Latest GDP Data Shows Gov’t Still Keeping Economy Stuck in Neutral

The latest preliminary 2011 Q4 GDP data shows that once again the governments decision to reduce the spending is suppressing GDP growth. The chart below shows the components of the latest quarters GDP.

Once again it is budget cuts and layoffs at the state, local, and federal government levels that are holding back a recovery. Simply leaving government budgets as is (note since local and state governments can’t issue their own currency transfer payments from the federal level would be needed) would have added at least 1% to GDP growth. Intelligently designed and implemented tax cuts or stimulus could in greater amounts would add even more steam to the recovery.

Despite quarter after quarter of data from the US, UK, Japan, the Eurozone, and Australia and economic history the world over showing that cutting government spending and raising taxes during a recession retards growth the politicians seem to be intent on enforcing their misplaced ideals of fiscal discipline.

In the US we are lucky that a dysfunctional Congress has only given us “death by a thousand cuts” austerity rather than the full blown kind that is driving European economies in to a renewed recession.