Economy’s Biggest Drag Right Now Is Government
April 29, 2012
Government has become its own worst enemy when it comes to the economy, with public spending putting a damper on growth that otherwise continues at a steady if unspectacular pace.
Friday’s gross domestic product report confirmed what a drag government can be: While consumer spending grew at a 2.9 percent clip, state and local governments cut back spending by 1.2 percent on an annualized basis and the federal government pulled back by 5.6 percent.
As a result, the GDP number showed just a 2.2 percent improvement. The report disappointed economists, some of whom had the number as high as 3 percent and beyond, and cast an uncertain future on a stock market dependent on Federal Reserve stimulus for growth.
“None of this is all that surprising, so where is the miss?” wondered Brown Brothers Harriman global currency strategist Marc Chandler, after noting some fairly pedestrian and in-line quarterly growth results. “Contrary to what passes as conventional wisdom, the main drag is coming from the government itself.”