April 29, 2014

AP’s Crutsinger, As Dismal First-Quarter GDP Report Looms: Happy Days Are Here Again

At the Associated Press, aka the Administration’s Press, Martin Crutsinger has pretty much proven that he’s been on some kind of workout regimen. If he wasn’t, he couldn’t possibly have carried so much Obama administration water in his 1:45 p.m. report on the state of the economy (saved here for future reference, fair use and discussion purposes) as he did.

Crutsinger’s message: Pay no attention to that lousy GDP report we expect to see tomorrow morning (there’s some reason to believe that it may get artificially juiced, which I’ll explain later). Starting this month, the economy has been smokin’, and this year’s going to be just great. Too bad the evidence for his optimism mostly doesn’t exist — and to the extent it does, it’s not rip-roaring great. Excerpts from Crutsinger’s latest crummy creation follow the jump.


The AP’s headline is actually more cautious than Crutsinger’s writeup (bolds are mine):

US ECONOMY LIKELY TO REBOUND FROM SLOW 1ST QUARTER

MartinCrutsingerWide2013

Expect a dreary report Wednesday when the government issues its first estimate of how fast the U.S. economy grew in the January-March quarter. Brutal weather kept consumers and businesses in hibernation for much of the winter and likely slowed growth to a scant annual pace of just 1.1 percent.

Yet thanks to a bounce-back in consumer spending, business investment and job growth, analysts foresee a strengthening economy through the rest of the year.

In fact, many say 2014 will be the year the recovery from the Great Recession finally achieves the robust growth that’s needed to accelerate hiring and reduce still-high unemployment.

Most analysts think annual economic growth has rebounded to around 3 percent in the current April-June quarter and will remain roughly that strong through the second half of the year.

If that proves accurate, the economy will have produced the fastest annual expansion in the gross domestic product, the broadest gauge of the economy’s health, in nine years. The last time growth was so strong was in 2005, when GDP grew 3.4 percent, two years before the nation fell into the worst recession since the 1930s.

To even get to 3 percent for the full year, the economy will have to average 3.6 percent growth in the second, third, and fourth quarters to make up for the lousy first. That seems far from assured. A 3 percent performance in the second quarter would then require both the third and fourth to come in at just under 4 percent.

Getting back to the AP report, check out this gem of a sentence:

One reason for the optimism is that a drag on growth last year from higher taxes and deep federal spending cuts has been diminishing

Gosh, after all this time, we’re finally learning that higher taxes can be a drag on growth. Imagine that.

As to “deep federal spending cuts,” where are they (besides defense)? Outlays on federal operations (i.e., before interest and several items which really should be treated as receipts) through the first six months of the current fiscal year are only 1.3 percent lower than through the same period in fiscal 2013. The “other activities category,” also often referred to as “discretionary spending,” is only down by 3.5 percent, and is still miles above where it was before the Obama administration’s gigantic “temporary” spending increases of 2009 and 2010 kicked in.

Crutsinger did note signs that housing will be a drag. Though this may indeed be the year the economy meaningfully improves for the average American, there is little definitive evidence that the robustness so many expect to occur actually will occur.

As to tomorrow’s GDP report, it could get juiced as a result of Obamacare. The government’s lengthy explanation of the various impacts is here.

As best I can ascertain it, there are three layers of relevant healthcare-related elements of which may be impacted. The first is covered health care expenses, the second is uncovered health care expenses, and the third is the difference between the first two items and total premiums paid. But a fourth element, the premium subsidies, is not treated as a GDP offset.

So to use an unfortunately not extreme example for one household. If their gross health insurance premium goes up 50%, overall GDP will end up being higher by the amount of that increase, regardless of what the household’s covered and uncovered expenses turn out to be. Whether or not those higher premiums are partially or even largely offset by “tax subsidies” is irrelevant.

This treatment seems like a recipe for creating an artificially induced GDP increase without any overall real economic value added. We’ll see tomorrow.

Cross-posted at NewsBusters.org.

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2 Comments

  1. “Great Expectations”

    Chapter 5 “Recovery Summer”
    (same title as first four chapters:
    http://www.whitehouse.gov/the-press-office/administration-kicks-recovery-summer-with-groundbreakings-and-events-across-country)

    “It continues to be the best of times …”

    Comment by Jim — April 29, 2014 @ 3:36 pm

  2. [...] noted yesterday, there is a chance of an Obamacare-related upside surprise (BEA’s lengthy explanation of [...]

    Pingback by BizzyBlog — April 30, 2014 @ 8:17 am

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