Been down so long it looks like up to him?: Harry says the nation is in a recovery

On the day after the Commerce Department reported that the nation’s gross domestic product fell by a tenth of a percentage point in the fourth quarter of 2012 and on the day the Labor Department reported new jobless claims jumped 38,000 in the past week, Harry Reid took to the floor of the Senate and declared the nation is in a recovery and any problems we may continue to have are all the fault of Republicans anyway.

Harry said:

“Mr. President, just a brief comment on my friend, the Republican Leader’s, statement. He continues bad-mouthing the recovery. We are in a recovery. The moral of the fourth quarter is a repudiation of the Republican playbook. Growth went down in the fourth quarter because of reduced government spending, and a resonance of the private sector as Congress fought over the fiscal cliff, and that fight came as a result of the Republicans being so unreasonable. We were finally able to work something out that was a compromise and that was good for the economy.

“The economy was rejecting the austerity and brinksmanship. So let’s hope the Republicans will understand that we have to move forward, that the Republican playbook of continual complaining about spending is something – we know we have to do something with spending, we understand that – but there’s more to making our economy recover than just continually harping on what’s going on with spending.”

He sounds like a teenager talking to his father after maxing out the credit card.

Harry is so wrong in so many ways it is hard to count them. First, Harry is self-contradictory. He says we are in a recovery but the economy rejected austerity and brinksmanship, apparently by declining.

Harry seems to think that more Keynesian spending would make the country better off, when everyone knows government merely takes money from productive citizens and spends it, doing nothing to create wealth or jobs. It simply moves the money from one person to another.

Dan Mitchell at Cato Institute explains that the GDP only measures how we spend our income. “Sort of like assessing the status of your household finances by adding together how much you spend on everything from mortgage and groceries to your cable bill and your tab at the local pub,” he says.

It makes more sense to judge your wellbeing by measuring your income.

The Wall Street Journal points out that most of the decline in GDP came from falling business inventories and less government spending — such as a 22.2 percent defense spending cut.

The editorial states:

“The government spending decline deserves a word because the Keynesians are using it to call for more ‘stimulus.’ The national income accounts include a Keynesian bias that equates higher government spending with growth, no matter how wasteful the spending. Thus the spending blitz of 2009-2010 gave a fillip to GDP, though not a sustainable one. The Keynesians now decry the very spending cliff they created.

“The real story is that the Keynesians promised that the stimulus would kick-start the economy to a higher growth plane. It hasn’t. Growth has sputtered in each of the last three years, and for all of 2012 was only 2.2%. That’s barely above 1.8% in 2011, which was below 2.4% in 2010. The biggest loser in all of this should be the notion that temporary bursts of government spending can produce durable economic expansions.”

Happy Harry remains a die-hard Keynesian and no amount of evidence will shake his stance.

10 comments on “Been down so long it looks like up to him?: Harry says the nation is in a recovery

  1. Steve says:

    Give a man a fish and he eats for a day, teach a man to fish and he eats for a lifetime. But teach a man to grow fish and stock rivers and he can feed a whole community.

    Its ok to give the guy a fish, but once that fish is gone the guy better know how fish for his next one. And it would absolutely great if Money were like fish then we could grow them and never have to worry where they come from.

  2. nyp10025 says:

    You actually think the economy is not in a recovery mode. That is remarkable.
    Looks like the Dow Jones Industrial Average disagrees with you.

    PS: Daniel Mitchell’s suggestion that GDP doesn[t equal GDI is completely idiotic, and illustrates, yet again the fallacy of analogising governmental budgeting to a single-family household.

    PPS: Why didn’t you mention the fact that the economy added 157,000 new jobs last month and that the revised figures from 2012 show a gain of 335,000 more jobs than previously estimated? Don’t you think those statistics are relevant to your discussion of whether or not the economy is in a recovery?

  3. You didn’t mention the unemployment rate went up to 7.9 percent.


  4. Don’t forget the labor participation rate of 63.6 percent, which means that, despite population growth of about 1 percent a year, we now have 8.5 million fewer people in the labor force than when Obama was sworn in the first time.


  5. nyp10025 says:

    Don’t make me get into a discussion of labor participation rates!

  6. Rincon says:

    Only the bottom 60% are having trouble. They borrowed heavily to maintain a rising lifestyle in the absence of rising incomes and are still paying the price. The upper 40% are having good times and apparently are busy investing much of their money in the stock market.

  7. Milty says:

    I’d like to read what Nyp thinks about labor participation rates!

  8. nyp10025 says:

    You would be the only one.

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