It’s the smallest of contractions, but it’s still not good:
The United States economy unexpectedly reversed course in the final quarter of 2012 and contracted at a 0.1 percent rate, the Commerce Department said Wednesday, its worst performance since the aftermath of the financial crisis in 2009.
Economists were predicting a 1.1% increase.
Time for more austerity, right? When I tighten my belt, the gubmint should tighten its too.
Hunter Gathers
Contraction of economic growth because of cuts in government spending? That’s unpossible.
Sawgrass Stan
It’s all Krugman’s fault. Let’s all chant “Simpson-Bowles, Simpson-Bowles, Simpson-Simpson, Bowles,Bowles” until long-term Medicare costs come down.
honeybooboo
lol…can always count on DougJ to dish out the gloom porn when the numbers are down. When they are up (which is much more often these days) he concern trolls about what Obama should be doing different on guns or whatever or why F@t B@st@rd Christie is such a great guy.
Ted & Hellen
Well, in keeping with his republican counterparts, the president does say that the deficit is a great concern…
Phoebe Jean
this is great news!
Belafon (formerly anonevent)
1. It’ll probably get revised up later.
2. Considering that we haven’t had any stimulus since 2009, I’m not entirely surprised.
ChrisB
@Phoebe Jean: Best possible way to cut the deficit but nobody’s saying that.
Comrade Dread
Doctor, the patient is anemic, weak, and can barely lift his head off of the pillow.
MORE LEECHES, NURSE! MORE I SAY!
Shrillhouse
Clearly, a “grand bargain” is needed to reassure the markets.
We need a steely-eyed centrist with the guts and gravitas to bring both sides to the table…
muddy
I don’t suppose all the fear mongering from the right has anything to do with it? Or the uncertainty leading up to the election?
I was getting questions in polls in the fall about how confident I was about the economy in the next 6 months to a year. I said that my answer would be completely opposite depending who won the election, , so the question was really pretty random.
I can well believe that businesses of all sizes were just not sure of what was coming. I don’t think it’s unreasonable to think that many in business wanted to hold their cards until they knew who was going to be the next president. I know I was.
Villago Delenda Est
This is what you get, America, for rejecting the Rmoney Boom that was going to happen if it wasn’t for Nate Silver and those other meddling, gay, thin, effeminate kids.
Waynski
I’ve gotta think Sandy has a lot do with that number. I didn’t click through. Was it mentioned?
WereBear
Between the liberals depressed before the election, and the wingnuts depressed after, I think there was a lot of gloom that took a while to dispell.
Gin & Tonic
I’m not tightening my belt, I’m loosening it. Oh, maybe it’s because I eat too much.
Mandalay
@Phoebe Jean:
Don’t get your hopes up too high:
ranchandsyrup
Profits and the market are still up. So the plutocrats have that going for them.
danimal
This is a great report. The deficit scolds need a 2×4 to the face showing that this is not the time to balance the budget, and a report showing a contraction of government spending resulted in negative growth is just perfect.
The Pete Peterson caucus is going to have a hard time explaining this turn of events.
Punchy
And inexplicably (to me, at least), the market said so fucking what?
And the lack of noise from the RWNM tells me that they too know its not a BFD.
Maude
@danimal:
The Pete caucus will make something up. They don’t have to stay with the facts.
El Caganer
A drop in military spending? Time to get that Iran-regime-change-freedom-democracy-full-spectrum-dominence thingie going.
jl
Dean Baker at CEPR has a good analysis
Falling Government Spending and Inventories Push Growth Negative in Quarter
January 30, 2013 (GDP Byte)
By Dean Baker
cepr.net/index.php/data-bytes/gdp-bytes/government-spending-and-inventories-push-graowth-negative
Suffern ACE
I bought a car in December, so don’t blame me. I did my part.
It would be nice if the private sector were growing faster so that cuts in military spending wouldn’t be so noticeable, but I’m not going to jump on the “military spending is atimulous!” bandwagon, even if it is technically true. That’s kind of like saying “Yay! Healthcare costs went up and now healthcare is 20% of the GDP! but at least GDP is growing!”
danimal
@honeybooboo: I expect trolls to be better than this. This was a weak and boring contribution. Back to troll school for you, come back after graduation.
Enhanced Voting techniques
@Waynski: Basically the military is hunkered down because the Republicans have screwed the budget but the rest of the economy is doing fine.
Feudalism Now!
Hmm a contraction after a month of Fiscal Cliff, sequester, government shut down “to get it out of their system” and no stimulus? Hoocoodanode! I am surprised it was only 0.1%.
Leeches are too primitive what the economy needs is a bleeding to get the capitalist humours in the right level. Austerity now! Austerity tomorrow! Austerity forever!
The Tragically Flip
@Mandalay:
Interesting, but did we see similar drops in previous Q4s?
Seems like all that suggests is that it wasn’t really about the military spending pause, if it’s an annual event.
liberal
@Punchy:
Oftentimes the market seems inexplicable. Often it’s because it’s already factored the news in.
liberal
@Waynski:
Actually, the Dean Baker post someone else linked to has it the other way: cars replaced cuz of Sandy. (I thought the conventional wisdom about natural disasters is that income can go up while wealth goes down.)
