That would be the double-dip recession warned of by the CBO in 2009 in advance of President Obama’s stimulus spending. “President Obama’s economic recovery package will actually hurt the economy more in the long run than if he were to do nothing,” the CBO reported back in 2009. They said the stimulus spending “will help in the short term but result in so much government debt that within a few years they would crowd out private investment, actually leading to a lower Gross Domestic Product over the next 10 years than if the government had done nothing.”
That’s a prognostication that’s coming true:
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 1.0 percent in the second quarter of 2011, (that is, from the first quarter to the second quarter), according to the “second” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.4 percent.
The GDP estimates released today are based on more complete source data than were available for the “advance” estimate issued last month. In the advance estimate, the increase in real GDP was 1.3 percent (see “Revisions” on page 3).
The increase in real GDP in the second quarter primarily reflected positive contributions from nonresidential fixed investment, exports, personal consumption expenditures (PCE), and federal government spending that were partly offset by negative contributions from state and local government spending and private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased.
Per Reuters, America is now on “recession watch” though from the practical perspective of most Americans the recession never really ended:
Economists had expected output growth to be revised down to 1.1 percent. In the first quarter, the economy advanced just 0.4 percent. The government’s second GDP estimate for the quarter confirmed growth almost stalled in the first six months of this year.
The United States is on a recession watch after a massive sell-off in the stock market knocked down consumer and business sentiment. The plunge in share prices followed Standard & Poor’s decision to strip the nation of its top notch AAA credit rating and a spreading sovereign debt crisis in Europe.
While sentiment has deteriorated, data such as industrial production, retail sales and employment suggest the economy could avoid an outright contraction.
Maybe it’s time to admit that government spending is not good economic policy.