Friday, July 31, 2009

Gov't spending and exports keep Q2 from going into a bigger hole

With the Administration loathe to stimulate consumption with deep tax cuts, the only support to the economy is coming from improving "net exports" and gov't spending in the form of the "automatic stabilizers." (That's transfer payments like unemployment insurance, Medicare, Medicaid, Social Security, etc.)

We can have strongly positive GDP growth if the Administration and Congress took measures to restore people's incomes, like with a big tax cut, but they don't want to because they are afraid of deficits so, we get poorer by the day. But, hey...we got poorer at a slower rate in Q2!

Here are the ugly numbers:

(Q2 vs. Q1, all figures in billions $)
Pers Cons -$33b
Biz Invest -$87b
Net Exports +$47b
Gov't +$35b

Read 'em and weep! (Look at the hit that business investment took!)

There's nothing wrong with our economy, we just choose not to use our capital to create wealth. We're telling the Chinese to do that instead!

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