Gork!

The BEA says:

GDP (Third Quarter 2006 (advance)): 1.6% [per year]

The odds of the Fed's cutting interest rates soon just went up. And Ben Bernanke looks like he called things right in stopping rate increases over the summer.

BEA Release Tables:

Table 1: http://delong.typepad.com/tables/20061026_bea_gdp_release.gif
Table 2: http://delong.typepad.com/tables/20061027_bea_release_gdp2.gif>

Comments

[Tim]

So he's going to pick door #2, inflation? Will that work?

[spencer]

The long term trend growth rate of the US economy is 3.5%.

Bush has been in office five, going on six years and has experienced one year of above trend real gdp growth.

[RW]

Roubini, who predicted 1.5% Q3 GDP growth, appears to have been on the right track but, if Q3 auto production is revised downward as some expect (e.g., http://tinyurl.com/yclu4s ), even he may prove to have been excessively optimistic.

[bogTom]

The Economist claims that our potential growth trend is now quite a bit lower. Check out this weeks issue.

[wcw]

Roubini was in the 1.5%-at-most camp, so if it's really 0.9%, he wins. Cf http://www.bloomberg.com/apps/news?pid=20601087&sid=aF5My4Z6jHiY&refer=home

I lose, since I thought he was a hint pessimistic.

[bakho]

With almost $260 Billion (over $400 billion on-budget) in deficit spending, any downturn cannot expect much additional fiscal help. A downturn will make the deficit worse by depressing revenue.

[andres]

"Gork!"? Either Brad has been taking cooking lessons from the Swedish Chef or he's playing some strange new sci-fi video game. Or there's some more internet vocabulary that I'm too obsolete to have heard of.

Also, I heard today either on All Things Considered or Marketplace that a substantial share of the decline in growth was in residential construction, so that leaving that part out leads to a healthier growth rate of above 2%. So either things are not as bad as they seem or a large part of the economics commentariat is grasping at whatever they can in order to make the outlook seem more rosy. But most median and lower wage workers know better.

[anne]

No; fiscal policy could and would be used if necessary to bolster the economy. A healthy economy is far more important than deficits, and the deficit is just not that much of a problem anyway. Long term interest rates are low and the Federal Reserve can lower short term rates, so I am cautious but only mildly concerned.

Remember California in regard to deficits; always respect economic health and perceptions. This is not the sort of economic health we wish, but I am hopeful we will avoid a recession.

What puzzles me though, as I have explained, is why spending for the war couples with tax cuts and low long term interest rates have not further spurred the economy. What am I missing?

[anne]

Yes; relatively poor wages and benefits are for me more worrying than the housing slowing. Employment however is holding and if employment holds we avoid a recession.

[AP]

Anne, I think part of why war spending hasn't helped the economy is that this is an odd sort of war being conducted for odd sorts of reasons. That money isn't going into arms manufacture or infrastructure. It's largely profit for security industry and private personnel contractors. Remember the body armor that we're not buying for our troops? Remember the armored humvees that we're not building? Remember the National Guard units who's Korean War-era equipment has been commendeered to be sent to Iraq?

War spending is a joke. War profiteering is a sick joke.

[Adrasteia]

What puzzles me though, as I have explained, is why spending for the war couples with tax cuts and low long term interest rates have not further spurred the economy. What am I missing?

Might be because none of that borrowed capital is going toward infrastructure or manufacturing. You know, measures that increase efficiency.

What it seems that the federal government is instead doing is reallocating hundreds of thousands of previously productive workers for the sole purpose of creating delays at airports and guarding statues and bridges from bears.

[bncthor]

Anne ..."What puzzles me though...is why spending for the war couples (sic) with tax cuts and low long term interest rates have not further spurred the economy. What am I missing?

You raise a very good question.

Could it be because a significant fraction, if not most, of the war apending and most of the tax cuts have simply been accumulated as cash balances held in banks around the world, or simply stashed in jars and kept in cupboards. Some may have been used to reduce debt.