Obama Economy Barely Gets Off the Floor
Disappointing 2.5 percent growth falls short
Add disappointing growth in the nation’s economy in the first three months of the year to stubborn unemployment to get the real picture of the failing Obama economy.
The government reported Friday that the economy grew by 2.5 percent in the first quarter, up from a dismal 0.4 percent at the end of last year. Yet a look at the details of the report shows a still fragile economy without much hope of progress for the rest of the year.
The Wall Street Journal reported that the growth was attributable to businesses rebuilding inventories and consumers boosting spending despite an increase in personal taxes.
“Yet government spending sank again- the back-to-back drop in military outlays is the sharpest since the 1950s- and imports surged in part because of a spike in oil prices,” the Journal reported.
The gross domestic product, a measurement of the value of all the goods and services produced in the economy, fell short of the 3.2 percent growth predicted by economists surveyed by the Journal’s MarketWatch.
“A lot of the growth in the first quarter came from factors that are not going to continue,” said Scott Hoyt, senior director of consumer economics at Moody’s Analytics. “There is not a lot of good news in this report when you scratch under the surface.”
Economists now predict that U.S. growth will taper off to 1.8 percent or less in the second quarter, the Journal reported.
The economy continues to be plagued by lack of demand as consumers and companies fail to spend and invest at the rates they did before the recession. As a result, low economic growth helps account for the current 7.6 percent unemployment rate.
The Journal speculated that first-quarter economic data provided little evidence that the overall picture would change.
“The underlying strength of demand for U.S. made goods and services actually softened. So-called real final sales, which omit unsold goods, decelerated to 1.5 percent from 1.8 percent and matched the smallest increase in two years.”
Consumer spending accounted for the biggest boost in first-quarter growth. Some of the spending went to higher gas prices in January and February, along with natural gas and home heating fuel at the end of the quarter because of a widespread national cold snap.
The Journal noted one surprise in government spending. Pentagon-related spending dropped 11.5 percent after falling 22.1 percent in the last quarter. These spending cutbacks represent the sharpest declines since the end of the Korean War in 1953.
As Congress faces the budget battles for Fiscal 2014, much will be said about the need for economic growth. Tax increases in pursuit of a so-called “balanced” approach are not the answer.
Only spending cuts that leave more money in the private economy for saving and investment will revive the stagnant Obama economy.