Thursday, June 9, 2011
The real GDP
If you measure GDP by income instead of spending, the economy isn't as good as we thought. The downturn happened about the time the Dems got control of Congress, but I'm sure that's a coincidence.
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I'm not sure the Republicans before them were doing much of a job maintaining a good state of the economy.
In Canada, in the late 90s, the Liberal government claimed huge surpluses and a robust economy that were a result of prior Conservative decisions.
Many times governments looks like wizards or villains based on steps taken well beforehand. I'd go so far as to argue that if the downturn was visible about the time the Democrats took congress, they were not responsible for that direction (in that the prior Government probably was, possibly the one before that but it was the same one!).
Now, having said that, the failure of the economy to look better and to continue in a lousy state is the fault of this government.
Neither government (of the last two) were very prudent fiscal managers.
There are certainly some lag effects. The housing bubble, for instance, had something to do with an act in the 1990s to "promote affordable housing", which translates to "lend money to people who can't repay".
Part of it is probably just due to the uncertainty introduced by a new government as people wonder how they're going to change the rules. I'd guess the effect was multiplied in this case because Obama had no track record to speak of and doesn't say anything concrete.
A lot of it is likely due to things the government can't do much about.
Hm...I wonder if any economists in the audience care to offer an opinion?
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