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What’s Not to Like About Government?

April 28, 2012

When you see an AP story (the All ProObama news service) that criticizes the government for being a drag on the economy your world begins to tilt. Can it be a glimmer of sanity is escaping from behind the veil of propaganda, you ask yourself?

Then you see how mention is made of massive government spending causing costs to rise above legal constitutional limits in state after state causing what? Cost cuts in government? Oh my gosh. And then you see any real government savings at a national level are driven by 8% plus cits in what, green energy spending? Nope, by cuts in our military.

Read a bit:

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.

Indeed, there’s a lot not to like about an economy that relies on government spending as its primary growth engine. Just ask anyone in Europe.

Ostensibly, the U.S. economy is consumer-driven, with private spending amounting to 70 percent of GDP. But several economists doubted that the robust 2.9 percent spending increase in the first quarter could last, raising further questions about where we go from here.

“We assumed that growth would be driven primarily by final demand, but, inventories contributed 0.6 (percentage points) to GDP, putting real final sales at a weak 1.6 percent annualized growth rate,” said Neil Dutta, U.S. economist at Bank of America Merrill Lynch. “Moreover, the strength in consumer spending and contribution from motor vehicle output look unlikely to repeat in future quarters.”

Government policymakers, then, face a dicey dilemma: Continue spending and risk falling further into the fiscal abyss, or cut back and deal with a prolonged future of uninspiring GDP numbers.

“The dagger (from the GDP letdown) came from a second straight steep drop in federal government spending due to plunging defense outlays,” observed Pierpont economist Stephen Stanley. “Boy, wait until these budget cuts start to kick in.”



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