Excuses, Excuses

I'm sure you've heard the news by now, the commerce department has come out with the final quarter numbers for last year as a 0.1% GDP decline. There are many excuses as Democrats try to spin the news, but the party's narrative is not very convincing. I thought I would take some time to overview the popular responses, by which I mean excuses, to the news and why the arguments are either dishonest of just out right wrong.

Excuse #1: "Government spending has been dropping, and that has hurt the economy."

If this is true at face value, it is just really sad. This would be saying that the private sector is, and probably has been, growing (maybe skrinking) at an even weaker rate during this entire recovery, and the only growth is not only spurred, but sustained by the government spending a record 24.1% average of GDP. Bush spent an average 20.5% (including FY2009), and Clinton spent 19.3%. Just imaging if that extra 4 percent was being spent in the economy by the private sector itself. At what point do we get to say the stimulus didn't work?

Excuse #2: "Republicans wanted cuts in spending, well this is what happens when they get their way"

It is true Republicans in general want less government spending, but rarely do they want the biggest and hardest hit factor of those cuts to be so focused on defense, which is by far and away the largest part of this short term dip in government spending with the sequester cancelling many defense contracts even before the fiscal cliff deal was struck. If this was the case, then we may be in store for another dip if the new sequester date approaches with no real solution. Also note that non defense federal spending in Q4 actually rose 1.4%.  So really this is a second reason, aside from the obvious, to be careful when approaching the defense budget.

Excuse #3: "This is only temporary"

Dear God, I hope so, but if I had a nickel for every time a monthly or quarterly report came out as "below expectations" the last few years I'd be a rich man. The Federal Reserve was predicting a huge slowdown and growth, dropping to 1.0%... GROWTH! This was factoring in known drops in federal spending. This is all just evidence of the Federal Government digging it's nails into who is winning and loosing in the open markets.

Excuse #4: "The other aspects of our economy are strong."

Here is where you really loose me. Sure, it may not have been a decrease in GDP without the large cuts in defense, but reduced exports and poor growth in company stockpiles. Even without some of these more 'one time' aspects, most people say growth was around 1.0 to 1.5%, not exactly bragging rights material.

Excuse #5: "We need to increase spending to correct this."

We had to borrow over a trillion dollars this last year in order to quench this governments thirst for it's stimulus programs. We are now years into this approach and the first flinch from the government in spending results in a net contraction. This approach is not only unsustainable, but it is doomed to fail unless we have such a strong growth rate that is swallows up our deficit. Sadly, this approach is exactly what this administration has been hoping for for the past three years. Take a look at his budget proposals for 2012, he has predicted a near double digit receipt growth for the following year each year since taking office, these inaccurate predictions have since removed from the white house website.

Excuse #5: "Who cares?"

Sadly, probably the same people that thought 1.8% growth in 2011 was too week, and that 2012's net 2.2% increase is not worthy of the term 'recovery'. A President who wants to be spending almost $6 Trillion a year 10 years from now  will always have people trying to justify and downplay bad news with this President. Not so unlike Presidents of the past, but surely not to this extent this casual observer has seen.