January 29, 2010 11:47 AM
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Better GDP, Better Presidential Prospects?
Even his most glittering speech won't do much to rally support for Barack Obama's political agenda. But more reports like Friday's GDP estimate would do wonders to reverse his slide in the polls.
In the fourth quarter of 2009, the U.S. economy grew at its fastest clip - 5.7% - in the last six years. High fives all around? Not quite.
On the surface, this report is great news. But the numbers also reflected a slowdown in inventory liquidations, which dropped $33.5 billion compared with the $139.2 billion decline in the third quarter of 2009. CNBC noted that the change in inventories contributed 3.39 percentage points to GDP, or "the biggest percentage contribution since the fourth quarter of 1987."
Not to be a total party pooper as there is good news in the report: After allowing for the inventory adjustment, the economy still grew a more sturdy 2.2% from 1.5% the previous quarter. But can the nascent recovery continue without more government spending? Even the White House's official spin acknowledges that this inventory bounce, is likely to be transitory.
Paul Krugman, who has warned for months that the economic rebound is likely to fizzle without more fiscal stimulus, argues in his most recent New York Timespiece that "the only thing that's keeping us from sliding into a second Great Depression is deficit spending."
More deficit spending, that is.
"On jobs, it's now clear that the Obama stimulus wasn't nearly big enough. No need now to resolve the question of whether the administration should or could have sought a bigger package early last year. Either way, the point is that the boost from the stimulus will start to fade out in around six months, yet we're still facing years of mass unemployment. The latest projections from the Congressional Budget Office say that the average unemployment rate next year will be only slightly lower than the current, disastrous, 10 percent. Yet there is little sentiment in Congress for any major new job-creation efforts."
He's entirely right about that. Republicans in Congress - as well as many Blue Dog Dems - aren't going to vote for more spending just now, not with the midterm elections on the horizon and the Tea Party crowd feeling its oats. (Maybe that explains the spectacle of Judd Gregg going ballistic on national television Thursday.) But all the political pyrotechnics and posturing in the world won't have as much impact on the White House as the next monthly unemployment report (as well as the ones which follow). If the jobs numbers start going his way, the president will be off to a strong start. Otherwise, 2010 could turn out to be a very long year for the administration.
In the fourth quarter of 2009, the U.S. economy grew at its fastest clip - 5.7% - in the last six years. High fives all around? Not quite.
On the surface, this report is great news. But the numbers also reflected a slowdown in inventory liquidations, which dropped $33.5 billion compared with the $139.2 billion decline in the third quarter of 2009. CNBC noted that the change in inventories contributed 3.39 percentage points to GDP, or "the biggest percentage contribution since the fourth quarter of 1987."
Not to be a total party pooper as there is good news in the report: After allowing for the inventory adjustment, the economy still grew a more sturdy 2.2% from 1.5% the previous quarter. But can the nascent recovery continue without more government spending? Even the White House's official spin acknowledges that this inventory bounce, is likely to be transitory.
Paul Krugman, who has warned for months that the economic rebound is likely to fizzle without more fiscal stimulus, argues in his most recent New York Timespiece that "the only thing that's keeping us from sliding into a second Great Depression is deficit spending."
More deficit spending, that is.
"On jobs, it's now clear that the Obama stimulus wasn't nearly big enough. No need now to resolve the question of whether the administration should or could have sought a bigger package early last year. Either way, the point is that the boost from the stimulus will start to fade out in around six months, yet we're still facing years of mass unemployment. The latest projections from the Congressional Budget Office say that the average unemployment rate next year will be only slightly lower than the current, disastrous, 10 percent. Yet there is little sentiment in Congress for any major new job-creation efforts."
He's entirely right about that. Republicans in Congress - as well as many Blue Dog Dems - aren't going to vote for more spending just now, not with the midterm elections on the horizon and the Tea Party crowd feeling its oats. (Maybe that explains the spectacle of Judd Gregg going ballistic on national television Thursday.) But all the political pyrotechnics and posturing in the world won't have as much impact on the White House as the next monthly unemployment report (as well as the ones which follow). If the jobs numbers start going his way, the president will be off to a strong start. Otherwise, 2010 could turn out to be a very long year for the administration.
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Charles Cooper is an executive editor at CNET News. He has covered technology and business for more than 25 years, working at CBSNews.com, the Associated Press, Computer & Software News, Computer Shopper, PC Week, and ZDNet. E-mail Charlie.
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