The Obama Administration may be “Juicing” the GDP Numbers

The Obama administration just reported 2% Advance Estimate of GDP growth in the 3^rd quarter, after reporting 1.3% GDP growth in the 2^nd quarter.  The Obama administration immediately touted the number as a great accomplishment, proof that his policies were working and that Obama was entitled to four more years to finish the job.  However, Stuart Varney, host of Varney & Company, promptly stated on “American Newsroom,” The Fox News Channel (“FNC”), 10/26/12, that it looked like the Obama Administration may have “juiced the numbers,” because government spending had “jumped” 9.6% in the 3^rd quarter.  Stuart said, “There is some suspicion these numbers had been juiced by government spending, deliberately in that quarter in the report right before the election.”  Stuart also thought the number would be revised downward as it had been in the previous quarters this year.  Even if the 2% is real, it is not enough to reduce unemployment when you consider the new people entering the labor force.  Stuart pointed out that it takes 3% GDP growth just to keep up with population growth.

Is it really possible that the same Administration whose trillion dollar stimulus created or “saved” lots of jobs in non-existent Congressional Districts and cooked up a phony 7.8% unemployment rate in the September unemployment report could have possibly deliberately  “juiced” the GDP growth rate by goosing government spending by 9.6% right before the election, just to win a Presidential election?

Stuart chided that the 2% number will get you a lot of “spin,” but it would not get you a lot of jobs. To have a substantial reduction in unemployment, Stuart said that you needed sustained growth of twice that number or 4% a quarter.  He continued, “What you really need for a robust recovery is 4% and sustain that over a couple of years and maybe growth of 5% just like we had in the rebound from the recession in the early ‘80’s.”  He added that the only time GDP hit 4% in the Obama Administration was the 4^th quarter of 2011.  When Bill Hemmer said that the ‘80’s were 30 years ago and asked haven’t we had sustained 4% growth since then, Stuart replied that the last time we had sustained GDP growth of 4% or above was in the middle of the last decade.  Of course the recovery of the ‘80’s was when Ronald Reagan cut taxes, reduced regulations and encouraged business and oil development, the opposite of the failed Obama policies, and sustained growth in the middle of the last decade was after the Bush tax cuts.

Furthermore, Tim Quinlan, a Wells Fargo Economist, reported that business spending was off more than 25% on a three month annualized basis.  He also pointed out that, “We have not seen that series drop by that magnitude in the last 20 years without a slowdown in overall economic growth.”  Id.  Also, J. D. Foster of the Heritage Foundation remarked that businesses don’t see a lot of hope in the immediate future, so they will just sit pat.  Id.  With these comments, there is not much substance behind the “Hope and Change” team spinning the GDP number as being something to brag about.

When asked whether the 2% was a good number by Martha MacCallum on “America Live,” FNC, 10/26/12, Lou Dobbs with a big smile sarcastically said “It’s a very good number, given that we have an economy that lacks leadership, that has CEO’s absolutely frozen, because of the uncertainly because of the fiscal cliff.  Because they are shepherding their cash, we are actually watching cash balances rise on corporate America’s balance sheets, as they await some greater clarity on the direction of the country.”

Martha MacCallum pointed out that under Reagan we were at 7% growth rate in GDP.   In discussing the 9.6% increase in Government spending, Martha said that some people were saying that the Administration was actually manipulating the numbers.  She went on to say that some people were saying, if you stripped out the defense spending increase, the number would be closer to 1.36% in the 3^rd quarter.  Lou said it was throughout the government and that the 9.6% was an exceptionally high increase in government spending.

When Martha chipped in that at least the number is going up, Lou Dobbs pointed out that the GDP rate was not growing.  It had been 2.4% in 2010, 1.8% in 2011 and even with the questionable 2% in the third quarter, it was still under 1.8% in 2012.  Lou thought that the Administration did not have one ounce of credibility when it came to the economy.  Lou Dobbs summed up, “Our growth is anemic.  We have not seen this Administration preside over a return to prosperity.  I don’t think the American people are willing to put up with much nonsense.”

Investor’s Business Daily(“IBD”) picked up on the theme of “anemic” economic growth in the headline,  “Economic Growth Less Anemic, But Investment Slumps,” by Jason Ma, IBD, 10/29/12, p.1.  The article said that the initial reading reported by the Administration for Q3 economic growth showed a pick up from “anemic” to modest, “but signs of momentum were scarce as business investment retreated ahead of the ‘fiscal cliff’ and exports slumped on global economic woes.”  The article also stated, “Federal government spending rose at a 9.6% pace in Q3, the first gain in five quarters, fueled by military outlays.  The surprise defense jump will likely be followed by a similar reversal later.  Exports probably won’t rebound quickly with Europe still mired in a debt crisis and China’s slump just starting to bottom out.”  Id.

Dylan Matthews headlined “Don’t believe the GDP report!” The Washington Post, Updated 11/26/12, www.washingtonpost.com , as he pointed out how subject to error these early GDP estimates are and that the second quarter was revised down from an initial estimate of 1.7% to 1.3%.  According to the Bureau of Economic Analysis the average revision between the 1^st and 2^nd estimates is .5 points, and 1.3 between the 1^st estimate and the last.  Dylan Matthews said that from 2008 to the 1^st quarter of 2012, “The initial data was generally much too optimistic throughout the recession and recovery.” Id.  In addition, some commentators are already saying that Superstorm Sandy will cause a dip in economic production that will reduce GDP in the 4^th quarter.

Should anyone believe the GDP numbers from the “faux Greek column” President?  The President that claimed his policies “created” 873,000 new jobs in September?  The last time the US economy created some 870,000 jobs in one month was during the Reagan recovery when the economy was growing at 7%, and Reagan’s policies of cutting taxes and regulations and promoting investment and capital spending were in place.  Obama’s policies of higher taxes, more regulation, attacks on energy production, class warfare and Obamacare have failed.  It is time for Obama to go.