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Monday, April 30, 2012

ECRI's WLI and Deficit Spending

ECRI's WLI Moves Higher; Q1 GDP Positive Due To Deficit Spending
For the week ending April 20, 2012:
  • WLI increased to 124.1, up 0.3 from the prior week's reading of 123.8.
  • WLI growth fell to a positive 0.6%, down from last week's reading of 1.2%. 
  • First estimate of Q1-2012 GDP Growth is only 2.2%
ECRI WLI & WLI Growth vs. US GDP Growth

GDP, WLI and Deficit Spending

As my graph above shows, GDP turned lower as you would expect with the lower WLI readings, but it remains firmly in positive territory. The US economy has not entered a recession but it is painfully low.
Actual GDP in Q1-2012 was $15.462 trillion compared to $14.868 trillion in Q1-2011. The difference is $594 billion, less than the current 6 month deficit of $779 billion I show in the second chart in the Seeking Alpha article "U.S. Borrows 53.7 Cents Of Every Dollar Spent In March." Clearly, we would be in a recession that ECRI predicted if not for deficit spending.

A "Failure of Leadership"
The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the US Government cannot pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government's reckless fiscal policies. Increasing America's debt weakens us domestically and internationally. Leadership means that, "the buck stops here.' Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit. ~ Senator Barack H. Obama, March 2006

1 comment:

  1. A very sane blog post!

    The year-of-year GDP figures starkly show how government spending during a slowdown can help to prevent a much worse slowdown from happening. Unlike the austerity being practiced in Europe.

    Interesting that Obama made a statement against raising the debt ceiling during the last administration. That was actually in the middle of the best time for fixing the deficit. That's when fiscal leadership was especially lacking. During the last boom, we got the Bush tax cuts (so we never ran a surplus) and started two wars. Both of those policies were unfunded--leaving us in a less robust position when the business cycle inevitably would turn down again.

    People often don't understand how much of an enormous structural deficit was already fatefully in place the instant the recession (and Obama's term) began.



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