America’s economic growth rate plunged from 3.0 percent to 2.2 percent in the first quarter of 2012, according to the new Commerce Department report released on Friday.
This is being widely described as “tepid” growth in the media, but when your government is $17 trillion in debt, and piling on another trillion per year, while the economy groans under rising inflation and double-digit real unemployment, “tepid” is disastrous. Even last quarter’s 3 percent growth was a full percentage point shy of what America needs for a real recovery.
Of course, like all grim economic news in the Obama years, the new figures were “unexpected,” because 2.5 percent growth was widely expected. Just wait until the initial figures get revised downward in a month or two!
“Tepid” first quarter growth is the good news. The bad news is that most analysts expect it to get worse. For starters, a big part of the difference between “tepid” and “apocalyptic” in the first quarter report were surges in consumer spending and inventory accumulation, neither of which is likely to continue. The consumer spending bump was largely a product of rising confidence as unemployment dipped a bit, but unemployment is melting down again, jobless claims are rising, and consumer confidence is falling.
Also, consumer spending totals have been boosted by rising inflation, because everything costs more. That kind of “surge” is not good, and not likely to hold up for long. Housing sales were looking up in the first quarter, but that market remains fragile. And a number of external factors, including European fiscal catastrophe and a major Iranian crisis, threaten on the horizon.
Business spending dropped steeply, which does not set the stage for a summer of robust job growth. According to Reuters, this was the first drop in business spending since the fourth quarter of 2009.
Another factor to bear in mind is that among the largest subtractions in GDP growth for the 1st quarter was government spending. Not everyone realizes that government spending is factored into Gross Domestic Product. Don’t worry – everyone will know it, as well as they know their alphabet, if President Obama loses his re-election bid, and a serious discussion of fiscal restraint begins. Democrats and their media auxiliaries will begin screaming about the dangers of weakened GDP due to reduced government spending. In a similar vein, we’ll hear about the menace of rising unemployment as hordes of bureaucrats are laid off.
A lot of the sudden drop in Q1 federal spending was due to military budget cuts. The bloated leviathan State is still packing on weight, burbling happily about its plans to “crucify” a few businesses and frighten the rest into obedience. To borrow a word beloved of statists when they’re attacking the U.S. energy industry, nothing is more “unsustainable” than the model of a huge government borrowing trillions of dollars so it can spend money like crazy, patting itself upon its flabby back for staying just above recessionary levels while the national debt soars into orbit. America must choose between packing on weight with private-sector muscle, or government fat.
We’re approaching 50-50 odds for a horrendously weak recovery to slip back into a double-dip recession. A stagnant summer looks like the best-case scenario.
Sign up to the Human Events newsletter