Mandalay
@The Tragically Flip:
Sadly, I think you are correct. From the same article: Defense spending often rises in the third quarter of a year and drops in the fourth quarter…Note the usual highs in September and lows in December of each year
Forum Transmitted Disease
Just wait. We’re actually five months into Fed sequestration (started in October). You’re about to see some truly shit GDP numbers, because now some actual, real money is starting to get cut out of the government’s budget, with the DoD and all their high-paying jobs leading the way.
General Stuck
@Phoebe Jean:
Yup, it’s always something. Like the Bush tax cuts, on one hand then on the other hand. I don’t know how anyone expects the business world to take the leap into expanding with adding workers, when the government and congress is a tree fucking ring circus, with the wingnuts leading the clown show putting the golden goose up against the wall , or else. It is a recipe for stagnation and that seems exactly what the wingnuts want. While they decide to execute that goose and take their chances in a world of The Postman. Dreaming of getting to be Will Patton’s character, General Bethlehem. Though Jane could beat them all as Irina Spalko from the left.
Sir Nose'D
A 0.1% contraction? Clearly Obama is cooking the books to justify increased government spending.
(alternate universe)
1.1% growth in line with expectations? Clearly Obama is cooking the books to make his increased government spending look successful.
General Stuck
I personally think Shakespeare was wrong, we should first kill all the economists. Every one of them seems to have a political angle mixed up with varying degrees of educated guesses.
El Cid
By the way, the next time someone you know gives you the humble ‘I have to cut my expenses’ argument for why it’s good that the gubmit cuts its own as well, point out that they never give examples of them cutting their personal budgets in ways that severely harm them and even risk immediate disaster.
They always give noble examples of sacrifice, minor to quite major; none of them, though, tend to proudly give examples of how they decided to save money by taking a decision representing serious harm.
Whereas what they want the gubmit to do has those effects: real people aren’t just going to have to give up on Netflix or eat more pasta — when needed programs are cut, people get hurt.
Every time this stupid analogy is used — i.e., the spending and budgetary context of the largest, most powerful and wealthiest nation ever to have existed really is just like your little family or small business — it’s not just idiocy but rank hypocrisy.
kuvasz
For Christ’s sake did everyone forget that the major manufacturing and business area of the United States sat under water for a week in October/November? Chalk up the contraction because the hurricane. The losses to the national economy of the tristate area as a result of the hurricane was certainly greater than the nationwide contraction.
Villago Delenda Est
@kuvasz:
Please take your facts away somewhere else. Thank you.
Zifnab
From what i read, the private sector continues to grow. Its military that took a hit. Unless they are joined at the hip, i don’t see a problem here. Military spending needs to cone down one way our another. While I’d live for agate spending to stay high, i can’t shed any tears over Boeing and Raytheon taking a hit.
LanceThruster
I blame the Kenyan usurper?
dww44
@Waynski: I don’t know about this link but I just came over from Booman’s place and he posits that the contraction is the result of a 22% reduction in defense spending combined with the negative economic impact of Hurricane Sandy. He notes that we had contractions at the end of WWII, both here and in Britain, but both economies proceeded to take off in very short order.
For me personally, I’ve been entirely grateful that Krugman has been making the teevee and radio rounds plugging his book “End the Depression Now” and making those points that austerity is NOT what needs to be happening now. He even took calls yesterday from disbelieving members of the public during his interview on public radio’s “Talk of the Nation”.
Mnemosyne
Hey, let’s take a look at how Great Britain is doing with their austerity programme, shall we?
Triple-dip recession looms as economy shrinks by 0.3%
The next wingnut who says “austerity” to me gets punched in the neck.
General Stuck
@Mnemosyne:
Republicans have long since accepted keynesian theory on stimulus money from the government being a good thing for a sluggish economy, and have voted for stim bills many times. They of course are more stingy than dems on them, but know full well a drop off in government spending right now is a bad thing for the country. What the size of the yearly deficits has given them is a whipping post for general political attack against dems and Obama for purely ideological purposes. I am sure you already know this, as does most everyone else that follows this. But it just needs to be said now and then. They don’t care about deficits as coined by the dark lord Cheney, that deficits don’t matter, and in fact have incurred them for the purposes of stopping dem presidents from spending money on welfare and other free stuff for those in need.
All money to them belongs to the rich, and is simply on loan for the peasants to trade and barter in between working hours making them rich in the first place. And sometimes, when the gods conspire and create a surplus, well it’s off to the races with fun wars and sending that extra cash back to where it belongs with the wealthy. Obama went off script, however, and helped the little people when he had no right to in real life. Now they are fit to be tied and in pol freefall because of it. The people like stuff from the government when they need it, so the wingnuts only have left shutting down the government, and here we be.
James E. Powell
@danimal:
The Pete Peterson caucus is going to have a hard time explaining this turn of events.
But our experience tells us that they never explain anything that shows they are wrong. And no one in the corporate press/media ever asks them about the contradictions.
We’ve pretty much been following the “cut taxes, reduce regulations, cut social welfare spending, the government is the problem” plan for thirty years. Prosperity was promised, but it never arrived. Now many of them don’t even make the prosperity promise. Instead, it’s warnings of looming disasters or some twisted moral argument.
Whatever happened to the “activist, Kenseyian policies built the largest and wealthiest middle class the world has ever known” plan?