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According To The Council Of Economic Advisors, Q2 GDP Was -3.3% Without Stimulus Benefits
According to the Council of Economic Advisors, on whose staff Larry "Shadow Bernanke" Summers used to sit under the Reagan administration, has released an estimate of the economic benefits provided by the Obama Stimulus. Net result - without the Stimulus, Q2 GDP (which as readers will recall came out at -1%),would have come out at -3.3%, indicating that while most pundits were expecting the major flow through of Stimulus spending to occur in Q3 and taper off in Q4, the majority of the benefits from this program have already likely peaked. Whether or not this portens badly for future GDP estimates, we will have to see and wait. From the CEA report:
Estimates of the impact of the ARRA made by comparing actual economic performance to the predictions of a plausible, statistical baseline suggest that the Recovery Act added roughly 2.3 percentage points to real GDP growth in the second quarter and is likely to add even more to growth in the third quarter.
As for stimulus benefits for Q3, CEA believes that this will add another 3% in the quarter about to end.
There is broad agreement that the ARRA has added between 2 and 3 percentage points to baseline real GDP growth in the second quarter of 2009 and around 3 percentage points in the third quarter.
Furthermore, even though the economy continues to bleed hundreds of thousands of jobs each month, the stimulus allegedly helped create one million jobs. So absent the stimulus, unemployment (and not real unemployment, but the one CNBC uses) would be around 10.6% if not higher.
This analysis indicates that the ARRA and other policy actions caused employment in August to be slightly more than 1 million jobs higher than it otherwise would have been. We estimate that the Act has had particularly strong effects in manufacturing, construction, retail trade, and temporary employment services. The employment effects are distributed across states, with larger effects in states more severely impacted by the recession.
Bottom line: in the past half a year, GDP will have been beneficially impacted by over 5% thanks to an unprecedented Stimulus spend. What happens once all these effects expire is anyone's guess.
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Keep stimulating ad infinitum if they work so well....
Can you post the Mike Duvall video (California assembly confession on CNN right now) ?? Its amazing what this country has become!! Imagine confessing your affairs during session !!
really might start watching cnn again.
better than watching turbo timmy, impersonate an elf, while lying through his teeth.
the key comment this am was by China regarding not taking the foot off stimulus -- they simply can;t or they risk being outflanked by dollar printing and nominally inflated US assets ojn the prowl - otherwise known as surreptitious theft
If you look at housing still sinking, employment still evaporating, tax receipts getting incinerated, and credit usage contracting, you have to think that the whole Q2 GDP estimate of -1% is horribly off and that so called stimulus added an even greater boost to a dead number.
The thing is that the organic part of the GDP number, the parts not stimulated, are still deteriorating rapidly. None of the reported numbers make any sense.
sales tax recepts here in a western NY State county shrank 10% in Q2. This county has the biggest regional mall and is one of the few counties in the country that has had positive growth even with the recession.
http://www.mpnnow.com/homepage/x1373215222/Monroe-among-counties-hit-with-double-digit-drop-in-sales-tax-revenue
With respect to employment, it would seem to me that the CEA is confusing correlation &causation. Moreover, there appears to be no real quantitative methodology that would back up their assertion of 1m jobs saved or created.
One wonders if the cost of saving a single auto job (estimated to be $1.2m of borrowed dollars) will provide any real and lasting economic benefit to the United states economy as a whole? Of course there is a real and lasting benefit to Obama's re-election campaign.
Maybe the Fed's hidden hand?
http://www.nakedcapitalism.com/2009/09/why-economists-rarely-saw-bad-thi...
Whoa! Lizzy! Gestapo will come after you with those comments. They will look european with black boots, tights and shirts. Kinda like devo in the "whip it" video.
What if you tried to create inflation by debasing the currency and no one played along? that is the dilemma Bernanke is facing. Without wage growth, all money printing does is shift the needle from a flat out deflation to a deflation with rising commodities prices, and/or a hyperinflationary currency crisis. Nice move, bozo.
In any case, GDP is a ridiculous measure. The government can jack it, as the report shows, by increasing spending, but GDP does not measure the debt incurred to get that spending.
GDP is like the revenue portion of an income statement - if you sold dollar bills for quarters your revenues would look great.
Your first paragraph is absolutely spot-on. I have been trying to explain exactly this to my family and friends, and they f*ckin glaze over! This is the most important message to get through to the average person, in my opinion.
When they understand this, they immediately get pissed off. And we need people to get pissed off to stop this treasonous Fed from wrecking the $.
Thanks for the compliment. Just as Bernanke has studied the GD extensively, I have studied his mindset extensively.
He believed that to avoid deflation all he had to do was debase the currency. that would scare people into spending, as they desired to spend dollars today versus spend less valuable dollars tomorrow. Poof, the economy shifts back into forward.
What an overly simplistic viewpoint for someone in charge of the money supply. He really believes that manipulating the fiat currency can overcome issues in the underlying economy. What an idiot.
Correct.
We need to produce things again. No more 'free' financial lunches. We need real jobs that produce real goods that can produce real GDP growth to pull us out of this nosedive. The Fed is focusing on the markets as if they were the solution to the problem, not just a symptom of this 25 year plus deindustrialization/outsourcing process.
