Voodoo GDP at election time
This past Thursday Obama crowed about the Gross Domestic Product (GDP), "I am gratified that our economy grew in the third quarter of this year. The 3.5 percent growth in the third quarter is the largest three-month gain we have seen in two years. This is obviously welcome news and an affirmation that this recession is abating and the steps we've taken have made a difference."
Fine words, but is this true? Has The One saved us? Are we miraculously recovering? You couldn't prove that by me, my neighbors, or the local businesses with which we trade. Is your local economy somehow magically different from ours?
Take a walk around your town. Talk to the business owners. Ask them about this miracle upswing in business. Don't mind the blank stares you get in return. Then what is going on? Is Obama's GDP some sort of product-less voodoo?
What is GDP?
Gross Domestic Product is the total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports.
In simplest terms, GDP is equal to Consumer, Investment, and Government Spending in a specific period.
But what about imports and exports? In the third quarter, exports showed a 1.0 percent increase, but imports topped that with a 1.5 percent increase, thereby resulting in a net loss.
Let's take a closer look at spending.
Consumer spending
In his Thursday speech, Obama added, "While this report today represents real progress, the benchmark I use to measure the strength of our economy is not just whether our GDP is growing, but whether we're creating jobs and whether families are having an easier time paying their bills."
Well. This is certainly good news, what with 15.1 million Americans looking for work and unemployment at 10 percent and rising. Here are a few pesky market statistics for the third quarter:
Consumer personal income decreased $15.5 billion (0.5 percent) in the third quarter, in contrast to an increase of $19.1 billion (0.6 percent) in the second. Personal taxes increased $4.8 billion in the third quarter, in contrast to a decrease of $119.1 billion in the second. Disposable personal income decreased $20.4 billion (0.7 percent) in the third quarter, in contrast to an increase of $138.2 billion (5.2 percent) in the second.
This means that real disposable personal income decreased 3.4 percent. Which means that real consumer spending is down. Which means that the Consumer Spending leg of GDP caused little of the 3.5 percent rise.
Oh, and tax increases. Don't forget the tax increases Obama and the Democrat Congress have already imposed. Don't forget the new personal and business income, carbon punishment, health care, and national value-added taxes that are on the way.
They'll be a big boost for GDP, eh?
Inventory spending
So business must have boosted GDP, right? Well, a key health indicator for businesses is whether or not they are hiring. They are not. Another key indicator is inventories. Business inventories fell to $130.8 billion in the third quarter, slowing from the record $160.2 billion plunge in the second quarter. Now more voodoo:
This steep decline is actually touted as a positive change by Obama and the Democrat Congress -- they called the loss a gain and added nearly 1 percentage point to the growth in GDP.
Business investment fell at a 2.5 percent pace with spending on nonresidential structures dropping at a 9 percent rate. A lack of credit has hit the U.S. commercial property market hard, yet we are expected to believe in a voodoo recovery.
And just for grins, don't forget that the Labor Department said on Thursday the number of U.S. workers filing new claims for jobless benefits stood at 530,000.
Which means that the Inventory Spending leg of GDP cause little of the 3.5 percent rise.
Government spending
We now come to the mother lode. Obama and the Democrat Congress have printed billions in unbacked dollars, borrowed $1.6 trillion to shell out TARP-Porkulus funds, seized financial institutions and the auto industry, and doled out billions more in special-interest payola and earmarks.
Obama and the Democrat Congress have racked up a $1.42 trillion deficit -- yet want to spend more by borrowing more -- generational theft of the futures of our children and grandchildren.
Sure, the Cash for Clunkers and Assistance for First-time Home Buyers schemes added to the GDP, but how long can the government prop up the economy by borrowing and printing money?
If you earn $30,000 annually but spent $40,000 this year, what do you do? If you take a credit card cash advance for $10,000, is that a raise? Is your salary now $40,000? Of course not. You just incurred even more debt that must be repaid -- with interest.
Just in time
Isn't it odd that such a rosy-sounding GDP is announced just prior to November 3, Election Day. I wonder if state-run media would make it sound so wonderful if our last president still resided in the White House.
There has been little investment in business. There has been little consumer spending. There has been little commercial consumption. Home sales are down. Government spending has exploded. The deficit is so large as to be unimaginable. How exactly has our economy turned around? With voodoo.
Hype and Chains.