April 15, 2011

GDP Since the Beginning of the POR Economy: Honey, They Still Shrunk the Private Sector

Filed under: Economy,Taxes & Government — Tom @ 12:34 pm

Commenter “Jerry in Detroit” this morning nudged me to update something I last tracked sometime last year, and to which I dedicated a column in February 2010, namely the separate and diverging private and government GDP growth and dollar components.

This is an especially opportune time to do so, since the now-finalized fourth quarter of 2010 (pending the annual comprehensive revision which will go back several years) represents the first quarter during which real GDP for the entire economy actually exceeded the value seen in the second quarter of 2008. It was during the latter one-third to one-half of 2Q08 that the POR (Pelosi-Obama-Reid) Economy began.

So here’s where things stand, in 2005 chained dollars (i.e., adjusted for inflation):


Jerry in essence indicated that he didn’t think the private sector has grown since the recession as normal people define it began. Jerry is correct; what I will from this point forward refer to as PDP (Private Domestic Product) has contracted by 0.67% since the second quarter of 2008. But it is clear that FDP (Federal Domestic Product) has rolled merrily along at what would be considered a booming rate if an entire economy were involved.

Keep in mind that the above excludes government transfer payments, which began to grow excessively when the recession began, and have zoomed out of control since the Obama administration took over.

Given that recent 1Q11 GDP forecasts have been revised downward to an annualized 1.5%-1.7% range, it looks like it might be a couple more quarters before the private sector goes positive (not annualized and assuming/hoping all the growth is private, the GDP forecast is about 0.4%, which is less than the 0.67% shortfall above).

As far as the private sector is concerned, we’re still asking “Rebound? What Rebound?” — and apparently will be for some time.



  1. When you say government transfer payments are you talking food stamps, unemployment benefits, social security, subsidies, etc??? If so, doesn’t this conclusively prove that pump priming by handing out money DOESN’T increase economic output in the private sector? Obama has given out virtually $4 trillion in transfer payments and zip response because consumption spending DOES NOT DRIVE THE ECONOMY.

    Comment by dscott — April 15, 2011 @ 5:21 pm

  2. #1, yes, all of what you noted except subsidies (which are not tracked, as far as I know) are transfer payments. And yes, it proves the point that pump priming accomplishes nothing. Businesses are not going to hire full-time help based on spikes in demand caused by transfer payments that aren’t permanent or reliable. As we’ve seen elsewhere, they take on temps and part-timers instead.

    Comment by TBlumer — April 15, 2011 @ 6:40 pm

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