Third quarter GDP growth revised upward to 3.3 percent

By Dan Calabrese —— Bio and Archives November 29, 2017

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Keep in mind, this is before tax reform has been passed. The corporate tax rate is still 35 percent, and there's still trillions in foreign-earned capital parked overseas because of the tax on repatriated profits. What happens when we've dealt with those policy problems? This is a 10 percent upward revision of the original projected growth rate of 3.0 percent, and the fundamentals are pretty much the same as we told you a month ago. They're just better:

— Business investment increased at a strong 7.3 percent annual pace from July through September, the sharpest pickup since the end of 2016. — Consumer spending, which accounts for about 70 percent of U.S. economic output, grew at an annual pace of 2.3 percent, down from 3.3 percent in the second quarter. — Government spending and investment rose for the first time in three quarters, led by an uptick in defense spending. — The Commerce Department's third and final estimate of third-quarter GDP will come out on Dec. 21. —The Federal Reserve's preferred gauge of inflation, which is included in the GDP report, rose at an annual pace of just 1.5 percent, well below the Fed's 2 percent target.

The rise in business investment is probably the leading factor here, and to the extent government policy is driving it, we would have to point to the simple fact that the Obama Administration is no longer around to harass, regulate and investigate the business community every chance they get. The business community knew it had an antagonist in the White House and that often gave decision-makers pause when considering decisions to put more of their capital at risk. With Trump, at least they know he's not looking for a reason to go after them. The rise in consumer spending is notable too, if only because liberals think redistribution of wealth is necessary to spur this aspect of the economy's growth functions. None of that is occurring at the moment - at least not the way they think it should happen - and yet consumer spending rose, hurricanes or no. I'll add my usual caveat here whenever we discuss GDP growth: As happy as I am to see us top 3.0 percent in two consecutive quarters, the goal should be 4.0 percent as the norm and 5.0 percent as the standard for what we'd call a strong quarter. If we can achieve that, we'll see an infusion of revenue to the Treasury that will dwarf anything liberals dream of from tax rate increases. Then again, liberals don't want tax rate increases mainly for the revenue. They want them to punish rich people. They do want the revenue, of course, because they want to spend it. But when the revenue comes from higher growth and not from higher tax rates, liberals are rarely happy about it - although they'll spend the money either way. What politicians should take from an economy that grows regularly at a 4.0-to-5.0 percent clip is that the private sector can generate enough wealth on its own to meet people's needs, and the government can shrink commensurate to the private sector's ability to generate wealth and opportunity. Whether that happens, of course, depends on the kinds of politicians we elect.