Friday, January 27, 2012
Reason Why GDP Was Such a Bummer
The online article I found stated that the first estimate of fourth quarter US GDP came in below the analyst expectations. A big reason for this can be blamed on the government. Government spending dropped 2.1% which is the largest drop since 1971. Other than imports, the declines in state, local, and federal government spending were primary factors working against GDP. Ben Bernanke, federal reserve chairman said "cutting spending will have a direct impact on growth as the recovery continues. The choice between spending cuts and GDP growth is going to be something the Obama administration will have to ponder a little deeper." Which is more important??
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Cutting spending and reducing debt is critical to the U.S. economy. However, these goals can conflict. This problem must be handled carefully. Cutting spending will exacerbate the problem but it is necessary in the long run. I don't think we can simultaneously cut spending and stimulate GDP growth. The federal government must prioritize whether reforming the fundamental problem of excessive national debt is more important or stimulating the economy at any means necessary is more important.
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