Editore"s Note
Tilting at Windmills

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February 25, 2011

AN ECONOMIC MODEL IN PRACTICE.... The previous estimates found that the U.S. economy picked up a little speed in the fourth quarter of 2010 -- October through December -- experiencing 3.2% GDP growth.

Revised estimates put the number a little lower. That's discouraging, of course, but for political purposes, it's worth appreciating why growth was more sluggish than originally thought.

Deeper spending cuts by state and local governments weighed down U.S. economic growth in the final three months of last year. The government's revised estimate for the October-December quarter illustrates how growing state budget crises could hold back the economic recovery.

The Commerce Department reported Friday that economic growth increased at an annual rate of 2.8 percent in the final quarter of last year. That was down from the initial estimate of 3.2 percent.

State and local governments, wrestling with budget shortfalls, cut spending at a 2.4 percent pace. That was much deeper than the 0.9 percent annualized cut first estimated and was the most since the start of 2010.

Just to clarify, the lower revised figure isn't reason to panic. There's no doubt that 2.8% growth isn't nearly good enough, but it still showed incremental progress -- the third quarter of 2010 was better than the second, and the fourth was better than the third.

What I found important about this, though, is the fact that the economy would have been stronger in the fourth quarter had it not been for "spending cuts by state and local governments." Those cuts were avoidable -- the federal government could have intervened to prevent them -- but Republican policy dictates that such intervention is outrageous and unacceptable. The GOP wants these cuts to occur; it's the foundation of the party's economic policy.

But let's also take the next step with this -- congressional Republicans see state and local governments cutting spending and believe federal officials should do the exact same thing.

It leads me to wonder if maybe Republicans in D.C. just aren't paying close enough attention to current events. In England, British policymakers cut spending and it slowed their economy. In Germany, German officials cut spending it slowed their economy. In American cities and states, officials cut spending, it slowed the broader national economy.

And now in the midst of a budget fight, congressional Republicans are absolutely convinced that what the country really needs is to follow the lead of the British, the Germans, and the states.

They feel so strongly about this, they're prepared to shut down the government to get what they want.

The Republican line is backwards, bogus, and blind.

Update: All of this, by the way, comes against the backdrop of independent estimates showing that GOP-approved cuts would push the U.S. economy back towards a recession -- data that Republicans haven't even tried to refute.

Steve Benen 10:00 AM Permalink | Trackbacks | Comments (13)

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The GOP wants these cuts to occur; it's the founation of the party's economic policy.

This should really read:

The GOP wants these cuts to occur; it's the founation of the party's 2012 electoral strategy.

They Rethugs are interested in two things-- winning elections and doing the bidding of their wealthiest campaign contributors. They do not care about governing the country in the best interests of the people and neither do the Dems.

Posted by: wyldpirate on February 25, 2011 at 10:11 AM | PERMALINK

As usual, the RepuGs have things backwards. They want to emulate the failed economic theories of Britain and Germany, but, they want nothing to do with their successful health care plans.

Posted by: berttheclock on February 25, 2011 at 10:14 AM | PERMALINK

It is convenient when ideology and electoral strategy coincide. The downside is, if you win, you lose. ( (along with the rest of us)

Posted by: DAY on February 25, 2011 at 10:20 AM | PERMALINK

When attempting to discern the motives of the Republicans, I think it's important to understand and remember two very important facts:
1. When the GOP arguably controlled all 3 branches of government, spending without offsets and increased tax revenue was not only encouraged, but Dick Cheney famously said "Reagan proved that deficits don't matter".
2. Just 2 years after their undeniable failure to produce growth in jobs, wages, the stock market, tax revenue, and what was defined as the worst recession since the great depression while still conducting 2 wars, they were rewarded with the largest gains in the House of Representatives in history.

Tell me again why they should give a damn whether or not their plan succeeds?

Posted by: Kiweagle on February 25, 2011 at 10:22 AM | PERMALINK

Steve, I have to say I agree with the comments already made, the ReNeanderthalicans are doing all this on purpose, it suits their desires in a lot of ways, please note that all the R govs in states not only are passing draconian spending cuts they are also sending along just enough tax breaks to make sure CEO's can order up new private jets next year. All paid for by you and me!

