April 30, 2012

AP Won’t Let Go of ‘Government Budget-Cutting’ As Reason For Tepid First-Quarter GDP Growth

AP_logo2012On Friday evening, it was Christopher Rugaber and Paul Wiseman. Today it’s Martin Crutsinger. Together with Derek Kravitz (who isn’t in on the latest offense — yet), perhaps the just-named quartet of alleged journalists should be named “The Four Distortsmen.”

Today, it was Crutsinger who, in the wake of a mediocre report on consumer spending, again invoked “government budget-cutting as the primary culprit explaining why the economy only grew by an estimated annualized 2.2% during the first quarter:

The government reported Friday that the overall economy grew at an annual rate of 2.2 percent in the January-March quarter. That’s down from 3 percent annual growth in the October-December period. The weakness mainly reflected government budget-cutting and weaker business investment.

Since they’re not letting go of their false meme, I’m not about to stop debunking it, this time with the help of the Wall Street Journal’s editorial board.

As I pointed out on Saturday (at NewsBusters; at BizzyBlog) in response Rugaber’s and Wiseman’s Friday evening report:

  • Federal spending hasn’t stopped growing, and in the January-March quarter exceeded the previous quarter by almost 14%.
  • The federal government, according to the Bureau of Economic Analysis, did cut its spending on items considered part of GDP (i.e., consumption expenditures and “investment”) by an annualized 8.1%, subtracting 0.46 points from reported GDP — but items which are part of GDP constitute less than 30% of all federal spending. (I would say all “budgeted” federal spending, but the government hasn’t had a budget for over three years, making the AP’s insistence on using the term “government budget-cutting” all the more ludicrous)
  • Almost all of the federal government-tied GDP hit (0.44 of the 0.46 points) came from reduced GDP-related spending in national defense. If the AP reporters wanted to blame “budget-cutting” where there’s no budget in the first place, they should have been specific about it. The sad fact is that government spending on non-GDP-tied items (transfer payments, salaries, etc.) is continues to roll merrily along.

In a weekend editorial, the Wall Street Journal wasn’t directly responding to the Friday and Monday AP items, but it might as well have been in the following excerpted paragraphs:

Keynesians decry this decline in government spending, but they’re the ones who said we needed the “temporary, targeted” demand-side spending blitz. Flood the economy with government spending for two years, then pull back when the recovery is underway, they said. The problem is we never got the roaring recovery they promised.

Economist David Malpass reports the startling fact that over the last year U.S. GDP has grown by roughly $600 billion but federal debt has climbed by $1.3 trillion. This is hardly “austerity,” and it explains why the U.S. debt to GDP ratio is climbing so fast.

The big picture is that this has been a traditional debt and spending demand-driven recovery, which typically has less staying power. The Obama Administration rejected supply-side incentives of lower tax rates and fewer regulatory burdens to boost noninflationary private output.

There’s more danger ahead, as the tax-increase cliff approaches at the end of this year. Even liberal economists and Treasury Secretary Tim Geithner are suddenly warning about the big tax increases that will hit the economy, but they are the ones who insisted that tax cuts be temporary. They created the cliff we may all leap off. President Obama says tax cuts don’t work, but he has never explained why the Reagan recovery that followed policies Mr. Obama rejected was so robust while the current recovery is so anemic.

If they’re going to blame government “cuts” for reduced GDP, the least AP’s reporters should do is say where those “cuts” have occurred. Beyond that, they need to focus more on why businesses won’t invest — which is where the real explanations for why the recovery has been so awful lie.

Cross-posted at NewsBusters.org.



  1. The Four Distortsmen of the Apocalypse!

    “Do not arouse the wrath of the Great and Powerful O…”

    “Do you presume to criticize the Great O? You ungrateful creatures!…”

    “Pay no attention to those reporters behind the curtain!”

    Too bad so many take this BS and believe it!


    Comment by IAFarmBoy — April 30, 2012 @ 8:56 pm

  2. Thanks for the comment. It is too bad.

    Comment by Tom — May 1, 2012 @ 10:25 am

  3. [...] AP Won’t Let Go of ‘Government Budget-Cutting’ As Reason For Tepid First-Quarter GDP Growth [...]

    Pingback by AP Won’t Let Go of ‘Government Budget-Cutting’ As Reason For Tepid First-Quarter GDP Growth | PERSUASION IN INK — May 1, 2012 @ 2:04 pm

  4. Here’s Krugman right and wrong at the same time:

    Paul Krugman We are already in new great depression


    Crappy solution as usual for the problem, but he at least deserves props for acknowledging the obvious. Look for the MSM and Dems to turn on a dime, acknowledge the problem but make exactly the same mistakes in a desperate move to pump prime the economy.

    Comment by dscott — May 1, 2012 @ 7:51 pm

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