Judging from the trillions our leaders want to spend to revive our national economy, one would think that the sky has fallen. Covid was no slouch but a brief look at some data might suggest a different result.
In 2018 and 2019 the economy* grew at a rate of about 2.3% per year. In 2020 the annual rate of change was -3.4%. Clearly Covid had a major effect. We don’t have full year data for 2021. But we do have three quarters and in those quarters the economy grew at an average of 5%.
Looking at those yearly figures makes one wonder why government
is so worried about the economy.
Let’s look a little further. The downturn in 2020 was much more extreme than the annual figures show. In the first two quarters of 2020 the quarterly growth rates were -5.1% and -31.2%. That -31.2% figure is eye popping. It would worry anyone. But guess what? 2020 wasn’t over in the second quarter. The growth rate in the third quarter was 33.8%. What goes down must come up. Right? I don’t know but we had a two quarter swing downward and then a reversal the next two quarters. 2020 ended with growth at 4.5% in the fourth quarter. And so far in 2021 we are averaging 5% growth.
The patterns I discussed above for national output are also prevalent in the subcategories of output. The four columns in the table below are for the four quarters of 2020. Notice how we get similar down/up patterns in the outputs as the year progresses.
Table Real GDP
2020
Q1 Q2 Q3 Q4
Consumer durables -12.0 -1.5 89.0 1.1
Consumer services -10.0 -42.4 37.5 5.3
Business equipment -21.3 -36.2 55.9 26.4
Exports -16.3 -59.9 54.5 22.5
Residential Construction 3.8 -10.6 8.1 10.2
The exception to these down/up patterns was found in Business Structures. Business Structures did not return to growth in 2020 and remained in negative territory in 2021.
-0.9 -46.8 -15.3 -8.2
Joe and his government friends are today trying to decide how much stimulus to add to the economy. The amounts of stimulus are unprecedented. Why? The figures I quoted above do not support the idea that the economy is struggling. The figures show a dip and then a return.
Or maybe the trillions of additional government spending being proposed represent an opportunity to install programs Biden and friends have been lusting after for decades. Nothing like an apparent emergency to sneak in lots of change. The nice thing is that it won't cost us a penny. I think I read that somewhere.
*When I speak of the economy I am using figures for real
Gross Domestic Product. Real means that inflation has been removed from the
numbers – so changes represent changes in the underlying quantities of goods
and services produced. These are official figures that come from bea.gov
Dear LSD. It’s apparent to folkz who have some edukation in econ, who unnerstan that spend’n more than you take in is not a gude ting, who have had to balance a personal/family/biz check’n account, or who unnerstan that debt (usually) must be repaid—it’s apparent that the current clownish administration either is fatally stoopid, certainly incompetent, or intentionally set on destroying ‘murika—or worse all three. Me tinkz the latter.
ReplyDeleteBozo Biden sez spend’n trillions won’t cost a dime ‘n SecTreas sez spend’n the trillions will reduce inflation. WTF ??????? This administration is Forrest Gump personified, “Stoopid is as stoopid does.”
I disagree somewhat regarding whether the economy is struggl’n. Me tinkz it’s hav’n a hard time try’n to git itself out from under all the BS the Bozo Biden clowns are dump’n on our hedz. Yepper, the sky it be a fall’n from all the Bozo Biden et al BS poop machine shoot’n up out’a the DC swamp.
One ‘n half ‘ourz to ‘appy ‘our . . . . CHEERZ!
Thanks dear Tuna. That's what we get for electing someone with so much government experience.
DeleteHi Tuna - I an not sure where you or for that anyone else would get the idea that inflation is caused by corporates, government spending, or we consumers etc etc. You really want to know what causes inflation. Check out Milton Friedman view on inflation. Here is the summary. And it is very very simple. Quote - "It is always, and everywhere a monetary problem" - Milton Friedman. Unquote - there is a series of videos on youtube that will open up your mind.
ReplyDeleteRegarding infrastructure spending, I am in the camp that the good outweighs bad, reason being it all about the future of America. America's present day infrastructure sucks to put it mildly - especially in small town America. I know this because I travel globally, worked globally and can see the erosion of our competitive ability down the line. Yes, there will be pork belly projects along the side. Yes, there will be misappropriations and all that nonsense. But we are a democracy - it is supposed to be messy, with different points of view, opinions. That's what makes it beautiful. Thank god we are not China (nothing against them but I prefer democracy any day over autocratic rule). So I won't say your view point on the spending is bad. But I do have a problem when you say that it causes inflation. It does not.
Thanks VenRam. Nice comment. Let me add that perhaps both of you are right. I believe that Friedman meant to explain long run or durable changes in inflation. He believed that money was the only long run cause of inflation. But in the short run there are many things that can cause aggregate demand to rise relative to supply -- and that can cause changes in the inflation rate.
DeleteAgree. ST inflation is dominantly either cost-push or demand pull.
ReplyDelete