Blame We Can Believe In
Today we heard the unexpected news that the economy contracted for the first time in three years. CNBC reported that,
“The U.S. economy posted a stunning drop of 0.1 percent in the fourth quarter, defying expectations for slow growth and possibly providing incentive for more Federal Reserve stimulus. The economy shrank from October through December for the first time since the recession ended, hurt by the biggest cut in defense spending in 40 years, fewer exports and sluggish growth in company stockpiles”.
So, how are the Democrats responding to the news? Why it’s blame game, of course. Here’s the current rundown:
*White House: GOP Responsible for contracting economy
“Carney said economic observers were “rightly appalled” by the threat of sequestration or default to drive a debt deal, and charged that Republicans were harming the economy to the benefit of the wealthiest Americans.It can’t be we’ll let sequester kick in because we insist tax loopholes remain in place for corporate jet-owners,”
The Hill further notes that “The White House has maintained that it wants to avoid the sequester. But when asked Monday on whether the president was planning specific meetings or events to address the topic, Carney said said he did not have “any specifics” to provide.”
*Alan Kreuger, head of President Obama’s Council of Economic Advisers, echoed that sentiment.
“A likely explanation for the sharp decline in Federal defense spending is uncertainty concerning the automatic spending cuts that were scheduled to take effect in January, and are currently scheduled to take effect on March 1st,”
So does that mean that the 1st quarter of 2013 will also be sluggish, seeing that January and February precede March 1 — the pushed-back deadline?
Ezra Klein: Government is Hurting the Economy By Spending too Little. Klein explains that
“the government is hurting the recovery. But it’s not because of deficits or uncertainty, or at least, it’s hard to find evidence for either theory. The real, provable damage the government has done to economic growth in recent years has been in cutting back on spending and investment since 2010.
Of course, who is anti-spending? Republicans! Tea Partiers! It’s their fault — read between the lines!
Some analysts are not outright blaming the Republicans. They are just not believing the economy shrunk at all.
Our liberal newspapers took up that cause. Paul Ashworth at Capital Economics called it “The best-looking contraction in U.S. GDP you’ll ever see.” So the Washington Post helpfully the jumped on Ashworth’s description with a handy chart.
Likewise, the New York Times Opinion Page called it Less than Zero (Growth) They suggested the contraction didn’t happen at all
Pay no attention to that minus sign! The consensus among economists seems to be that the economy did not really contract in the last quarter of 2012, despite the government’s initial measure, released this morning, which shows the economy shrinking at an annual rate of 0.1 percent, its weakest performance since the spring of 2009.
According to the consensus, the negative reading is bound to be revised upward in the months to come, for two main reasons. One, the factors that drove growth down, including declines in defense spending and business inventories, are notoriously volatile. Two, the reading is inconsistent with relatively upbeat recent news on other economic fronts, like housing.
My friends, there you have it. The narratives being offered regarding the economic contraction are that 1) it didn’t really happen that way and 2) if it did, it’s the Republican’s fault.
Blame you can believe in.
Crossposted at alanjoelny.com