Down­ward growth trends

The Washington Times Weekly - - Editorials -

Af­ter grow­ing at a very slug­gish an­nual rate of 0.6 per­cent dur­ing the first quar­ter, the U.S. econ­omy re­bounded strongly dur­ing the April-June pe­riod, ex­pand­ing at an an­nual rate of 3.4 per­cent. How­ever, the big­gest rev­e­la­tions in the Com­merce De­part­ment’s July 27 re­port were the rather large down­ward re­vi­sions in the growth rates dur­ing 2004, 2005 and 2006.

The sec­ond-quar­ter re­bound was led by strong, but un­even, growth in busi­ness in­vest­ment, which ex­panded by 8.1 per­cent com­pared to a lack­lus­ter 2.1 per­cent dur­ing the first quar­ter. Spend­ing on busi­ness struc­tures (plants, mines, ware­houses, of­fice build­ings, shop­ping malls, etc.) in­creased at an an­nual rate of 22.1 per­cent, the big­gest ad­vance in that cat­e­gory since the sec­ond quar­ter of 1994. How­ever, busi­ness spend­ing on equip­ment and soft­ware, which was ac­tu­ally lower in the first quar­ter of 2007 than it was in the first quar­ter of 2006, in­creased by a dis­ap­point­ing 2.3 per­cent last quar­ter.

Im­prove­ment in the na­tion’s trade deficit also con­trib­uted to sec­ond-quar­ter growth as ex­ports of goods and ser­vices in­creased by a solid 6.4 per­cent, while im­ports de­clined by 2.6 per­cent. Ris­ing gov­ern­ment spend­ing, es­pe­cially on na­tional de­fense, also con­trib­uted to sec­ond-quar­ter growth. The in­crease in con­sump­tion spend­ing slowed con­sid­er­ably dur­ing the April-June pe­riod, grow­ing by only 1.3 per­cent af­ter ris­ing by an av­er­age of 3.8 per­cent dur­ing the pre­vi­ous two quar­ters. The de­flat­ing hous­ing bub­ble may be fi­nally af­fect­ing per­sonal con­sump­tion. Speak­ing of hous­ing, res­i­den­tial in­vest­ment, which had de­clined by 16.5 per­cent dur­ing the pre­vi­ous four quar­ters, fell at an an­nual rate of 9.3 per­cent dur­ing the sec­ond quar­ter.

As noted, the an­nual re­vi­sions for the 2004-2006 pe­riod took a ma­jor toll on pre­vi­ously re­ported eco­nomic growth. Specif­i­cally, eco­nomic growth was re­vised down­ward from 3.4 per­cent to 3.1 per­cent dur­ing 2004; from 3.1 per­cent to 2.9 per­cent dur­ing 2005; and from 3.1 per­cent to 2.6 per­cent dur­ing 2006. The net ef­fect was to re­duce av­er­age an­nual eco­nomic growth dur­ing the 2004-2006 pe­riod from 3.23 per­cent to 2.87 per­cent. That qual­i­fies as a sta­tis­ti­cally sig­nif­i­cant hair­cut. Since the re­ces­sion ended dur­ing the fourth quar­ter of 2001, the av­er­age an­nual growth rate dur­ing the Bush ex­pan­sion is a his­tor­i­cally dis­ap­point­ing 2.75 per­cent.

Down­wardly re­vised eco­nomic growth dur­ing the sec­ond half of 2006 (an an­nu­al­ized 1.6 per­cent) proved to be sig­nif­i­cantly slower than ear­lier re­ported (2.25 per­cent). Thus, dur­ing the pre­vi­ous three quar­ters (July 2006-March 2007), the econ­omy grew at an an­nual rate of about 1.25 per­cent. Dur­ing the past year, end­ing with the sec­ond-quar­ter re­bound, the U.S. econ­omy has ex­panded by about 1.75 per­cent. That’s lousy.

Since the Bush-Cheney ad­min­is­tra­tion en­tered of­fice, the U.S. econ­omy has ex­panded by an av­er­age an­nual rate of 2.36 per­cent. By con­trast, the econ­omy dur­ing the Clin­ton-Gore ad­min­is­tra­tion grew at an av­er­age an­nual rate of 3.6 per­cent, which is more than 50 per­cent faster than the Bush-Cheney rate.

Since Mr. Bush en­tered of­fice, the na­tional debt has in­creased by more than $3.2 tril­lion. Dur­ing the last six and a half years, the na­tional debt in­creased by nearly 60 per­cent, ris­ing from $5.66 tril­lion to $8.87 tril­lion. What did those tril­lions buy for the U.S. econ­omy? A puny growth rate of 2.36 per­cent (Jan­uary 2001 through June 2007) and (as­sum­ing an av­er­age in­ter­est rate of 5 per­cent) more than $150 bil­lion in ad­di­tional an­nual in­ter­est pay­ments for­ever.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.