Friday, January 29, 2010

Obama's GDP Shell Game

Trouble is, it's a lie. Well, to be charitable, let's call it an exaggeration. The Obama Administration is bragging about a "5.7 percent growth in gross domestic production (GDP)," but skeptics abound. The so-called growth wasn't growth at all. Rather, the "improved" growth rate number was due largely to inventory adjustments. In other words, the Obama Administration is playing a slight of hand in a shell game of funny math. The inventory adjustment factor is important, as we will learn in a moment. As for "growth," employment is still over 10 percent nationwide, in no small part because businesses large and small are worried about the future. The Salt Lake Tribune states the frighteningly obvious in an article today: "The economy boomed at the end of 2009, growing at the fastest rate in more than six years. Now if only it could keep it up. The economy expanded at an annual rate of 5.7 percent in the fourth quarter, the second straight quarter of growth. But analysts warn it's unsustainable. Consumer spending, chilled by double-digit unemployment and scant wage gains, remains weak. Also, the benefits of government aid and higher company output to feed stockpiles will dwindle." Full Article... The numbers are as artificial as Michelle Obama's sudden adulthood pride in her country. Even the mainstream media - believed by many, included myself, to be sympathetic to Obama - is rather skeptical about the GDP growth. MSNBC is skeptical: "The U.S. economy turned in a surprisingly good performance in the fourth quarter, surging ahead by 5.7 percent on an annual basis, according to a government report released Friday. Or did it?" MSNBC continued: "Obama noted that last years’ massive economic stimulus program had also 'stopped the flood of job losses.' He also repeated his administration’s commitment to spur job growth to re-hire the 8 million workers sidelined by the worst recession in 60 years." About Those Inventory Adjustments: Sounds good, doesn't it? Sure does, until you understand that those are lies - excuse me, exaggerations - by Obama. Again, MSNBC (emphasis added): "But when you look a little more closely at the numbers, it quickly becomes apparent that it’s hardly time to start breaking out the champagne. A big part of the latest GDP gain comes from a statistical adjustment for changes in inventory levels that don’t reflect real growth. Over the past year, businesses cut deeply into those inventories — not wanting to get stuck with unsold goods. Now that they’ve cut them to the bone, the rate of inventory-cutting has slowed. The way the GDP is calculated, that slowdown adds to “growth” — even though it doesn’t reflect increased production or sales. If you back out that inventory adjustment, GDP grew only 2.2 percent." Wow! Obama is claiming a 5.7 percent GDP growth, but it was really only 2.2 percent? That's one heck of a difference. The Wall Street Journal's Market Watch offered analysis, too, and it was also skeptical: "Even with healthy growth in the second half of the year, the economy shrank 2.4% in 2009, the worst year for GDP since the 10.9% drop in 1946, when the United States geared back to a peacetime economy. Business investment fell the most since 1942. Read the full report on the government's website." What? Obama is saying that the GDP is just great, fantastic, but the experts at the Wall Street Journal - who eat, sleep and make love to these kinds of numbers - tell us that the economy shrank in 2009, and that business investment was the worst since World War Two? Is Obama exaggerating? The Market Watch report continued (emphasis added): "In the fourth quarter of 2009, about two-thirds of the growth came via the swing in inventories. Excluding the change in inventories, final sales increased at a 2.2% annual rate, a signal that the economy remained weak despite stellar topline numbers. Consumer spending increased at a 2% annual rate, down from 2.9% in the third quarter when the government's so-called cash-for-clunkers program boosted auto sales." Golly. Why is Obama not bragging about those numbers? Could it be because he knows damned well that they're a bit closer to reality - much too close - than he likes? Or could it be that he's so stupid that he doesn't understand Economics 101? Regardless of my opinion of Obama as a dishonest, socialist, self-hating American, I cannot believe that he's stupid. He's a very bright man, really. His exaggerations about the "growth" of the GDP, however, assume that you and I are not so bright. Fortunately, some of us are bright enough to understand that what may seem like innocent, over-eager exaggerations by Obama are really bald faced lies. RELATED: Economy May Be Humming, But Can it Last? CBS News Editorial: GDP recovers; if only job market would Scripps News US stocks fall as GDP rises The Press Association Merchants finally restock, boosting GDP Marketplace ( Economy likely grew faster in 4Q, but fears remain BusinessWeek Growth will tail off in second half: CIBC Meanwhile: Why Latvia's economic recovery program works Baltic Reports Leave a Comment * Conservative T-Shirts * Follow CNB on Twitter * RSS Feed