US Growth - Real?

[Napalm]

I have just returned from a business trip overseas where the US growth figures were very big news. Interestingly, news reports there question what this growth really means, with great speculation that it is actually the result of the huge levels of military-related spending. If this is the case, the growth is being fueled by the huge federal deficit and eventually taxpayers will need to foot the bill.

Does anyone know what proportion of the growth is related to military spending? Is this angle being reported/investigated on this side of the Atlantic?

N

 

[glugglug]

My current interpretation of the "growth", at least for now, is that it is the art of creative accounting taken to a whole new level.

 

[ElFenix]

actually defense spending fell iirc

 

[zephyrprime]

An interesting question. I did a little reseach and I got this from cbs marketwatch:

Consumer spending surged ahead 6.6 percent, the best in more than five years. Led by strong auto sales, purchases of durable goods rose 26.9 percent, the best in 15 years. Spending on non-durable goods rose 7.9 percent, the best in 27 years. Spending on services increased 2.2 percent.

Consumers also increased their investments in residences by 20.4 percent, thanks to record low mortgage rates during the summer months that boosted housing starts by more than 30 percent.

Businesses did their part, as well. Investments in equipment and software rose 15.4 percent, the biggest swing in capital spending since the first quarter of 2000. It's the fifth increase in capital spending in the past six quarters following six straight quarters of declines.

Investments in business structures fell 2.4 percent, the seventh decline in the past eight quarters. In all, nonresidential investment rose 11.1 percent.

Businesses remain cautious, however. Inventories were reduced by $35.8 billion, subtracting about 0.7 percentage points from growth. Once businesses decide to replenish their stocks, production and employment should rise, economists say.

The nation continued to run a large trade deficit with foreign economies. But the gap shrank in the third quarter, so net exports added about 0.8 percentage points to growth. Exports rose 9.3 percent while imports increased 0.1 percent.

Government spending increased 1.3 percent, with equal contributions from the federal government and state and local governments. Defense spending was flat.



link

 

[BaliBabyDoc]

The growth is real but it's not sustainable. Essentially Bush and Congress are using the US Treasury's credit card for massive government consumption (including military) while tax cuts, low interest rates, and abundant credit is allowing US consumers to do what we do best . . . spend money we don't really have.

The US continues to be the most productive economy in the world but competitive pressures from abroad plus our atrocious system of K-12 education means future generations of Americans will be employed when some multinational corporation starts looking for an undereducated workforce with poor health habits.

 

[ElFenix]

massive government consumption (including military)

Government spending increased 1.3 percent, with equal contributions from the federal government and state and local governments. Defense spending was flat.

i think i'll trust CBS, thanks

 

[BaliBabyDoc]

Government spending increased 1.3 percent, with equal contributions from the federal government and state and local governments. Defense spending was flat.

Government spending increased marginally but it's a moot point since it's all money we don't have. At the state/local level, governments are trying to pick up the slack from federal cuts while paying for continued increases in healthcare/pension/education expenses. Defense spending was flat b/c the government gave Rummy a blank cheque for the first and second quarters so being flat in the third was still a lot of activity. Furthermore, the Bush Leaguers are going to spend $87B over the next 3-4 quarters just on the war against BS.

 

[BaliBabyDoc]

Although I mentioned it separately, the tax cuts are essentially government spending by fiat. The US government is running a massive budget deficit. Accordingly, the money being "returned" to taxpayers is essentially money on loan from future generations. IMHO, that's just a government lending program with an exceptionally bad interest rate . . . basically wasteful government spending.

 

[Wag]

In order to be "growth" doesn't that have to mean new jobs?

Well, it didn't help my state. Here in MA we still have some of the highest unemployment in the country.

 

[charrison]

Originally posted by: Wag
In order to be "growth" doesn't that have to mean new jobs?

Well, it didn't help my state. Here in MA we still have some of the highest unemployment in the country.

GDP covers the size of the economy in dollars, not the number of people in employed.


Was the growth in 92 real when there was 290 Billion defecit(larger than todays in inflation adjusted dollars). More people were unemployed(7.9%).

No one questioned if that growth was real.

 

[BaliBabyDoc]

You are definitely right, Wag. The man (and woman) on the street doesn't measure economic growth by GDP. It is reasonable to expect that good GDP growth will lead to future jobs. But there are variety of factors that may short circuit continued GDP growth and I wouldn't hold my breath expecting Bushies to rescue the US economy.

 

[ElFenix]

Originally posted by: BaliBabyDoc

Government spending increased 1.3 percent, with equal contributions from the federal government and state and local governments. Defense spending was flat.

Defense spending was flat b/c the government gave Rummy a blank cheque for the first and second quarters so being flat in the third was still a lot of activity.

that is all well and good but since this is quarter to quarter growth your argument holds no water

 

[BaliBabyDoc]

Actually it does hold water b/c an economy being financed on short term debt is one thing but as it becomes glaringly obvious that debt is a structural component of the Bush regime . . . interest rates will climb regardless of economic strength. Furthermore, quarter to quarter growth requires a continuation of previous activity plus some. This government is currently spending an excess $400-500B with no end in sight. Servicing that debt will eventually become an anchor on government spending/investment AND business/consumer activity.

It is true that consumers/business pushed the economy forwards but they are standing on superfluous government spending . . . and much of the consumer spending was on borrowed money in one form or another. So I repeat . . . GDP growth in the 3rdQ was real but is unsustainable.

 

[ElFenix]

Originally posted by: BaliBabyDoc
Actually it does hold water b/c an economy being financed on short term debt is one thing but as it becomes glaringly obvious that debt is a structural component of the Bush regime . . . interest rates will climb regardless of economic strength. Furthermore, quarter to quarter growth requires a continuation of previous activity plus some. This government is currently spending an excess $400-500B with no end in sight. Servicing that debt will eventually become an anchor on government spending/investment AND business/consumer activity.

It is true that consumers/business pushed the economy forwards but they are standing on superfluous government spending . . . and much of the consumer spending was on borrowed money in one form or another. So I repeat . . . GDP growth in the 3rdQ was real but is unsustainable.

that's fallacious. your argument was

massive government consumption (including military)

. it was pointed out that gov't spending is roughly flat quarter to quarter, and military spending in particular was flat quarter to quarter. you tried to counter with

Defense spending was flat b/c the government gave Rummy a blank cheque for the first and second quarters so being flat in the third was still a lot of activity,

which doesn't hold water because what we are measuring is quarter to quarter increases. you can't say the increase in quarter to quarter economic activity was due to increased military spending. military spending did not increase quarter to quarter. it may be more activity than last year at this time but that is not what is being argued about. changing your argument doesn't change that.

 

[heartsurgeon]

tax cuts are essentially government spending by fiat

this is a novel concept...so i didn't really "make" that money, the goverment "gave" it to me?