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October 27, 2011 8:55 AM U.S. economy shows signs of life

By Steve Benen

By most measures, the third quarter — July through September — wasn’t pretty. The Eurozone crisis intensified; the debt-ceiling scandal rattled investors; and Republican intransigence generated a downgrade in U.S. debt. Talk of a “double-dip” recession was ubiquitous.

But as it turns out, the U.S. economy muddled through anyway. The Commerce Department released its report this morning showing that the nation’s gross domestic product rose at 2.5% annual rate in the third quarter. It’s the strongest economic growth in a year, and a marked improvement over the anemic growth we saw in the first two quarters (January through June).

Indeed, economic growth in the third quarter was nearly double the rate seen in the previous quarter.

That said, it’s important to note that 2.5% GDP growth is hardly great news. It’s a clear improvement relative to the first half of 2011, but as Neil Irwin put it, we’re still dealing with “the diminished economic expectations of the post-crisis age.” By no means is 2.5% “robust” growth. On the contrary, to help claw our way back to economic health through a strong recovery, we’d like to see a significantly higher number.

I mention this in part because, while faster economic growth is encouraging, policymakers and pundits would be making a tragic mistake if they saw today’s numbers as an excuse for inaction (“See, the economy is starting to grow, so there’s no need to pass a jobs bill.”) The fact remains that we’re slowly getting out of a ditch — budget cuts, taking money out of the economy, and ignoring the jobs crisis may very well push us backwards in a hurry.

Indeed, this morning’s report emphasizes that spending at the state and local level fell at a 1.3% annual rate, which helped hold the economy back. Congressional Republicans not only support this drag on the economy, they’re eager to make it worse on purpose.

And with that, here’s another home-made chart, showing GDP numbers by quarter since the Great Recession began. The red columns show the economy under the Bush administration; the blue columns show the economy under the Obama administration.

Steve Benen is a contributing writer to the Washington Monthly, joining the publication in August, 2008 as chief blogger for the Washington Monthly blog, Political Animal.

Comments

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  • T2 on October 27, 2011 9:02 AM:

    GOP: The Commerce Dept is a tool of Obama and his socialist government.

  • j on October 27, 2011 9:10 AM:

    Wow, read Mother Jones for the article on Romney's foreign policy adviser, who was in a group that committed massacres in the middle east!

  • Ron Byers on October 27, 2011 9:12 AM:

    I have been thinking about the jobs bill. Assume it passes. Unlike Republicans I think it really will stimulate the economy, but what happens after the money runs out. A short term stimulus should be a bridge to somewhere. Where?

  • c u n d gulag on October 27, 2011 9:14 AM:

    "U.S. economy shows signs of life."

    Conservatives show signs of wanting to make it sick.

    Killing it by drowning in a bathtub is still the longterm goal.

  • T2 on October 27, 2011 9:30 AM:

    Ron Byers.....if a bill passes that provides employment for people....then they have a job and they'll be able to then buy stuff-contribute to the economy...which should help the economy revive which in turn would mean they would keep their job...and on and on. And that's how a short term thing becomes a long term thing.
    As long as we have 9% unemployed, that chain of event will not pick up steam - which is why the Party that has said it wants the economy to suck so Obama will be voted out, continues to prevent anything that may provide jobs.

  • beejeez on October 27, 2011 9:36 AM:

    So in other words, the economy did best when we had a Democratic Senate, House and president. What a surprise.

  • Ben on October 27, 2011 9:45 AM:

    What is the political risk to the Democrats if nothing gets passed, and the economy starts to improve anyway?

  • Ron Byers on October 27, 2011 10:10 AM:

    T2

    Traditionally a recession would run a natural course, there would be an excess of demand, companies would tool up and produce goods to satisfy the excess, when the excess was satisfied demand would decline and inventory would pile up, then we would enter into a recession, people would be laid off. Over time the excess inventory would be sold, natural demand would give businesses an incentive to hire more workers, who would buy more goods increasing demand. Everything would bubble along until the next decline in demand.

    The Great Recession wasn't a traditional recession. There was a real estate bubble all thru the 90s. The bubble burst which sounds like the start of a normal recession, but instead Wall Street had invented a lot of junk securities intended to fleece the rest of us. They were based on the value of residential and other mortgages. Most of the mortgages were good, but some were bad, the bad were mixed in with the good. Nobody could trust the value of any of the investment vehicles. The economy began to collapse. The government stepped in. The rest is history.

    What nobody has talked about is that the real estate bubble masked a real change in the nature of production and work. We don't need a large percentage of our work force to produce the goods we all want and need.

    Industry is able to meet all of our demand needs without adding new employees. The traditional recovery cycle is broken.

    When I talk about what happens next it isn't out of ignorance, or foolishness, and I am not kidding. The stimulus will work. Millions of workers will be put to work, but they won't be put to work in the traditional economy. What happens in 2014. Nobody wants to talk about that.

  • SW on October 27, 2011 10:18 AM:

    What is interesting is that if you look at the data (I know that is hopelessly out of fashion), initial unemployment claims were pretty much pinned at or above the 400,000 mark during the entire Reagan Presidency except for one brief moment 84-85. But from 80 thru 87 you are right there at 400K or above or perhaps just slightly below. Where we are right now is just a stone's through away from conservative nirvana.

  • chi res on October 27, 2011 10:32 AM:

    Where we are right now is just a stone's through away from conservative nirvana.

    Where we are right now IS the conservative nirvana under a Democratic president up for election in a year.

  • chi res on October 27, 2011 10:36 AM:

    Industry is able to meet all of our demand needs without adding new employees.

    You may well know more about this than I, Ron, but it seems that there may be new technologies (green energy, for example) that could, if given a decent headstart, pick up some of the slack in employment. Is there enough? Don't know, but I think it's worth giving it a real shot. Too bad it can't even be tried with a republican congress.

  • flyonthewall on October 27, 2011 4:54 PM:

    Somebody should tell the republicans all this money being spent by their PACS and candidates is stimulating the economy and creating jobs and demand.

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