Thursday, October 30, 2008

Holtz-Eakin on the Latest GDP News Release

BEA released its advance estimate of how real GDP fared during the third quarter of 2008 and it would seem real GDP fell a bit:

The decrease in real GDP in the third quarter primarily reflected negative contributions from personal consumption expenditures (PCE), residential fixed investment, and equipment and software that were largely offset by positive contributions from federal government spending, exports, private inventory investment, nonresidential structures, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased.

In short, consumption and investment fell but the blow to aggregate demand was tempered by increases in government purchases and net exports.

Douglas Holtz-Eakin took the liberty of issuing this BS:

Today's announcement that third quarter GDP fell at a 0.3 percent rate confirms what Americans already knew: the economy is shrinking. Barack Obama would accelerate this dangerous course. According to the independent Center for Data Analysis, Barack Obama's new policies will destroy nearly 6 million jobs over the next decade. Barack Obama's ideologically-driven plans to redistribute income will impose higher taxes on families, small businesses, and investors; expensive, rigid, job-killing health mandates on employers; energy policies that fail to promote domestic oil, natural gas, and coal, and will impose a massive Washington-driven regulation of everything from home furnaces to factories; isolationist trade policies that endanger one out of every five jobs; and massive new spending plans that that will burden the economy and saddle our children with debt. Barack Obama is change Americans cannot afford.

Shifting the tax burden away from the middle class and working poor and towards high income individuals may actually reverse some of the decline in consumption. As far as trade policies – McCain wants a stronger dollar which will reduce net exports. Holtz-Eakin also repeats McCain’s assertion that he would lower government spending. The notion that reducing government spending is a cure for a recession must have Lord Keynes rolling over in his grave.


reason said...

What on earth is this "Center for Data Analysis"

reason said...

Ah I found it - Heritage. In what sense is it "independent" I wonder. It is wonderful how flexible words can be these days. Orwell will be spinning in his grave.

Sandwichman said...

Presumably that would be the "independent" Heritage Foundation Center for Data Analysis. What a hack.

ProGrowthLiberal said...

is interesting as this Heritage report claims that the Obama plan will increase aggregate demand (lower taxes and more consumption) but it also claims McCain's fiscal stimulus will increase GDP by more. Well duh - the more fiscal stimulus, the bigger the short-run effect on GDP if one is doing Keynesian economics. Heritage ducks the deficit question altogether. Wonder why? But here is what is laughable - Heritage takes a Keynesian demand model out for a decade. Holtz-Eaton at CBO would have reminded folks that eventually the premises of classical economics do become relevant and that more consumption means less long-term investment and lower long-term growth. For Holtz-Eaton to trot this paper out as some proof that McCain has the better economic game plan is incredibly dishonest even for a member of Team McCain!

Alan said...

Reuters reports that in a survey of chief financial officers "twice as many said McCain was best able to handle the economic crisis than said so about Obama." With CFOs like that, no wonder the economy is in trial.

Anonymous said...

Yeah, FDR did a great job curing the depression with his mercantilist/socialist programs and increased government spending, right?