Uh-oh: GDP declined in late 2012

Jan. 30, 2013

By John Seiler

The wild spending plans of President Obama, Republican House Speaker John Boehner and Gov. Jerry Brown depend on the economy growing. This just in:

“The U.S. economy posted a stunning drop of 0.1 percent in the fourth quarter, defying expectations for slow growth and possibly providing incentive for more Federal Reserve stimulus.

“The economy contracted from October through December for the first time since the recession ended, hurt by the biggest cut in defense spending in 40 years, fewer exports and sluggish growth in company stockpiles.

“The Commerce Department said Wednesday that the economy contracted at an annual rate of 0.1 percent in the fourth quarter. That’s a sharp slowdown from the 3.1 percent growth rate in the July-September quarter.

“The surprise contraction could raise fears about the economy’s ability to handle tax increases that took effect in January and looming spending cuts.”

Actually, the economy could handle “spending cuts,” of which there won’t be any in any case. In 1946, World War II demobilization brought a 2/3 cut in spending, yet private-sector growth zoomed 30 percent.

The real culprit is the tax increases that, in 2013, are slamming the economy. More bad news like this is going to keep coming in as government strangulates the life’s blood out of the private sector like a boa constrictor devouring a baby.