Tuesday, November 10, 2009

Article Response #1: GDP != State of Economy


"The Republican alternatives in Congress, mostly just collections of tax cuts, would not have set unemployment on a drastically different course than it is on now." If the smarts of the Obama admin were so wildly inaccurate in their prediction of the impact (or lack thereof) of the stimulus package to unemployment, how can you (or anyone else) so quickly and easily dismiss tax cuts as being wholly ineffective? --- "Even though the recession may be technically over – the government just reported the economy had grown for the first time in nearly a year" Be careful how you interpret those results. Look at the data itself. GDP is the primary measure they're bragging about, part of which is government spending (source). That has certainly gone up over the last months, but does that really indicate a better economy? Also, consider cash for clunkers occurred during that period. Even though that's basically govt paying for half of your car, it all adds to GDP. It's not a sign of a strong economy, it's just a sign that someone is throwing a lot of money in the pot, that someone being govt. And where is the government getting that money to throw? It's printing it, it's borrowing it, from foreign countries (select 'Ownership of Federal Securities'] and from our posterity. But that isn't sustainable. There are many economists predicting that looking back at 2009-2010 the stimulus will cause the recession to slow, stop, then create a "fake" recovery, followed by another downhill period as the "bump" provided by the stimulus goes away. Now politicians are considering a second stimulus because they believe that if they can keep things afloat long enough, then the private sector will recover on its own by then. How? ... Somehow.

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