Lies, Damn Lies, and GDP in the Age of Obama
November 5, 2009 02:55 PMBy Jay Barnes
Liberals and Democrats heralded the news last week that gross domestic product grew by 3.5 percent in the third quarter. While careful to temper expectations, President Obama said it was “an important sign that the economy is heading in the right direction.” White House Economic Adviser Christina Romer called it “an encouraging sign.”
Unfortunately, if one looks behind the top line growth number, a disturbing set of numbers emerge. The economy is not improving. In fact, it might be getting worse.
Gross domestic product is calculated by adding private consumption, business investment, and government spending. Guess which one led GDP growth in the third quarter? According to the Commerce Department’s report, personal consumption expenditures increased 3.4 percent in the third quarter – compared to a retraction of 0.9 percent in the second quarter. However, instead of being driven by honest, repeatable consumption by American’s, the third quarter’s GDP growth was driven by government welfare for car buyers and out-of-control spending by government.
Durable goods consumption increased an incredible 22.3 percent in the quarter – up from a decrease of 5.6 percent in the second quarter. The consumption growth was fueled, according to the federal government’s report, by Cash for Clunkers, a one-time boondoggle transferring wealth from taxpayers to car buyers. The other significant area of growth was in federal government spending, which increased by 7.9 percent in the third quarter. In the short run, government spending might save Obama the embarrassment of ever worsening GDP statistics. But in the long-run, federal spending sprees are paid by the American taxpayer – resulting in decreased future consumption.
Perhaps the worst news from the GDP report regards income. Personal income actually decreased in the quarter by 0.5 percent – a switch from an increase of 0.6 percent in the second quarter. Disposable income decreased as well – by 0.7 percent – in comparison to an increase of 5.2 percent in the second quarter.
To state the obvious, the American economy will not have sustained economic growth if income continues to decrease. We might get increased GDP numbers through the magic of Obama’s budgets. But it will not make the lives of ordinary Americans better. It will make things worse for this generation, and future generations charged with paying back the tab Obama and his Democratic Congress are running up.
The next time you hear of GDP increasing in the Obama era – check the numbers and remember the words of Missouri’s own Mark Twain, “There are three kinds of lies: lies, damn lies, and statistics.” In the case of GDP, growth fueled by government giveaways spending is neither real nor sustainable over the long-term – despite what the President, his advisors, and GDP may claim.
Jay Barnes is an attorney and writer in Jefferson City, Missouri. He was formerly chief speechwriter for Missouri Governor Matt Blunt. His columns can be found at the Missouri Record.
If one looks behind the top line growth number, a disturbing set of numbers emerge. The economy is not improving. In fact, it might be getting worse.
