Consumer Spending Drops For The First Time In 17 Years

• October 30, 2008

It was a record setting run. Seventeen years without a drop in consumer spending. The previous record was 11 years, so pretty much we were due for a drop anyway given the cyclical nature of our economy.

WASHINGTON – The U.S. economy contracted at a 0.3% annualized rate in the third quarter, as consumer spending declined at the fastest pace in 28 years, the Commerce Department estimated Thursday. The drop was close to economists’ expectations that the economy would shrink 0.5%. Final sales to domestic purchasers fell 1.8%, the largest decline in 17 years. Consumer spending dropped 3.1%, the first decline in 17 years and the biggest drop in 28 years, while business investment fell 1%. Investments in homes fell for the 11th straight quarter. Inflation-adjusted after-tax incomes fell 8.7%, the largest quarterly decline since the record-keeping began in 1947.

This isn’t good news, but it wasn’t unexpected either. Consumer spending has a lot to do with consumer confidence, and with the financial crisis and the housing market crash people just aren’t feeling very confidence now. And for good reason.
But this recent economic woe should stand in stark contrast to the nearly eight years of relative economic growth and prosperity that we’ve just enjoyed. And while the left is going to blame Republicans for this, it’s worth noting that the economic woes that are making consumers worried were caused by big-government liberal policies.
If not for government policies pressuring lenders into giving loans to people who could not pay them, and if it weren’t for two government entities (Fannie Mae and Freddie Mac) owning over half of our $12 trillion mortgage market, we wouldn’t be in this mess.

Tags: Domestic Issues, Politics

http://SayAnythingBlog.com The_Whistler_ofnd

How much of this is drop is because of the surge in spending from the stimulus check?
http://sayanythingblog.com/ likwidshoe

BTW, WOOF – read the comments underneath the article you linked. There are tons of people explaining the fundamental flaws in the article.
http://sayanythingblog.com/ likwidshoe

WOOF – Mandate, what mandate?
What banks were forced to make bad loans?

It’s called the CRA. Lenders had to not only comply, but to show how they were complying.

You don’t think that a law requiring banks to treat low income as they would high income is the definition of a “bad loan”?

Get real.

The CRA, in turn, distorted the market and the rules of the market.

But nevermind that. You have history to rewrite.
robert108

OB: It was the Dem social engineering affirmative action home loan mandates that created the bad paper, which was covered up by Fannie and Freddie, with govt backing, and was eventually repackaged and sold along with good paper, that caused the financial problem. When you mandate bad business practices, everybody suffers. If you had a spark of intelligence, you would know that.
ollie-B

But this recent economic woe should stand in stark contrast to the nearly eight years of relative economic growth and prosperity that we’ve just enjoyed. And while the left is going to blame Republicans for this, it’s worth noting that the economic woes that are making consumers worried were caused by big-government liberal policies.
If not for government policies pressuring lenders into giving loans to people who could not pay them, and if it weren’t for two government entities (Fannie Mae and Freddie Mac) owning over half of our $12 trillion mortgage market, we wouldn’t be in this mess

Rob,
You simply refuse to accept the fact that the problems we face today is a direct result of the greed of the the institutions who were tasked with implementing “big government liberal policies”.
If there is one thing I have learned on this blog, it is to never overestimate the intelligence of conservatives.
robert108

I realize this is too simple and logical for you, Woof, but loans were made to people who didn’t qualify for them under good business practice. Those loans would have caused the lenders to lose money, so why were they made? Why did Freddie and Fannie have to be funded by the govt to buy up those loans if they could be paid by responsible borrowers.
You know nothing about economics and business, and it shows.

I have linked to the regulations many times on this blog; they were instituted by Carter and increased under Clinton.

Educate yourself:

http://www.americanthinker.com/2008/10/what_really_happened_in_the_mo.html

This gives the timeline from FDR to the present of this effort to use home loans for social engineering purposes, with details.
di butler

Woof,

George Bush went to congress 17 times to stop this lending. His only blame in this,{and yes, I think it’s big}, is that he didn’t bring it to the public’s attention. He should have addressed the American people, through an press conference, and let the American people express their outrage over this. It would have kept people from believing Barney “butt f#cker” Frank when he was telling people that there wasn’t a problem right up until the end. So, yes, he did fail, but not in the ways you enumerated.
http://sayanythingblog.com/ likwidshoe

WOOF, your “facts” leave out the fact that two government entities were buying up most of the bad loans, thereby freeing up the market to make more bad loans.

You want to blame this on “deregulation” and the Republicans when the genesis of the problem is government and Democrat programs.
robert108

If this had been a smaller increase than projected, the headlines would read “Growth less than anticipated”, or something like that. In this case, the decline was 40% less than expected, but no reports on that part of it.
This should also be laid at the feet of the Pelosi Congress, but it won’t.

What’s bad for America is good for the lefties.
WOOFX

Mandate, what mandate?
What banks were forced to make bad loans?
Enumerate the bad loans.
Robert you are so full of shit yo Moma
put you in the diaper pail.

Michael Barr testified back in February before the House Committee on Financial Services that 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision and another 30% were made by affiliates of banks or thrifts which are not subject to routine supervision or examinations.

Not surprisingly given the higher degree of supervision, loans made under the CRA program were made in a more responsible way than other subprime loans. CRA loans carried lower rates than other subprime loans and were less likely to end up securitized into the mortgage-backed securities that have caused so many losses, according to a recent study by the law firm Traiger & Hinckley

Community Reinvestment Act had nothing to do with subprime crisis BusinessWeek
WOOFX

Facts .
Banks regulated by the CRA made good loans,

Mortgage originators unregulated by the CRA
made bad loans.

The mortgage debacle happened exclusively under the supervision of the Bush Administration.

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Consumer Spending Drops For The First Time In 17 Years

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