When investment banks cease to act as devestment banks and channel money into R&D and new productive technologies rather than into cheap and easy consumer debt that sucks the lifeblood out of a nation... Ooops... too late already...
Or we can just make do with much much less.
And that understates it if they are only counting the stimulus plan.
All government deficit spending should rightly be considered "stimulus". By that token the decline in GDP was even worse.
Good morning Mr. Anderson.
Woulda coulda is no way to gauge success.
Ohhh, please this group is aways in the president's pocket no matter what. A brick of salt is needed here! $4C has had dubious effect. Exports and imports are cancelling each other out. Shopping is lethargic, businesses are counting rubber bands, gov't def. contracting is slow, banks are barely lending, real estate- pick your poision...
Tell me that I am pessimistic.
I think they created jobs all right. By "helping" the unemployment number a little bit, don't ya think?
I am waiting with breathless anticipation the moment when the world, nation by nation, realizes they have thrown all of this "stimulus" into a black hole; naught to be seen again. That it's total cumulative effect was cero nada bupkis. All they have done is dazzle with brilliance, and baffle with bs. Sham wow. This doesn't end well.
I think Americans are so dazed by the severity of what's happening to them that if the government reported unemployment as 0% tomorrow nobody would even bother to question it. They already know the truth and don't need the bloody government to tell them.
Then again in a recent poll 97% of Americans thought that Quantitative Easing meant loosening your belt after eating a 4 course meal...
I thought QE was plying fat girls with drinks.
+10
Has the CEA considered recommending turbo fan lunar excited chargers to boost battery output to economic stimulators?
Not sure... but Ross Perot has a solid idea about lining up all the underutilized aircraft on the equator. Face them west and gun the engines to slow the rotation of the planet down by 25%. Gives you a 30 hour day for more output and only 9 months a year to make debt payments on...
I miss Ross.
Good plan except for the potential for west coast flooding...
I guess stuffing banks to the gills with printed money counts as GDP "growth". Anyways can anyone tell me what's the use of measuring growth in terms of a constantly depreciating fiat currency? If nominal growth is all that counts, then I guess Zimbabwe is doing a pretty bang up job.
And their point is? David Rosenberg believes that 100% of GDP is attributable to the stimulus--there is zero organic growth taking place. Since the stimulus is either a future tax liability or an inflationary debasement of the USD, we're supposed to be happy?
You go, boys. Thanks for saving us by throwing un an anchor.
WELL SAID!
Hey cool avatar
all the numbers are irreducible based on broken methodology so its a jobless recovery again!
The impact is not 5%. The GDP is calculated in such a manner that the quarterly rate is pro-rated to an annualized rate.
The effect of the stimulus so far is 5%/4=1.25% annualized.
If we get two more quarters where the effect is 2.5% each quarter, the net effect will be 2.5% annualized.
Another way of putting it would be $787 Billion in stimulus bought $350 Billion in GDP if that 2.5% annualized rate continues for two more quarters (doubtful).
It's more likely the net effect will be around $250-Billion or so, which is pretty typical bang for the buck for government. Adding in interest, the reward gets even more meager.
Okay, Q2 GDP was about $3.5 trillion, so 2.3% of that is 80.5 billion, so in a perfect world, the stimulus added 80.5 billion to the Q2 GDP.
http://www.washingtontimes.com/news/2009/aug/14/pace-of-stimulus-spending-plummets/print/
According to the above article, stimulus spending averaged $9.7 billion/week for Q2 for a total of about $120 billion, so according to Larry Summers, every stimulus dollar spent bumped the GDP up 67 cents, and 1/3 of the stimulus created no value.
That's pretty consistent with what most economist believe to be the multiplier effect of stimulus.
except the government shills like Mark Zandi, of course.
So we flush a third, and then have to pay interest on the debt. Awesome
$151.4bn of the $787bn has been spent through August, but 44% of that was in the form of tax reductions and an additional 20% in unemployment benefits & nutrition programs based on p.7. Only 11% ($16.5bn) was from direct gov't outlays (25% went to state gov'ts through medicaid & education). According to their analysis, tax relief seems to be the quickest way to provide stimulus and has. When that runs out (which it soon will), we'll only be left with pork, but we're still waiting on that...
We're still just shifting demand from the future to now through borrowing, not creating real growth. I still can't find anything organic that will help us out of this mess.
You've got to believe virtually all of the 44% and 20% spent on tax reductions and unemployment benefits were spent as they both affect disposable incomes. Of course you'd have to knock off a few percentage points for what people stuffed in their mattresses. Money paid to distressed states is tougher. I'd wager a great deal will get diverted to general funds to be tapped for payroll and WIP.
Your demand shift assumption is right on the money. The stimulus was intended to dispense opiates to the masses.
They could have said they "saved or created 100,000,000,000 jobs" and it would have had about as much credibility - and been equally true.
I mean, as long as they're just making stuff up, why not go all out?
Sorry all - this was supposed to be in reply to lizzy, above.
Mea culpa.
Government produces nothing. What's it doing in a measure of production?