The nation’s economic performance in the first quarter of this year couldn’t have been much worse, as the gross domestic product actually contracted by 2.1 percent, or so says the latest revision from the Commerce Department. (First they said it was a 1.0 percent contraction, then they revised it all the way down to minus-2.9 percent, only to come out today and revise it again to minus-2.1 percent. Any way you look at it, terrible.)
So all the conservatives who crowed over this clear evidence of the failure of Obama’s economic policies (including this one) had to gulp pretty hard when second-quarter growth was reported today at a truly robust 4.0 percent. Is this vindication and redemption for Obama and his economic policies?
Not even a little. And to set the stage for why that is, let’s look at some of the particulars from the
government's report:
Real GDP increased 4.0 percent in the second quarter, after decreasing 2.1 percent in the first.
This upturn in the percent change in real GDP primarily reflected upturns in private inventory investment and in exports, an acceleration in PCE, an upturn in state and local government spending, an acceleration in nonresidential fixed investment, and an upturn in residential fixed investment that were partly offset by an acceleration in imports.
The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 1.9 percent in the second quarter, compared with an increase of 1.4 percent in the first. Excluding food and energy prices, the price index for gross domestic purchases increased 1.7 percent, compared with an increase of 1.3 percent.
Real personal consumption expenditures increased 2.5 percent in the second quarter, compared with an increase of 1.2 percent in the first. Durable goods increased 14.0 percent, compared with an increase of 3.2 percent. Nondurable goods increased 2.5 percent; it was unchanged in the first quarter. Services increased 0.7 percent in the second quarter, compared with an increase of 1.3 percent in the first.
Real nonresidential fixed investment increased 5.5 percent in the second quarter, compared with an increase of 1.6 percent in the first. Investment in nonresidential structures increased 5.3 percent, compared with an increase of 2.9 percent. Investment in equipment increased 7.0 percent, in contrast to a decrease of 1.0 percent. Investment in intellectual property products increased 3.5 percent, compared with an increase of 4.6 percent. Real residential fixed investment increased 7.5 percent, in contrast to a decrease of 5.3 percent.
Real exports of goods and services increased 9.5 percent in the second quarter, in contrast to a decrease of 9.2 percent in the first. Real imports of goods and services increased 11.7 percent, compared with an increase of 2.2 percent.
The wild swing in export and import activity is one of the most perfect indicators of what’s happening here, which is that the economy has been going in fits and stops for the past six years. Indeed, this is not the first time during Obama's presidency that we've seen a single quarter of 4 percent or better growth. It's the third, and the most recent before now was only three quarters ago. The problem is that we never sustain consistent growth, which is why we end up with annualized growth that can never get better than around 2 percent, if that.
It's the same thing with job creation. We've finally seen a couple of months where we've exceeded 200,000 jobs created, which is just about replacement level considering the growth of the labor force, but we're also still seeing close to 300,000 new unemployment claims each week. We take a step forward, we take a step back. We never get on the right track and stay there.
Now I'm not going to deny that this is overall a good report, for this one quarter. In fact, if we could achieve 4 percent consistently, that would be great. It's exactly what we need to grow out of our deficit, debt and entitlement problems, not to mention realizing a healthier business and job creation environment.
But given Obama's history, does anyone really see that coming? Especially with another spike in health insurance premiums coming, and more people's jobs being jeopardized by the looming employer mandate (unless, of course, the White House arbitrarily postpones it again). You simply can't build sustained prosperity on high taxes, heavy regulation and government meddling in the economy. By the way, while politicians like to take credit when things go well (and assess blame when they don't), don't lose sight of the fact that it's private businesses operating in the private economy who generate the goods and services that make up the GDP. The fact that they found a way to overcome Obama's policies to give us a bounce-back from the horrendous first quarter is to their credit, not to his.
But we should celebrate good news when we get it, because it's sure been hard to come by since 2009.
