Q3 GDP up 3.5% over prior quarter is being pitched as the economic turn of the tides.  The recovery is here, break out the champagne.

The problem is, the mainstream media never actually looks at the numbers.  They just get fed the headlines and vomit that back through your TV.  If they actually had to spend any time to think about what they were reporting on, their talking heads would explode.

Inside the 3.5% growth are some insidiously overlooked facts. 

First, there was the ridiculous Cash-for-Clunkers program that stole sales from the current quarter and put them into last quarter.   That’s not growth, that’s borrowing from the future.  And remember this past summer with all the home buying going on?  With everyone taking advantage of government (tax payer) subsidized tax credits to buy perpetually overpriced homes?  Well, all that buying took place in Q3. 

When you combine the “growth” from these two government incentivized programs…GDP was 1.5% less, so really only 2%.

But we’re not done yet.

Another 1% of that 2% left in growth was actually the improvement of declinining inventories.  An example of declining inventories is like when Target orders less and less product because demand is down…and they would rather sell all the inventory they already have before ordering new inventory.  In Q2, inventories declined $160B.  In Q3, they only declined $130B (note: second largest decline on record).  They still declined, they just declined less.  Declining inventories are not good, it means nobody is buying anything, but somehow, less declining is good.  Makes no sense.  Anyway, less declining adds 1% to the GDP number.

So that moves GDP down to 1% growth.

But we’re not done yet.

All the government spending and growth in government was about .5% of the GDP growth.   Government spending is never growth, it’s just the government taking money that you could have spent on what you want, and spending it where the government wants instead.  That is not growth, that is wealth redistribution.  The only difference is, they didn’t ask you for your opinion on where they spent your money.

So that moves GDP down to 0.5% growth.

Suddenly, you might decide to tell me that number doesn’t sound like any growth at all and I’d say…you’re right.  The real party slogan should be, “HEY, AT LEAST IT’S NOT NEGATIVE!”  That would be more appropriate.

Categories: Government Failures

Tags: bailout, big government, cash for clunkers, economy, GDP, government spending, recession, recovery, redistribution, taxes, taxpayer