Reuters ponders the electoral significance of today’s weak report on third-quarter GDP growth:
U.S. economic growth picked up in the third quarter as a late burst in consumer spending offset the first cutbacks in investment in more than a year by cautious businesses.
The stronger pace of expansion, however, fell short of what is needed to make much of a dent in unemployment, and offers little cheer for the White House ahead of the closely contested Nov. 6 presidential election.
Gross domestic product expanded at a 2.0 percent annual rate, the Commerce Department said on Friday, accelerating from the second quarter’s 1.3 percent pace. A pace in excess of 2.5 percent is needed over several quarters to make substantial headway cutting the jobless rate.
Two percent growth, this long after a recession? Average growth for 2012 was actually a bit lower than it was in 2011, by about half a percentage point, and the fourth-quarter forecasts for ’12 have been grim. (I’ve heard predictions that one percent growth might be in the cards.) This is no “recovery.” It’s a holding pattern until the next recession hits, and the tax increases Obama and his intransigent party are about to drop on America will probably do the trick.
And if you’re tempted to believe Obama’s pleas that his numbers will really, finally, totally add up during his second term, remember that he promised over 4 percent growth for 2012. The man who laughed out loud when he discovered there was no such thing as the “shovel-ready jobs” he seized a trillion dollars to purchase says you can believe all his projections and promises this time.
Much of the slightly-improved Q3 number came from consumer and government spending, neither of which is sustainable fuel for a robust economy. Consumer spending will go right over the “fiscal cliff” in January, and it was already feeling a pinch from poor wage growth and declining disposable income, as food and fuel prices – very relevant to average Americans, but not included in the official core inflation rate – continue to rise.
These mediocre growth numbers and continuing double-digit real unemployment should put paid to the core Obamanomics theory that consumer spending can drive robust economic growth. It’s been a recurring theme of his: shower the little people with cash through various programs, such as increased unemployment benefits, and jobs will coalesce from thin air, as businesses eagerly mop up all that government-provided cash. It doesn’t work. It’s too small-minded.
Business formation and expansion – which, as today’s report demonstrates, has not been healthy – is not powerfully inspired by dropping a few extra bucks in the pockets of consumers, at least not by enough to outweigh all the factors prompting them to stand pat or even get smaller: regulatory costs, high tax burdens on corporations and small businessmen, and the menace of ObamaCare. ObamaCare gives businesses explicit incentives to keep their work forces small and part-time. A number of corporations have openly announced their decision to respond to these incentives.
Reuters mentions “a series of headwinds from high gasoline prices to the debt turmoil in Europe and, lately, fears of U.S. government austerity” as factors holding back economic growth. Well, a strong free-market economy is better able to weather such headwinds. Obama’s economy is so weak that it’s basically helpless against external stress. And if you don’t run up a gigantic, unsustainable welfare state, presided over by people who only pay attention to budget deficits when they want to use them as leverage for tax increases, you don’t have to worry about “austerity measures.” That’s exactly what Mitt Romney is talking about when he warns against letting Obama drive the United States further down “the road to Greece.”
Two percent GDP growth… followed by a few quarters that will make two percent seem like our salad days? We can do much better than that. Let me rephrase that: we have to do much better. The forces converging upon us cannot be held at bay with two percent growth. The American workforce cannot be restored in an environment where 7.8 percent adjusted unemployment is hailed as a wonderful breakthrough. Our titanic government cannot be sustained by skimming increasing amounts of cash off the top of a stagnant economy. Malaise is not an option.
Update: Statement from Mitt Romney on the new GDP numbers: “Today, we received the latest round of discouraging economic news: Last quarter, our economy grew at only two percent, less than half the 4.3% rate the White House projected after passing the stimulus bill. Slow economic growth means slow job growth and declining take-home pay. This is what four years of President Obama’s policies have produced. Americans are ready for change – for growth, for jobs, for higher take-home pay. Paul Ryan and I will deliver it. “