Getting elected, canceling unions collective bargaining and cutting back the pay of hardworking middle class citizens to earn a good living while at the same time send sweet tax breaks to billionaires and ruining the chances of a Dem President to be reelected.....priceless!

Posted by: latimlf on February 25, 2011 at 10:27 AM | PERMALINK

They Rethugs are interested in two things-- winning elections and doing the bidding of their wealthiest campaign contributors. They do not care about governing the country in the best interests of the people and neither do the Dems.

What wyldpirate said to begin this thread is all you really can say.

Steve, at what point will you begin to get a little more emphatic? Maybe civilized is the only way you can be, I respect that, but we have a situation here that's gone way beyond civilized. The GOP is committing a form of treason. I don't use that word lightly.

It's a black irony that the very people who were just positive the commies were going to infiltrate and kill them in their beds, are--and have been for a long time--the very people who are bringing down the country. It's time to quit being civil and nice. Problem is, there's no-one to stand up to these traitors. No-one.

Posted by: LL on February 25, 2011 at 10:39 AM | PERMALINK

data that Republicans haven't even tried to refute.

They don't care if they can refute it- They're going to refudiate it.

Posted by: Tim H on February 25, 2011 at 10:42 AM | PERMALINK

And now in the midst of a budget fight, congressional Republicans are absolutely convinced that what the country really needs is to follow the lead of the British, the Germans, and the states.

Of course, because the Republicans know darn well that a sluggish economy is their best hope for capturing the White House in 2012.

The Republicans are willing to tank the US economy at best out of blind faith in their disproven articles of faith, and at worse out of cynical political calculation. That fact may not resonate among the upper-clas punditocracy, but events like Wisconsin proves that the American people sense it.

Posted by: Gregory on February 25, 2011 at 10:46 AM | PERMALINK

Emulate Germany? By all means, if that means the same as having manufacturing companies remain in their home countries, while, employing workers from said country. Miele manufactures the finest vacuum cleaners in the industry. They manufacture them at their 10 plants, spread from Germany to Austria into the Czech Republic. At one time, they tried to sell products which were manufactured in Asia, but, as they did not meet the quality of German made products, they discontinued that system. In addition, those German workers have excellent government health care. We have, mostly, in this nation American companies in name only with their infrastructure in China. Both RepuG and Democratic regimes sold out the workers of America by allowing this out sourcing. Thus, we have become a two tiered nation with mansions behind their gates and a vast pool of Oaxaca-like peons. But, the mantra of "government unions destroyed your jobs and our nation", continues to blare from FAUX.

Posted by: berttheclock on February 25, 2011 at 10:56 AM | PERMALINK

No matter what the republicans might want, many of these cuts have to occur. Many state budgets are that far out of whack and most legislators are not keen on increasing taxes.

State and local governmental spending make up about 10% of GDP. We have known this was a vulnerable segment of the sick economy since early in the recession -- one of the expected, "next shoes to drop". Well, guess what, it is here.

A particularly rough time for it to hit coupled with all the other bad news happening now. All I can add to the partisan sentiment here is that the Republicans are most certainly adding to the uncertainty which is undermining any faith in a recovering economy.

Posted by: lou on February 25, 2011 at 10:58 AM | PERMALINK

Not to worry. I'm sure that the promised great times resulting from those tax cuts are right around the corner!

I'm lining up for my unicorn as we speak...

Posted by: Ranger Jay on February 25, 2011 at 11:39 AM | PERMALINK

What do you think the chances are that this news, and the facts of it, are 'presented' to the American public on any of the nightly propaganda shows called the evening news by Brian Williams, Katie Couric, and Diane Sawyer ?

Posted by: stormskies on February 25, 2011 at 11:51 AM | PERMALINK

The GOP only believes in deficit control and budget cuts when there is a Democratic President. Also, cutting the budget and slowing down the economy plays into the GOP electoral strategy for 2012. My educated guess is that the few people in the GOP who genuinely understand economics know exactly what they're doing - they deliberately want to damage the economy in the run up to next year's elections.

Posted by: Dennis on February 25, 2011 at 11:56 AM | PERMALINK




 

 

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