Notable contributions to real GDP growth in the second quarter included net exports (0.6 percentage points) and fixed investment (0.7 p.p.). Defense spending added 0.4 p.p. to GDP, but this gain was offset by declines in state and local government (-0.4 p.p.) and nondefense spending (-0.2 p.p.). Consumer spending rose just 0.1 percent at an annual rate, with a steep decline (23 percent) in motor vehicle consumption accounting for the weakness. The downward revision to first quarter GDP from 1.9 percent to 0.4 percent reflects lower contributions from inventory investment and imports.
Just to recap - consumer spending is in the shitter because millions are out of work (or afraid of losing their job), or otherwise deferring most purchases as they deleverage from the cheap credit spending binge of the early to mid 2000s bubble. Gross investment suffers a similar fate as consumers and businesses alike hoard their cash in fear of flagging aggregate demand. Net exports are perhaps the one bright spot.
So do some math with me here. Your goal is to increase GDP. When three of the four primary factors that make up gross domestic product have plodded along through a historic recession and one of the weakest economies on record, what do you do? Oh, and keep in mind that for the other factor, government spending, you can borrow money at historically low interest rates (~3%) as investors around the world flee to Treasury securities as one of the few safe investments left on the planet.
If your answer is "slash government spending" or "do nothing and hope that the confidence fairies and free market Jebus bless us in the face," then congratulations: you have a future in American politics. Government spending is perhaps the one economic factor favorably within our control, and the American government is running away from screaming with their fingers in their ears like a bunch of children. Yes, we have a very large deficit, but we also have a much more pressing and grim short-term economic outlook.
Not to mention the amount of disgusting cynicism it shows on the President's part that he values the ignorant whims of independent voters over the plight of the unemployed. Or just how how incredibly stupid that sounds when you think about it. Independents think that we should spend less. Why? Just because! Okay then! We better give them what they want, especially after the 2010 "shellacking."
You know what else independents might like? An unemployment rate somewhere south of 9.2%. Just a hunch.
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