Bad news for Dems: GDP Grows at 6.1% Rate

Wall Street Journal ^

[Sub-Driver]

WASHINGTON -- The economy was even stronger than first thought during the first quarter, growing at a blistering 6.1% annual rate -- its strongest showing in more than two years.

The third and final reading on gross domestic product -- which measures the total output of goods and services produced in the U.S. -- was even higher than the Commerce Department's most recent estimate of a 5.6% pace.

[ex-snook]

"GDP Grows at 6.1% "

Audited by Arthur Anderson? Or government accountants who say we have a budget surplus? Or the political party economists who during the last election saw balanced budgets, tax cuts, and unlimited spending for as far as the eye could see?

P.S. If the economy is great when the next election rolls around, the voters will know it. Telling them how great it is, won't cut it.

[Bill Davis FR]

gdp grows at 6% and stocks drop 10%

[Tokhtamish]

"GDP Grows at 6.1% "

Audited by Arthur Anderson? Or government accountants who say we have a budget surplus? Or the political party economists who during the last election saw balanced budgets, tax cuts, and unlimited spending for as far as the eye could see?

P.S. If the economy is great when the next election rolls around, the voters will know it. Telling them how great it is, won't cut it.

You got that right. The public expects "Prosperity is just around the corner" happytalk in times like these. They aren't stupid. Looking at their 401K statements, they know that official statistics can be cooked.

[alloysteel]

Very contradictory news. First, the stock market seems to be going into the tank, yet the output of goods and services continues to grow. Which set of indices are we to believe?

The glass is clearly at the 50% mark. Your call, half full or half empty?

[Charlotte Corday]

gdp grows at 6% and stocks drop 10%

Actually it's not a bad idea to start decoupling the idea that the stock market is the "economy".

[Orangedog]

The glass is clearly at the 50% mark. Your call, half full or half empty?

I think the appropriate question should be "Who the hell drank half of my water!"

[LS]

You must be kidding. Aren't you and the two posters above you the same people COMPLAINING in the 1990s that although stock prices (401Ks, etc.) were up, the growth wasn't "real" because it wasn't reflected in productivity, only investments?

Now that it is "only" reflected in productivity and growth---but not profits---this isn't "real" either? You can't have it both ways.

What we have is a situation where companies are performing well, productivity is up, but profits are down because no one is investing and money is tight. Investment is the key---I have always been confident that the economy was out-performing the statistics. We will not get the new investment until four things are settled: 1) "war on terror" has to be viewed as substantially "won" and that won't come until after Iraq; 2) the accounting scandals have to flush out of the system, which they will do; 3) the "last mile" of the internet must be wired for 75% of the available on-line homes; and 4) the money supply needs to be increased enough that venture capital again appears in the high-tech markets.

[fogarty]

GDP grows at 6.1% (according to government auditors), and meanwhile two companies lay off 30,000 employees between them.

This tells me the government figures are grossly inaccurate, and companies are working their remaining employees to death, squeezing the last drop of productivity out of the survivors.

[fogarty]

Some other factors:

The dollar is perilously weak. It is on the verge of plunging against foreign currencies, and foreign investors who currently own multiple BILLIONS worth of treasuries and US investments are very close to dumping and running. With such a weak dollar the fed has very little leverage to either lower rates or increase the money supply.

Even with an expansion in money supply and available credit, businesses and homes are literally drowning in debt. They could not take advantage of more easy money if they wanted to. WorldCom is not the only company with excess of $30 billion in debt.

The employment picture is still very grim. Another 30,000 layoffs anounced by two major companies in the past 24 hours. People are surviving, for the moment. But a few more months of this will have impacts on the housing market, as more and more people are unable to afford the mortgage payments they are saddled with.

As far as the 'last mile' of the internet being wired to homes, I think the effect of that will be minimal at best. There appears to be very little demand for it as it stands. It unlikely that the 'multimedia' explosion that has been talked about for the past 5 years will change that. The fact of the matter is, the demand for 'content' is remarkable slim.

[VOA]

Bad news for Dems: GDP Grows at 6.1% Rate

This must be truly good news.

How can I reach this conclusion?

I've been listening to talk radio since about 5AM this morning here in Los Angeles
(one two stations) and not heard a peep about this story.
(The news must be so good, every one of the news directors here...all Demos, for sure,
have got a news embargo in place.)

[Freedom'sWorthIt]

Excellent analysis - can we throw in more tax cuts for individuals and business, less regulations for same, and a new birth of entrepreneurship? If not, the socialists are going to take us all down the road to Hillary Care II. Guaranteed.

[The Vast Right Wing]

Ding, Ding, Ding. We have a winner. You are exactly correct. Stocks will continue to drop until they are no longer overvalued relative to earnings. The fact the economy is growing like it is and the stock market is slumping just shows how big the bubble was.

