It's 'Unbelievable' How Much The Economy Is Getting Slammed By The Government Spending Slowdown

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http://www.businessinsider.com/federal-government-spending-slowdown-2012-7

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Ben Casselman and Conor Dougherty at the WSJ (via Ben White) have a great look at how cuts in federal spending are hampering the recovery.

They write:

Recent economic data show that long before the fiscal cliff hits, federal spending already is falling—and taking a toll on the recovery. Federal spending and investment fell at an annual rate of 0.4% in the second quarter and has fallen 3.3% in the past year. Federal employment has fallen by more than 52,000 jobs in the past year and for the first time is lower than when the recovery began.
Deutsche Bank's usually bullish economist Joe LaVorgna is quoted as saying: "It's unbelievable how much the economy is getting hurt already by the sharp drop in federal spending."

Some other points from the article:

In 2012, state and local governments will get just over $20 billion in stimulus funding from the Federal government, down from over $180 billion in 2010 and 2011. That will shrivel even further next year.

Military spending has fallen for three straight quarters.

Even planned spending is getting delayed. An asphalt maker saw earnings drop 26% due to gridlock over the highway bill.
Even excluding postal workers, federal government employment has fallen by 34,000


Read more: http://www.businessinsider.com/federal-government-spending-slowdown-2012-7#ixzz226d2YITm

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1. A Dam Has Burst. More People Admit That It's The Public Sector Cuts That Are Hurting The Recovery

http://www.businessinsider.com/aei-mark-perry-maybe-the-private-sector-is-doing-fine-2012-7

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In a blog post over at conservative think tank AEI (!) professor Mark Perry has a post titled: Maybe private sector is doing fine? Growth in post-recession “private GDP” (3%) is above average.

First Trust Portfolios (Brian Wesbury et al.) is the only organization I know that calculates and reports “private real GDP” on a regular basis, here’s their most recent commentary: “We’ve been tracking real “private” GDP (real GDP excluding government purchases), which grew at a 2.2% annual rate in Q2 and is up 3.3% in the past year.”
In the second quarter of 2012, “public sector GDP” decreased -1.44%, and that was the eighth straight quarter of negative growth for total government spending, averaging -2.88% per quarter over the last two years. In contrast, there have been 12 consecutive quarters of positive growth for private sector GDP averaging 3.07% per quarter in the three years since the recession ended, which is slightly higher than the 2.8% average growth rate in private real GDP over the last 25 years. Most of the decline in government spending over the last few years has come from cuts in defense spending at the federal level, and ongoing cuts in government spending by local and state governments.

Unlike some conservative economists, who have spent the past few years purely focusing on the economy's shortcomings (of which there are many) Professor Perry has a track record of being a straight shooter who calls it like he sees it, pointing out strengths and weaknesses where they are.


Read more: http://www.businessinsider.com/aei-mark-perry-maybe-the-private-sector-is-doing-fine-2012-7#ixzz226sRyvrT