Skip to main content

American Governmental contribution to GDP growth in Q4/2009 was negative

One of my favorit economic blog: Worthwhile Canadian Initiative published a comparison between Canadian and American GDP growth for the Q4/2009 period, comparing Canada's 5.0% GDP growth to America's 5.9%.  Stephen published the table below which compared the source of growth in the two economies:
The third column of the graph has serious implications; underlining the different impact that government spending are having in both jurisdictions.  Whereas the source of GDP growth in Canada was consumption, government spending and investments, in America GDP growth was caused by inventory, consumption and investments.  It appears that  the massive federal government capital injection into the American economy was completely negated by the cuts in expenses by state and local governments.  The overall GDP growth contribution by all levels of government was negative -- the implication of the ending of federal stimulus will therefore become a serious drag on the economy.  A fun fact is that unlike Canadian provinces, American states are constitutionally prohibited from running budget deficits (essentially the American system has installed a system that Europe should have adopted).

The stories one hear from states like Nevada -- where even if the state fired every single employee (we are talking everybody -- teachers, road crew, police, firemen etc) they would still register a budget deficit.    

I'm not entirely clear why so few commentators discuss this aspect of GDP growth.  I was surprised that this was not a talking point on FOX (no not really) -- imagine Fox news stating that government contributed negatively to GDP growth.

Comments

Popular posts from this blog

Ok so I lied...a little (revised)

When we began looking at farming in 2013/14 as something we both wanted to do as a "second career" we invested time and money to understand what sector of farming was profitable.  A few things emerged, First, high-quality, source-proven, organic farm products consistently have much higher profit margins.  Secondly, transformation accounted for nearly 80% of total profits, and production and distribution accounted for 20% of profits: Farmers and retailers have low profit margins and the middle bits make all the money. A profitable farm operation needs to be involved in the transformation of its produce.  The low-hanging fruits: cheese and butter.  Milk, generates a profit margin of 5% to 8%, depending on milk quality.  Transformed into cheese and butter, and the profit margin rises to 40% (Taking into account all costs).  Second:  20% of a steer carcass is ground beef quality.  The price is low, because (a) a high percentage of the carcass, and (b)...

Spray painting Taylor Swift G650 aircraft (updated)

 First, a bit of paint will not harm anyone.  These climate activities are going to learn two things in the next few days:  (1) Trespassing at an airport is a felony almost anywhere in the world.  That means criminal prosecution.   (2) removing paint from an aircraft is expensive.   So these climate activists are about to find out the reach of the British criminal system and it will not be pleasant, the UK has very strict laws about that, I would be surprised if cleaning the aircraft of all the paint will cost less than $100,000.     I am sure that when they planned (premeditation) this little show they had a very valid logic to doing this.  Tonight, they are probably realizing the depth of their troubles.   I understand that in the UK it's a minimum one-year jail sentence.    Also, good luck travelling with a criminal trespass charge against you.  I am relatively certain that the airline industry will ...

Janet Yellen from China supporter to Hawk...

There is rarely serious news in the world these days, it seems that most newspapers are filled with headlines and little else, and then Ms Yellen went to China.  Secretary Yellen has long been known in the Biden administration as the voice of moderation when dealing with China, yet as her trip which concluded yesterday a hawk was born:  She warned the Chinese against dumping goods in the United States.    fighting words! The American administration is very concerned about the lack of Chinese domestic consumption.   Even before the COVID-19 epidemic, there were already the beginning signs of a slowdown, automobile sales were off.   China is facing domestic deflation (a clear sign of collapsing demand) China imports few consumer goods, they import raw materials and intermediary goods.   It seems that the American administration is concerned that the Chinese administration will dump consumer goods abroad to keep its manufacturing machinery ...