[gcruse]

I forget his name, but one of the major columnists at Barron's finally tossed in the towel at one time and said government statistics are manipulated and retroactively revised (fudged) for the need at hand to such a degree as to make them useless for forecasting or investement decisions.

[Moonman62]

Very contradictory news. First, the stock market seems to be going into the tank, yet the output of goods and services continues to grow. Which set of indices are we to believe?

That's what happens when the president's standing policy is to grow the size and cost of the federal government as a solution to every problem.

[LS]

First, I have heard these "Americans-are-drowning-in-debt" scenarios for 20 years. At some point, we have to face reality. THE SCHOLARLY STUDIES I have seen do not suggest any "crisis" at all, but rather a 20-year phenomena in which people voluntarily take on more debt in flush times and reduce debt (just the contrary to what you are arguing) in weak times.

I admit the scholarship on this SO FAR only involves a few studies, but SO FAR the conclusions are all pretty consistent. Moreover, when you look at debt/total assets levels---and this must include Social Security, life insurance, pensions, and HOME VALUES, as these are all areas where 60 years ago Americans would have saved money to finance these things---I do not think there is any evidence that these numbers are "dangerous," let alone even high by recent standards. Now, I can't prove this, but I suspect that if you look at the debt/assets ratio today, compared to, say, 1978, we are in much better position.

As for the "last mile," I think you are seriously wrong. The internet now stands, it is exactly where autos were in 1900-1920---an explosion waiting to happen. Once all the "vicinities effects" began to come together, autos spun off into a boom in road building (hence, bond sales, hence, stock and bond brokerages), rubber, steel, aluminum, glass, and petroleum. The internet is at the same spot. MANY "related" technologies just waiting to jump in, but it won't happen until the last mile gets wired.

[LS]

Absolutely, more tax cuts. But right now, I don't think "middle class" tax cuts are going to address the problem---we need massive cuts in top brackets and, above all, in "unearned income" to spark venture capital to come out of hiding.

I agree the Fed alone cannot begin to address the weaknesses in the economy---but does anyone really think that we are in worse shape than in, say, 1873, when virtually all the banks folded along with the railroads, or 1893, when the nation's gold sailed out of the U.S. so fast we nearly went bankrupt?

This is precisely my point: the productivity statistics are UP, and they are NOT COOKED. So if productivity is up, and production is up, the ONLY reason profits are not up (and hence, markets booming) is confidence.

[LonePalm]

An optimist says, "The glass is half full."

A pessimist says, "The glass is half empty."

An engineer says, "The glass is twice as big as it needs to be."

An Entrepreneur says, "I can sell more water in that glass."

A liberal says, "Give me that glass. Can't you think about all the children who go to school thirsty? We need a new federal water program."

Bill Clinton said, "I came within one hour of getting that glass."

W.C. Fields would have said, "Water? I never tough the stuff. You never know what fish do in it."

You can come up with more on your own.

Garde la Foi, mes amis! Nous nous sommes les sauveurs de la République! Maintenant et Toujours!
(Keep the Faith, my friends! We are the saviors of the Republic! Now and Forever!)
LonePalm, le Républicain du verre cassé (The Broken Glass Republican)

[fogarty]

As for the "last mile," I think you are seriously wrong. The internet now stands, it is exactly where autos were in 1900-1920---an explosion waiting to happen.

You are certainly free to think that. But as I said (and I notice you've used similar reasoning above) we've been reading about this 'last mile' issue for most of the past decade. The supposed 'explosion' already happened. It's unfortunate that the internet explosion has already resulted in the dot-bomb implosion.

I believe that an internet 'explosion', if any, will be fueled by demand. And that demand, right now, is very much absent. There is no reason for companies to put billions of dollars down to build the last mile when there is no market demand for it.

[LS]

I'm a historian. As such, I look at historical precedents. The internet spread faster than any other technology in American history---7 years as opposed to about 50 years for the auto to get to 25% of the population. However, if you look at autos, it was about 30 years before they became truly "consumer" items where they had an impact on the economy. This was due to the "vicinities" effects required by DEMAND---the need for roads, for electric starters and improved batteries, the need for glass and rubber. ONLY when all of this coalesced did you have the explosion in autos AND the related economy (the 1920s).

Now, I know you've "been hearing" about the internet explosion since 1995 (not for 20 years---Gilder was the first real "tekkie" to champion this in his book "Microcosm"). But we have content at one end (music, videos, info at high deliverability rates) and receivers at the other (computers that are incredibly fast) but no "lines" yet that are available.

NAPSTER, rightly or wrongly, also set the program back while the industry sorts out the legal issues of digitizing all private property. This won't be easy to solve, but it will be solved. At that point, there will be an explosion. Maybe that will take five more years, but it is as sure as the rising sun that it is coming.