One of the virtues of the “let it burn” strategy, in which the GOP stands aside and lets Democrats lead America to a new golden age by passing the unsustainable liberal agenda in toto, is that it would spare us this, at least. Aren’t single-payer and open borders a price worth paying to watch Carney and Obama field questions about policy failures without a Republican crutch to lean on? Then they could get back to the messaging they prefer, that those policy failures really aren’t failures at all.
“This report is nowhere near as bad as it looks on the surface,” said Nigel Gault, chief U.S. economist at HIS Global Insight. “It would be a mistake to view this drop in GDP – driven by temporary corrections in defense spending and inventories – as a possible harbinger of recession…
Austerity, it turns out, detracts from growth. In the fourth quarter, declining state and local government spending reduced GDP by 8 basis points. But the real drag on growth in the fourth quarter was the federal government, and especially the Pentagon. Defense spending plunged 22.2 percent, subtracting 1.28 percentage points from the growth rate. The decline is partly due to the continuing drawdowns from Iraq and Afghanistan, and partly due to seasonal spending factors (defense spending in the third quarter actually rose sharply.) But there’s a third factor at work: “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,” Alan Krueger noted.
Those automatic cuts were, of course, originally proposed by Obama, and one of the chief reasons he wants Hagel at the Pentagon is so that he’ll have Republican cover when the next round of GDP-shrinking defense cuts begins. (He also issued veto threats in the past when the House GOP tried to replace some defense cuts in the sequester with other discretionary cuts.) So that’s one alternative. The other is to keep spending to the tune of $1 trillion a year in deficits until we have a consistently growing economy, whereupon Keynesians on the left will declare that we can’t cut spending just yet because it’ll imperil the new recovery. Which do you prefer?