First quarter GDP came in down, 6.1%, equating to a loss in output and national income of $125 billion.
|GDP = C + G + I + NE|
Where, C=Personal consumption; G=Government spending and investment; I=Business investment and; NE=Net exports (exports-imports)
The three components of GDP that always tend to add to overall output--Personal Consumption, Government Spending and Investment and Business Investment--tell a very interesting story.
While personal consumption rose from Q4 2008, it is still $200 billion below the peak seen last year, so it remains weak. Business investment has plummeted--absolutely cratered!
But here is the shocking part: Governemnt spending and investment fell in the first quarter. FELL!!
With consumers tapped out, out of work or unable to get credit and with business seeing their profits fall or going bust and not able to get credit either, the only hope for an increase in GDP or just something that could arrest the decline would be HIGHER LEVELS OF GOVERNMENT SPENDING.
Yet, government spending is falling.
This is so sad because the only thing that precludes us from getting out of the mess that we are in now is a warped and fallacy-laden belief system that causes us to view government spending as bad, even as the facts show otherwise.
The longer we allow this to continue, the greater the risk that our economy loses competitiveness vis-a-vis other countries of the world. And if that happens, the true legacy that we leave to our kids and grandkids will not be higher levels of government debt, but a lower standard of living and more poverty.
It is an outrage and a great failing of President Obama that he has allowed this to happen. Because of a character flaw that causes him to feel the need to be surrounded by those who represent the status quo--or worse--deficit hawks and debt "terrorists" we are rapidly allowing the wealth producing capacity of our nation to waste away.
By the time anyone realizes it, it will be too late.