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News & ArtsWednesday, January 30, 2013
Economy No, Nothing Keynesian About That...
Posted by Goldy on Wed, Jan 30, 2013 at 12:07 PM
The US economy unexpectedly shrank in the final quarter of 2012, contracting 0.1 percent:
The drop in gross domestic product was driven by a plunge in military spending, as well as fewer exports and a steep slowdown in the buildup of inventories by businesses. Anxieties about the fiscal impasse in Washington also contributed to the slowdown, one reason stockpiles grew more slowly.
But don't you worry. All that austerity Republicans are seeking to impose—those massive cuts in federal spending they long for—that won't be contractionary because... well... just because!
(Also, imagine if all that military spending propping up our economy was actually spent on stuff we need? One can always dream.)
1
I can't find the figures now, and my Google-foo is failing me, but I've seen comparisons of the effects of military vs. domestic economy spending by the government. And, the stimulative effect of military spending was quite a bit lower than that of other spending.
2
Seeing as how most military spending is essentially firing up a hundred thousand nozzles to burn as much fuel as possible, continuously, for no reason, I think the world can stand a reduction. But yeah, now would be a good time to spend some of that stimulus money that GWB wasted in the '00s when times were flush.
4
There are different multiples for military spending.
The highest GDP multiple for military spending is on salaries and benefits for military based in the US. Much lower GDP multiple when they are overseas.
The next highest GDP multiple is for US services and material supplied.
If you took the money we cut from military spending and spent about 1/3 of that on US education and infrastructure, you'd have the same net GDP effect, but would have saved 2/3 of the money spent. Which you could use to cut the deficit, thus reducing borrowing costs (interest). Best used to buy off high interest treasuries.
The highest GDP multiple for military spending is on salaries and benefits for military based in the US. Much lower GDP multiple when they are overseas.
The next highest GDP multiple is for US services and material supplied.
If you took the money we cut from military spending and spent about 1/3 of that on US education and infrastructure, you'd have the same net GDP effect, but would have saved 2/3 of the money spent. Which you could use to cut the deficit, thus reducing borrowing costs (interest). Best used to buy off high interest treasuries.
5
The economy also lost all that sweet campaign spending (nearly a billion a month) for much of Q4.
Not a huge chunk of total GDP, but with multipliers probably good for 0.1%.
Not a huge chunk of total GDP, but with multipliers probably good for 0.1%.
6
I wonder how much of that reining-in is just prudent managers avoiding buying too many raw materials/services and cranking out too much product, and how much was a few titans of industry deciding to throw a scare into the markets/fire a shot across the bow of Congress.
Also, R&D and weapons-system purchases are the relatively easy parts of military spending to curtail in the short order; there's no huge reduction-in-force planning that I'm aware of. Maybe as Afghanistan winds down, get those soldiers trained and working on repairing all the shabby, flimsy buildings on bases, and most importantly, doing energy-efficiency upgrades. Those are real-world marketable skills as well.
Also, R&D and weapons-system purchases are the relatively easy parts of military spending to curtail in the short order; there's no huge reduction-in-force planning that I'm aware of. Maybe as Afghanistan winds down, get those soldiers trained and working on repairing all the shabby, flimsy buildings on bases, and most importantly, doing energy-efficiency upgrades. Those are real-world marketable skills as well.
10
You can't build a 21st century economy by propping up 19th century industry...much as Obama, Democrats and urbists wish they could.
11
@10 You can't build ~any~ economy without spending money. If the poor and middle class can't and the rich won't, who's left?
12
@4 No, no, no. We have to laugh at the POTUS's high speed rail proposals and break the teachers' unions. Real Murka *needs* ten carrier battle groups loaded with malfunctioning F-35s.
13
@10 Which 19th century industries are the Democrats propping up? I must have missed the debate on corset and penny-farthing bicycle subsidies.
17
But let's not forget, this is all happening under President Obama's watch. He OWNS this crappy economy.
This should not be "unexpected" as you say Goldy. When ya'll voted for this guy, after the past 4 years of Obamaconomy, you should have known that this decline would result. Or did you just like his smile better that Romney's?
Sixteen TRILLION dollars in debt people. Hello...
