Wednesday, June 26, 2013

More evidence that austerity does NOT work

The US government continues on a quest to show that austerity does not work. The BEA announced that growth in the 1st quarter was revised down to 1.8 percent (see graph below).
From the report is clear why we have a slowdown. Yes consumption grew less than expected, but the culprit is government spending that has been falling by almost any measure. From the BEA news release:
"Real federal government consumption expenditures and gross investment decreased 8.7 percent in the first quarter, compared with a decrease of 14.8 percent in the fourth. National defense decreased 12.0 percent, compared with a decrease of 22.1 percent. Non defense decreased 2.1 percent, in contrast to an increase of 1.7 percent. Real state and local government consumption expenditures and gross investment decreased 2.1 percent, compared with a decrease of 1.5 percent."
So, we are convinced; can we change policies now?! 

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