Thursday, January 31, 2013

Barack Constanza's (Unexpected) Incredible Shrinking Economy

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Remember just before the election, when conservatives were telling you not to believe the rosy scenario being painted by the administration on things like unemployment figures? Unemployment dropped below 8% when the economic anchor that is (liberal) California failed to produce their unemployment figures in a timely manner, which just happened to bring the national average if there had been some actual improvement?

And how many times have the economist flacks for this administration told you in the last four years, that each subsequent piece of bad economic news was "unexpected"? The absence of leadership from the top, combined with the absence of pro-growth policies, and reckless, out of control spending, have put this nation on a very predictable course for economic disaster. There should be nothing "unexpected" about it, at least for those who are paying attention.

WASHINGTON — The U.S. economy shrank unexpectedly late last year, a reminder of the biggest threat it faces in 2013: sharp government spending cuts and prolonged political budget fights.

A plunge in defense spending helped push the economy into negative territory for the first time since mid-2009. The contraction in the October-December quarter came in at an annual rate of 0.1 percent, according to a government estimate released Wednesday.

Note first, the use of the ubiquitous "unexpectedly" in the lead. Ever get the impression that Forrest Gump is the editor in chief of most major news organizations?
"Life is like a box of chocolates. You never know what you're gonna get."
Sorry, Forrest, but, yeah, we do! The ones that look like nuts covered in chocolate are generally chocolate covered nuts! To be completely surprised at every turn of the economy takes a far simpler mind than Forrest Gump's. Or someone in the tank for liberal politicians.

Note secondly the role attributed to government spending in propping up the economy. In bad economic times, average people tend to cut back their spending to essentials, and try to squirrel a little away in case times get worse. Governments, on the other hand, feel an entitlement to spend whatever they please, knowing that they can always print more money or extort more from their subjects.

So when government spending is finally curtailed, (in this case, by cuts in the military, which perhaps should be the last on the cutting room floor, not the first), those segments of the economy dependent on government cut back on their inventories, salaries and expansion plans, which further shrinks the economy.

Now before you draw the wrong conclusion about government spending as a stimulant to the economy*, remember than in order for government to spend a dollar in the economy, it must first take that dollar from someplace else in the economy. Worse yet is the inefficiencies of government, both from the amount of overhead siphoned off that dollar to maintain the bureaucracy, but often spending those dollars in inefficient or counter productive ways. Can you say "Solyndra"? When a company or individual who is creating wealth spends money, it is often reinvested in ways which grow their enterprises, increase their wealth, and increase the coffers of both private and public sectors, in addition to creating new, self-sustaining jogs.

In short, to channel my inner Jeff Foxworthy,
If you are an economist and are constantly surprised by just how bad the economic news might be a liberal!

*Remember Nancy Pelosi's claim that for every dollar spent on food stamps, $1.79 is put back into the economy? It must follow then, that every dollar in taxes that government takes out of your pocket depresses economic activity by $1.79, right? Again, made worse by the fact that government overhead for the food stamp program could mean that government has to tax us $1.80 to provide that one dollar for food stamps that yielded the $1.79.


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