Blame Budget Austerity for Poor GDP Growth
As the Obama administration’s 2009 stimulus continues to wind down, the effects on the US economy are showing up in the economic data. Coming out of a steep recession, the economy should be experiencing robust output, or GDP, growth. Output growth of 3 percent in the fourth quarter of 2011 helped bring the unemployment rate down. However, the government’s announcement that output growth fell to 2.2 percent in the first quarter of 2012 should give policy makers pause. The economy needs to grow by at least 2.5 percent just to keep unemployment from rising. Thus this latest figure on GDPgrowth does not auger well for the job market, which has seen a steady rise over the last few weeks in initial unemployment claims. In the face of weaker demand, Investment spending by business is slowing. Cutbacks in government spending at the federal as well as state and local levels are already hurting GDP growth. In the absence of federal revenue sharing with the states–the first time the federal government has not had such a program when unemployment is above 7 percent–state and local government expenditures have fallen for seven consecutive quarters. Read more here.