AP's Crutsinger Falsely Claims 'Sharpest Government Spending Cuts in 40 Years' Hurt GDP
In two items about today's report on economic growth from the federal government's Bureau of Economic Analysis today, Martin Crutsinger claimed that today's lower-than-expected annualized growth of 2.8% during the fourth quarter of 2011 (vs. expectations of 3% or higher) was hurt because of big "cuts" in government spending, especially federal spending -- supposedly the biggest cuts in 40 years. I guess the underlying message is supposed to be that Congress shouldn't try to reduce federal programs any more, because already they're allegedly being cut at historic rates.
Baloney. Crutsinger was either being incredibly ignorant by assuming that all government spending is part of GDP (it's not; only government purchases of goods and services are components of GDP), or he deliberately deceived his readers. At the federal level, purchases of goods and services and "investment" are only about 30% of all government spending. Total spending has hardly gone down at all. Here are the relevant paragraphs from his two reports:
8:45 a.m. (saved at web host; "Economy grew modest 2.8 pct. in Q4, best in 2011")
... Americans spent more on cars and trucks, and companies built up their stockpiles. But growth in the October-December quarter - and all of last year - was held back by the biggest annual government spending cuts in four decades.
... Spending by government at all levels fell at an annual rate of 4.6 percent in the fourth quarter and 2.1 percent for the year - the biggest decline since 1971.
Sweeping federal defense cuts at the beginning and end of 2011 were a major factor.
6:20 p.m. ("American economy not healthy yet, but it's healing")
... Still, overall growth last quarter - and for all of last year - was slowed by the sharpest cuts in annual government spending in four decades. And many people are reluctant to spend more or buy homes, and many employers remain hesitant to hire, even though job growth has strengthened.
... And government spending at all levels fell at an annual rate of 4.6 percent in the fourth quarter and 2.1 percent for the year - the sharpest drop since 1971. Defense cuts at the start and end of the year were a key factor. With Congress aiming to shrink budget deficits, the likelihood of further federal spending cuts could weigh on the economy.
Again, what Crutsinger calls "government spending at all levels" is really "government purchases of goods and services" (plus a small amount of "investment").
Government purchases of goods and services indeed dropped during the fourth quarter compared to the third, and represented a negative 0.93-point contribution to GDP. National defense made up two-thirds of that reduction.
Today's reported federal dollar component of GDP was an annualized $1.044 trillion. Total federal spending in the fiscal year ended September 30, 2011 was $3.599 trillion. Federal spending in the first three months of fiscal 2012 was $877 billion (vs. $902 billion during the final quarter of fiscal 2011), which annualizes to $3.508 trillion. The largest element of the $2.5 - $2.6 trillion difference between total spending and the GDP component would be transfer payments of all types (Social Security, Medicare, Medicaid, food stamps, welfare, and so many more).
Governments (federal, state, and local) basically bought less stuff in the fourth quarter than they did in the third. Most of what they bought less of related to national security, which is not a particularly comforting thought. At the federal level, the growth in transfer payments didn't slow down, meaning that total spending didn't meaningfully slow down.
If his aim was to be truthful, Crutsinger should have told readers that "governments reduced their purchases of goods and services by the largest percentage in 40 years." Less descriptively, he could have written that "governments' component of GDP shrunk by the largest percentage in 40 years." Instead, either ignorantly or deliberately, he gave readers the impression that all government spending was reduced at a historic rate. It isn't so. What occurred in connection with government spending other than that which directly relates to GDP wasn't even relevant to his report.
Cross-posted at BizzyBlog.com.
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Comments
It appears that the Leftist media is ratcheting up the lies and
Submitted by Rush Fan on Sat, 01/28/2012 - 3:35am.
half-truths for the forthcoming election.
I'll be glad when the presidential election is over, so that the Leftist media's lies and half-truths will be reduced to their standard lies and half-truths.
AP = Asbestos Pants...
Submitted by bigdaddy on Sat, 01/28/2012 - 4:38am.
...As in "Liar, Liar, Pants Afire"....
Total bull
Submitted by Injest on Sat, 01/28/2012 - 5:29am.
was hurt because of big "cuts" in government spending, especially federal spending -- supposedly the biggest cuts in 40 years.
Total bull, in order to have massive cuts in the Federal Budget, 1st you have to have a budget, no budget no cuts to the budget can be made. They can say once we have a budget then these cuts will happen. As of today we have not had a budget for 1002 days.
Te continuing resolutions just authorize what was in the last budget we had.
So, federal spending
Submitted by djaymick on Sat, 01/28/2012 - 12:27pm.
So, federal spending decreased by $25B from the previous quarter and purchases dropped by 4.6% (which translates to about $42B). This just shows the idiocy of the liberals. First off, it shows how our dollars aren't get out to spur the economy and is being kept back for other governmental obligations. And the people who need it most complain that their not getting it and the taxpayers are saying government is usurping all the money and if we could reduce it, more money would flow your way.
Second, as the liberals and the media have screamed for defense cuts, they never see the effects of their actions. This writer needs to understand that military spending is going to stay at these levels and this is the new GDP standard to expect.
Lastly, does a $100B annual cut do anything to solve our fiscal problems? Is that really the biggest annual cut in 40 years? We have a projected $1.3T deficit, so we should be happy that Obama reduced it to $1.2T, more than double his promise to get the deficit down to $533B in 2009.
spending cuts?
Submitted by mmilesll on Sat, 01/28/2012 - 1:03pm.
Yet another "journalist" saying something so stupid that you wonder what planet this clown is on. Spending cuts? Is he kidding?
Liberal Math and the Budget
Submitted by ThePickle on Sat, 01/28/2012 - 6:03pm.
You have to remember these are the folks that will take a 6% projected raise in a budget item being reduced to 3% , and characterize it as a 50% cut.
Tom, on the spending decreases
Submitted by Gary Hall on Sat, 01/28/2012 - 6:56pm.
Are they spending "cuts," or is this more about the Stimulus Bill (American Recovery gag) having been more front weighted - and now it's dwindling down?
(;~> gary
It's probably a combo
Submitted by Tom Blumer on Sat, 01/28/2012 - 8:43pm.
They're not segregated out, but overall spending this year is down from last year by a very small %.
If there was a real drop-off from the stimulus, we would be spending about $400 billion per year less than we are spending now.