks happy.
ReplyDeleteIf President Obama wants to stimulate, he should recognize that the deficit is the point of the stimulus.
No, they're really cutting back. They seem to be panicked about the deficit, but don't want to show panic. I can just imagine Rahm Emanuel screaming at everyone to cut the f--king spending!
ReplyDeleteDavid Axelrod--Obama's political advisor--is calling teh shots, just as Karl Rove did for Bush and just as Dick Morris did for Clinton. It's all about politics, not economics.
according to this only 5% of the stimulus has been spent so far.
ReplyDeletehttp://apnews.myway.com/article/20090609/D98MRQU80.html
Faster, plz?
Michael,
ReplyDeleteYes, this is the good news and Obama said he will try to "speed this spending up" over the summer. The question is, will he offset it with cuts elsewhere? My guess is, yes.