Government Cutbacks Separate This Expansion From Others

[frigidmagi]

The Wall Street Journal

The recoveries and expansions that occurred in the Bush, Clinton and Reagan eras all saw government spending increase along with most other major drivers of growth. But in the current Obama recovery, which began in 2009, total public outlays have decreased at an annualized rate of 1.5%, according to a Dow Jones/Wall Street Journal analysis of newly revised government data.

In the previous five expansions, dating back to 1975, government spending grew a yearly average of 1.9%.

The current pull back in government spending, which is most pronounced at the state and local level, helps explain why on annualized basis, the gross domestic product has grown by just 2.2% since the recovery began. By that measure, the current rebound is the weakest of the post World War II era.

Measuring growth on an annualized basis controls for recoveries and expansions of varying lengths.

Much of the attention in this election season has been focus on government spending that ballooned at the end of the most recent recession and during the early part of the recovery. But since the middle of 2010, that aid to growth has fallen off when adjusted for inflation.

In fact, state and local governments have now cut outlays for 11 consecutive quarters, leading spending to contract at a 2.4% rate since the second quarter of 2009. Slower federal spending has now also become a drag on growth, contracting at a 0.2% annualized rate, the analysis of data the Commerce Department released last week found.

By comparison, federal spending grew at an annualized 3.5% rate during the longer of two Regan-era recoveries and grew at a 3.8% pace during the George W. Bush recovery and expansion from 2001 through 2007. Both periods benefited from increased defense spending as the Cold War reached its climax and the U.S. fought wars in Iraq and Afghanistan.

The recovery during the Clinton administration saw federal spending contract somewhat, but a jump in state and local spending more than offset the decline.

That isn’t to say decreased government spending is the only factor holding back growth. Consumer spending, which has grown at just a 2.2% rate in the current recovery, is much more mild than the average 3.8% annualized gain during the prior five expansions.

Also the growth of imported goods, which partially reflects the increasing cost of oil, makes that category a larger drag on GDP growth in current recovery than all but one of the prior five expansions.

Basically low government spending placing a drag on economic growth.

[Dark Silver]

Huh....who would have thought it?

Certainly not those who are hawking on cutting governmental spending and decrying the Government for daring to spend....but how dare they not fix the economy...