Financial FAQs

Democrats have bought the Republican lie that Democrats were the big spenders, it seems, with the draconian federal budget cuts enacted over the past 2 years. But recent statistics show it’s been the Republicans since 1980 that created the most state and federal government jobs—4,289,000 under the Reagan and 2 Bush administrations, whereas Clinton created 1,934,000 jobs, while 752,000 government jobs have been lost to date during the Obama Administration.

The result of the huge cutbacks in government spending and hiring since the Great Recession has been an economy still stalled—especially in overall jobs and lost output.

WSJ Marketwatch’s economist Rex Nutting highlighted this recently. Though we are out of the Great Recession, and the just announced Q3 2013 GDP growth is 2.8 percent, above Q2’s 2.5 percent, our economy lost some $5 trillion in income and output since the end of the Great Recession. Our unemployment rate is stuck at 7.3 percent with millions of jobs lost, median household incomes have been falling steadily, and our infrastructure continues to crumble with some $2.2 trillion in deferred maintenance and upkeep, according to the American Society of Civil Engineers.

“And we’re falling behind the Chinese in investing in the future,” said Nutting. “Last week, the Treasury Department announced that federal spending fell 2.3 percent to $3.45 trillion in fiscal 2013 after dropping 1.8 percent in 2012,” he wrote. “It was the largest annual decline in federal spending since 1955, and the first time spending had fallen two years in a row since 1954-55, at the end of the Korean War.”

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Graph: WSJMarketwatch

“We can’t blame Obama alone,” said Nutting. “Congressional Republicans must take the bulk of the responsibility because they insisted that supposed out-of-control federal spending was our paramount economic problem, despite stagnant wages, the glaring scarcity of jobs and the glaring lack of out-of-control spending. Obama and congressional Democrats fought back, but only half-heartedly.”

Gross Domestic Growth picked up in Q3. However there was underlying weaknesses. Personal consumption expenditures (PCE) that power most consumer spending increased at a 1.5 percent annualized rate - the slowest rate since Q2 2011.
It looks like state and local governments are spending more, but the Federal government isn’t.  Federal government actually subtracted 0.13 percentage points in Q3, whereas state and local governments added 0.17 percentage points.

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Graph: Calculated Risk

That means the U.S. economy isn’t operating anywhere near its full potential, not to speak of an unemployment rate that was predicted to drop to 6.5 percent by the end of this year. Now it looks like we will be lucky to reach 7 percent.

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Graph: Calculated Risk

Government has actually lost jobs during Obama’s tenure to date, as we said. Calculated Risk reports that 752,000 jobs have been lost, mostly due to the Great Recession, but also because Republicans have succeeded in their message that government spending is out of control.

“Even Herbert Hoover, the president who has gone down in history as the man who did nothing to stop the Great Depression, wasn’t this bad,” said Nutting. “Under Hoover, real federal spending rose at an 18 percent annual rate. And Hoover built stuff we still use. Our fiscal policy has been awful. We needed government to step up and fill some of the gap left by the private sector, and instead we got literally nothing. Thanks for nothing, Washington!”

Harlan Green © 2013

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