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What they’re saying about the rise in GDP

By Josh Richman
Thursday, October 29th, 2009 at 12:48 pm in economy, General, George Miller, John Boehner, U.S. House.

From President’s Council of Economic Advisers Chairwoman Christina Romer:

“Data released today by the Commerce Department show that real GDP [Gross Domestic Product] grew at an annual rate of 3.5 percent in the third quarter of the year. This is in stark contrast to the decline of 6.4 percent annual rate just two quarters ago. Indeed, the two-quarter swing in the rate of growth of 9.9 percentage points was the largest since 1980. Analysis by both the Council of Economic Advisers and a wide range of private and public-sector forecasters indicates that the American Recovery and Reinvestment Act of 2009 contributed between 3 and 4 percentage points to real GDP growth in the third quarter. This suggests that in the absence of the Recovery Act, real GDP would have risen little, if at all, this past quarter.”

“After four consecutive quarters of decline, positive GDP growth is an encouraging sign that the U.S. economy is moving in the right direction. However, this welcome milestone is just another step, and we still have a long road to travel until the economy is fully recovered. The turnaround in crucial labor market indicators, such as employment and the unemployment rate, typically occurs after the turnaround in GDP. And it will take sustained, robust GDP growth to bring the unemployment rate down substantially. Such a decline in unemployment is, of course, what we are all working to achieve.”

From House Minority Leader John Boehner, R-Ohio:

“Any positive signs for our economy are welcome, but a jobless recovery is not what the American people were promised. President Obama and his economic team said the trillion-dollar ‘stimulus’ would create jobs immediately and keep the unemployment rate below eight percent. Since then, roughly three million jobs have been lost and unemployment has risen to near 10 percent.

“For millions of out-of-work families struggling to make ends meet, this recession feels far from over. Yet even now, after the Obama Administration’s top economist has stated that the ‘stimulus’ already had its greatest impact on the economy, Washington Democrats are intent on staying the course and trying to spend, tax, and borrow their way to prosperity. Republicans have proposed fiscally responsible solutions to help small businesses create good-paying jobs and get our economy moving again.”

From House Education and Labor Committee Chairman George Miller, D-Martinez:

“Today’s news is another important indicator that the Recovery Act is beginning to repair our economy and get our nation back on its feet. While it will take time for all these investments to kick in, we know that the Recovery Act has already helped to stave off hundreds of thousands of pink slips being planned.

“While saving and creating jobs must be a central concern, we also must ensure that Americans still looking for work have the temporary support they need to get by and that displaced workers have access to the education and training they need to succeed in the jobs of the future. We won’t rest until the millions who lost their jobs during this economic crisis have an opportunity to work and are ready to help shape a new era of economic growth and innovation.”

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  • http://www.halfwaytoconcord.com/obama-inauguration/ Bill Gram-Reefer

    The impact on GDP will be smaller going forward, and according to Dr. Romer, the impact will be around zero by mid next year, and will be a drag later in 2010 (as stimulus is reduced).

    So once the stimulus stops…then what?

    http://jec.senate.gov/index.cfm?FuseAction=Hearings.HearingsCalendar&ContentRecord_id=6dd4483c-5056-8059-7664-1856ea0ee4e6

    These estimates suggest that the ARRA added two to three percentage points to real GDP growth in the second quarter and three to four percentage points to growth in the third quarter. This implies that much of the moderation of the decline in GDP growth in the second quarter and the anticipated rise in the third quarter is directly attributable to the ARRA.

    Fiscal stimulus has its greatest impact on growth around the quarters when it is increasing most strongly. When spending and tax cuts reach their maximum and level off, the contribution to growth returns to roughly zero. This does not mean that stimulus is no longer having an effect. Rather, it means that the effect is to keep GDP above the level it would be at in the absence of stimulus, not to raise growth further. Most analysts predict that the fiscal stimulus will have its greatest impact on growth in the second and third quarters of 2009. By mid-2010, fiscal stimulus will likely be contributing little to growth.

    =====

    The impact on GDP will be smaller going forward, and according to Dr. Romer, the impact will be around zero by mid next year, and will be a drag later in 2010 (as stimulus is reduced).

    So once the stimulus stops…then what?

  • J

    BGR, i’d recomend you listen to the Robert Reich lecture, dated Sept 02, from the source I provide at the bottom. If you don’t know Mr Reich, i’d recommend you do a google/wikipedia search to learn his background, if interested. If you do know Mr Reich but disagree with his politics (ie his suggested solutions), it is still worth a listen given how accurate his forecasting and read of the data has been of late.

    http://webcast.berkeley.edu/course_details_new.php?seriesid=2009-D-71765&semesterid=2009-D