Economy’s Biggest Drag Right Now Is Government

Government has become its own worst enemy when it comes to the economy, with public spending putting a damper on growth that otherwise continues at a steady if unspectacular pace.

Friday’s gross domestic product report confirmed what a drag government can be: While consumer spending grew at a 2.9 percent clip, state and local governments cut back spending by 1.2 percent on an annualized basis and the federal government pulled back by 5.6 percent.

As a result, the GDP just a 2.2 percent improvement. The report disappointed economists, some of whom had the number as high as 3 percent and beyond, and cast an uncertain future on a stock market dependent on Federal Reserve stimulus for growth.

“None of this is all that surprising, so where is the miss?” wondered Brown Brothers Harriman global currency strategist Marc Chandler, after noting some fairly pedestrian and in-line quarterly growth results. “Contrary to what passes as conventional wisdom, the main drag is coming from the government itself.”

Before anyone starts thinking that Washington suddenly has gotten religion on spending, the bulk of the federal government cuts came from defense spending, which plunged 8.1 percent.

State and local governments, facing the necessity to balance their budgets against declining revenue (not to mention the specter of Meredith Whitney’s muni bond default forecast) likely will continue to cut, though that’s not as certain with their federal counterpart. Washington’s drop in spending came after a 19.1 percent decrease in the fourth quarter of 2011.

“The government spending plunge is unlikely to repeat for a third quarter (in 2012 at least) and an inventory drag in 2Q only masks moderate demand gains,” Citigroup economist Steven C. Wieting said. “But the 1Q GDP data should limit remaining optimism that U.S. economic growth will accelerate significantly this year.”

Read more at CNBC.

Comments

Polititainment

Foxx talks dancing with Christie, McCain
Who could possibly forget this epic photo? Late night host Jimmy Kimmel certainly hadn’t, so when he had the chance to interview actor Jamie Foxx Wednesday night, he simply had to get the back story. Foxx has been the host of this annual charity event for several years. “What’s interesting is that every year that […]
Jon Stewart on Christie's 'pig problem'

Jon Stewart got into Chris Christie’s “pig problem”—which wasn’t quite what Stewart thought it was at first.

Rogen: 'Amazing' to smoke in White House

Seth Rogen told The Hill in a recent interview that he believes he is now on a "list" of individuals banned on from President Obama's residence because of his recent tweet expressing his desire to smoke marijuana in the White House.

Kimmel's insightful e-card rant

Kimmel's broadside against e-cards raises an interesting point about the way Democrats have encouraged their followers to pass along birthday well-wishes to their party's elected officials and leaders.

Stewart hits Pelosi for hypocrisy
Jon Stewart hit Rep. Nancy Pelosi (D- Calif.) hard Tuesday night for her hypocrisy in a recent voting decision. “You are a recognized champion of women and voter rights,” Stewart started off, playing clips of her oft-repeated speeches on the topics. “Your voting and lady bonafides are unmatched.” So lucky for Rep. Tammy Duckworth (D- Ill.), […]

White House

Obama spurns GOP with expansive immigration orders

WASHINGTON (AP) — Spurning furious Republicans, President Barack Obama unveiled expansive executive actions on immigration Thursday night to spare nearly 5 million people in the U.S. illegally from deportation and refocus enforcement efforts on "felons, not families."

After multiple hacks, the federal government’s cybersecurity plan remains on hold

The federal government is not having the best time with cybersecurity of late.

Obama to announce executive action on immigration Thursday

President Obama announced Wednesday afternoon that he will unveil his unilateral plan for immigration reform to the nation in a primetime address Thursday.

Reports: Obama could unveil amnesty for illegal immigrants within days

President Obama is set to unveil a comprehensive, unilateral plan for immigration reform that includes amnesty as soon as next week, according to a report Thursday.

Obama on ‘Face the Nation': Congress still has time to act on immigration
After warnings from Sen. Mitch McConnell and Rep. John Boehner, President Obama claimed on Sunday’s “Face the Nation” that Congress still has time to act on immigration before his executive order comes down. “I’d prefer and still prefer to see it done through Congress, but every day that I wait we’re misallocating resources. We’re deporting […]

Congress

Rep. Bachmann finds the smoke-filled rooms of DC
Minnesota Congresswoman Michele Bachmann may be on her way out of Washington, but that didn’t stop her from finally finding her way to the often criticized smoke-filled rooms of DC. On Wednesday, the Congresswoman seemed to be enjoying her a last bit of recess down time with a cigar and a perfectly appropriate tweet. After […]
Rand suggests a wardrobe change for 'King' Obama
Sen. Rand Paul (R- Ky.) took to Facebook to suggest an Obama wardrobe change following the president’s comments that he will use the executive branch to push his immigration agenda. Post by Rand Paul. “This isn’t about immigration reform. This is about his usurping of power that the Constitution didn’t give him,” Paul said in an interview […]
Senator: 'There could be violence'

Retiring Oklahoma Sen. Tom Coburn has issued a stark warning about the fallout from President Obama's immigration plan.

Pro- and anti-NSA Republicans vote down reform

Senate Republicans banded together to kill a National Security Agency reform bill, but some did it for entirely opposite reasons.

The House hires an Obama voter to sue Obama

In an act that belongs in the trolling hall of fame, the House of Representatives has retained a lawyer who voted for President Obama and supports "national health care" to sue President Obama over Obamacare.