Wednesday, August 1, 2012

Decrease In Government Spending Is Responsible For Slow US Recovery

I was surprised to see this article coming from the WSJ. It totally deflates the campaign rhetoric of the Romney campaign which blames the slow recovery in the US on excessive government spending, and on the federal stimulus.

GDP has grown only 2.2% in the current recovery.  It is the slowest post WW ll recovery in US history. The major difference between this recovery and previous recoveries is that government spending has declined by 1.5%. Government spending increased by an average of 1.9% in our previous recoveries.  Since 2010, state and local spending has decreased by 2.4%.  Federal spending has also declined  by 0.2%.  It is pretty clear that out of control government spending is not the cause of the slow recovery.  Decreases in government spending is a big part of the problem.  Cuts in government spending also have a negative effect on private spending.  Unemployed state and local workers are forced to cut back on their spending as well.

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