The Commerce Department reported today that GDP declined during the first quarter of 2009 at a 6.1 percent rate, worse than expected. The decline occurred despite a rebound in consumer spending.
Some will say: Nice going, Barack. But that isn’t fair, since the effects of the Obama administration’s policies have yet to be felt (although the decline in business spending may reflect, in part, businessmen’s expectations regarding the effects of those policies).
But that, really, is the problem. Normally when the economy suffers a steep decline, it also experiences a sharp rebound. The effect of Obama’s policies–massive expansion of inefficient government spending, higher taxes, a government-dominated financial sector, subsidies to auto industry unions, not to mention cap and trade and socialized medicine, should those come to pass–will be to suppress growth. So we can expect a steep decline, followed by a slow recovery. The recovery will be hampered further either by inflation, or by the Fed’s efforts to contain inflation.
Of course, our economy has a way of confounding expectations. When Adam Smith wrote that there is a lot of ruin in a country, he had not witnessed the American economy, which is vigorous enough to survive a lot of bad policy choices. That’s what the Democrats are counting on, I guess; they can’t possibly believe their policies will actually help the economy grow. Let’s hope the proverbial goose can survive one more attempt to kill it, and that the voters wake up in time.