What part of "we are so screwed" don't you (D) genius' understand?
This should not be "unexpected" as you say Goldy. When ya'll voted for this guy, after the past 4 years of Obamaconomy, you should have known that this decline would result. Or did you just like his smile better that Romney's?
Sixteen TRILLION dollars in debt people. Hello...
What part of "we are so screwed" don't you (D) genius' understand?
18
@17: You're probably trolling, but your hypothetical questions do have answers. Why did we vote for Obama's economy over Romney's? Because under Obama we had a known pattern of steady, if modest growth, and he promised to do things that seemed likely to sustain that pattern.
Romney promised austerity, which your allusion to the debt seems to indicate you support. Austerity has never been shown to improve an economy and the countries that are practicing it have seen their recovery falter, stall, even reverse.
Romney also promised that the mere fact of his awesome presence would be the magic key to improving things. "if we win on November 6th, there will be a great deal of optimism about the future of this country. We'll see capital come back and we'll see—without actually doing anything—we'll actually get a boost in the economy." Does that sound like a man with a good plan? No, it sounds like a man who thinks the economy is going to recover anyway, and he wants to be in a position to take credit for it.
Romney promised, during the second debate, to create 12 million new jobs, and also assured us that government does not create jobs. So what was he planning to do? Hire 12 million people personally to, like, take care of his horses or whatever?
Romney also promised many things that contradicted each other. So, I felt like I had literally no idea about what he would actually do if elected. It's possible the economy would have been fine, but only if he went with his promises that involve basically doing what Obama's been doing. If he fulfilled his promises of austerity, I was pretty sure we'd go back into a recession.
That could still happen, of course. But it won't be because of Romney's policies we didn't implement.
More...
@17: You're probably trolling, but your hypothetical questions do have answers. Why did we vote for Obama's economy over Romney's? Because under Obama we had a known pattern of steady, if modest growth, and he promised to do things that seemed likely to sustain that pattern.
Romney promised austerity, which your allusion to the debt seems to indicate you support. Austerity has never been shown to improve an economy and the countries that are practicing it have seen their recovery falter, stall, even reverse.
Romney also promised that the mere fact of his awesome presence would be the magic key to improving things. "if we win on November 6th, there will be a great deal of optimism about the future of this country. We'll see capital come back and we'll see—without actually doing anything—we'll actually get a boost in the economy." Does that sound like a man with a good plan? No, it sounds like a man who thinks the economy is going to recover anyway, and he wants to be in a position to take credit for it.
Romney promised, during the second debate, to create 12 million new jobs, and also assured us that government does not create jobs. So what was he planning to do? Hire 12 million people personally to, like, take care of his horses or whatever?
Romney also promised many things that contradicted each other. So, I felt like I had literally no idea about what he would actually do if elected. It's possible the economy would have been fine, but only if he went with his promises that involve basically doing what Obama's been doing. If he fulfilled his promises of austerity, I was pretty sure we'd go back into a recession.
That could still happen, of course. But it won't be because of Romney's policies we didn't implement.
19
@17 Just for fun, my trolling friend, go get the National Debt figures for the fiscal year ending in each year a Presidential Inaugural took place. Now, use that as the denominator and calculate the percentage rise of debt for each Presidential term, using the figure for the subsequent inaugural as the numerator in the calculation.
By this simple calculation, you can see that each Republican administration since the Second World War has had a far higher increase in the National Debt than each Democratic administration. This has been amplified over the last 40 years. Republicans are now responsible for at least two thirds of our debt.
Obama's performance numbers on the debt are actually fairly good, with the strongest percentages of decrease in the annual deficit in ages.
Have a nice day.
By this simple calculation, you can see that each Republican administration since the Second World War has had a far higher increase in the National Debt than each Democratic administration. This has been amplified over the last 40 years. Republicans are now responsible for at least two thirds of our debt.
Obama's performance numbers on the debt are actually fairly good, with the strongest percentages of decrease in the annual deficit in ages.
Have a nice day.
20
@19 But, but, but....the House of Representatives! Whaaaa! Whaaaaaaa! Presidents (Republican Presidents, anyway) are powerless against them!
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