Right Thinking From The Left Coast
I find that the harder I work, the more luck I seem to have. - Thomas Jefferson


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I Blame Bush

What a horrible economy!  Unemployment is still rising.  And last quarter, the economy continued to shrink at a 1% annual rate.

Whoops.  Sorry.  Obama is President.  So that’s good news.

The American economy shrank at an annual rate of 1 percent from April through June, the government reported on Friday, stoking hopes that the worst recession since the Great Depression was nearly over.

The economy’s long, churning decline leveled off significantly in the second quarter, as stock markets started to recover, corporate profits bounced back, housing markets stabilized and the rampant pace of job losses tapered off. Declines in business investment leveled off, and the economy was aided by big increases in government spending at the federal, state and local levels.

“We’re in a deep hole, and now we’ve got to dig ourselves out of it, which is a very difficult task,” Diane Swonk, chief economist at Mesirow Financial, said.

But consumer spending fell by 1.2 percent as Americans put more than 5 percent of their disposable income into savings. Economists are concerned that consumer spending, which makes up 70 percent of the economy, will not rebound as long as employers keep cutting jobs and trimming wages.

That last bit is the best news in the report.  Americans should be saving.  I’m no macro-economist but the emphasis to “spend spend spend!” seems ill-conceived to me.  I hope the savings rate continues to go up, even after the economy has recovered.  I’m living that idea myself.  After selling my house in Texas and getting backpay for the wife, we had some cash left over.  So we socked into savings rather than spend it.  I know that’s selfish and greedy, but I’d rather have a safety cushion in case things get really hairy for the 10000 household.

Anyway, I’m sure this will be trumpeted in liberal quarters and downplayed in conservatives ones (as I just did).  The thing is that there are reasons to be skeptical—reasons the libs would be trumpeting (and conservative downplaying) if McCain were President:  the growth has been driven by stock market recovery and, perhaps, deficit spending; jobs are not rebounding; these are preliminary numbers very likely to be revised downward; even during the Great Depression, there were quarters that looked recovery-esque.  That’s why even the most optimistic economists is not anticipating a real recovery until later in the year, at minimum.

More to the point, I don’t think we’ve retrenched out economic system for a long-term recovery.  Regulations have not been changed, taxes have not been simplified and governments’ long-term fiscal outlook is worse than it was a year ago.  That’s not a foundation to build on.

So, yeah, things are getting worse at a slower pace.  But you’ll forgive me if I keep the champagne corked for the moment.

Posted by Hal_10000 on 07/31/09 at 08:57 AM in Politics Law, & Economics • Permalink

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