Posts tagged Gross domestic product

The Error Heard ’Round the World

180
2 weeks ago
by dcpetterson in
Kenneth Rogoff - World Economic Forum Annual M...

Ken­neth Rogoff — Co-​​Author of Error

Less than two weeks ago, three econ­o­mists at the Uni­ver­sity of Mass­a­chu­setts, Amherst pub­lished a rather tech­ni­cal paper that should have fallen like a bomb­shell on vir­tu­ally all politi­cians and eco­nomic the­o­rists on both sides of the Atlantic. An influ­en­tial and frequently-​​cited study, one that had been used as a jus­ti­fi­ca­tion for aus­ter­ity pro­grams and bud­get cut­ting in both Amer­ica and in Europe, it turns out, is wrong. Its find­ings were based on errors and omis­sions and some really absurd methodology.

This is no aca­d­e­mic dis­cus­sion that can be con­fined to ivy-​​tower the­o­ret­ics. This affects the lives of every Amer­i­can, every Euro­pean, and prob­a­bly most peo­ple in most devel­oped coun­tries all over the world. Some of the most impor­tant bases for con­ser­v­a­tive argu­ments against cur­rent lev­els of West­ern debt are com­pletely wrong.

Remem­ber how we’ve been warned for the last few years that if a nation’s debt gets close to 100 per­cent of GDP, this spells inevitable dis­as­ter? That argu­ment, it turns out, comes from errors and omis­sions in an Excel spread­sheet. (more…)

Do Tax Cuts Increase Economic Growth?

62
2 months ago
by Reed Davis in

On Jan­u­ary 30th, the Bureau of Eco­nomic Analy­sis issued its ini­tial esti­mates of the real gross domes­tic prod­uct in the fourth quar­ter of 2012. Fol­low­ing is the begin­ning of the accom­pa­ny­ing news release:

Real gross domes­tic prod­uct — the out­put of goods and ser­vices pro­duced by labor and prop­erty located in the United States — decreased at an annual rate of 0.1 per­cent in the fourth quar­ter of 2012 (that is, from the third quar­ter to the fourth quar­ter), accord­ing to the “advance” esti­mate released by the Bureau of Eco­nomic Analy­sis. In the third quar­ter, real GDP increased 3.1 per­cent.

The Bureau empha­sized that the fourth-​​quarter advance esti­mate released today is based on source data that are incom­plete or sub­ject to fur­ther revi­sion by the source agency (see the box on page 4 and the “Com­par­isons of Revi­sions to GDP” on page 5). The “sec­ond” esti­mate for the fourth quar­ter, based on more com­plete data, will be released on Feb­ru­ary 28, 2013.  (more…)

Keynes Enabled?

52
3 months ago
by Michael Weiss in

John May­nard Keynes

Last week, the Bureau of Eco­nomic Analy­sis pub­lished a report indi­cat­ing that the gross domes­tic prod­uct decreased by an annu­al­ized 0.1 per­cent in the fourth quar­ter of 2012. Every­one (at least in pol­i­tics) reacted as if the GDP drop was a bad thing. Democ­rats blamed Con­gres­sional Repub­li­cans. Most Repub­li­cans blamed Con­gres­sional Democ­rats (though some blamed Pres­i­dent Obama). But was the report really that bad?

As with so many eco­nomic ques­tions, the answer depends on one’s perspective.

Part of the prob­lem here is that we typ­i­cally point to changes in GDP as the indi­ca­tor of the econ­omy. It’s not that GDP is a bad met­ric, but, like all eco­nomic met­rics, it needs to be viewed in con­text. The pri­vate sec­tor grew in the fourth quar­ter. Again. And this hap­pened despite draw­downs in pri­vate sec­tor inven­tory.  (more…)

Blanket Economic Statements

11
3 months ago
by Michael Weiss in

On Wednes­day, the United States Bureau of Eco­nomic Analy­sis announced that the Gross Domes­tic Prod­uct decreased in the fourth quar­ter of 2012 by an annual rate of 0.1 per­cent. It’s the first con­tract­ing quar­ter since 2009.

Granted, we’re not talk­ing about a large con­trac­tion, but the results were par­tic­u­larly jar­ring, in light of the third quarter’s expan­sion at a 3.1 per­cent annual rate. And any con­trac­tion is poten­tially dan­ger­ous to the over­all eco­nomic health of the nation.

Of course, peo­ple started assign­ing blame right away. (more…)

Wages, Productivity and Corporate Profits

30
4 months ago
by Reed Davis in

On Novem­ber 29th, the Bureau of Eco­nomic Analy­sis released the pre­lim­i­nary esti­mate of cor­po­rate prof­its for the 3rd quar­ter of 2012 (a revised esti­mate was released on Decem­ber 20th). Soon after, a num­ber of pub­li­ca­tions ran sto­ries report­ing that cor­po­rate prof­its had reached a record high while wages had fallen to a record low. For exam­ple, CNN Money ran an online story on Decem­ber 4th. Fol­low­ing is an excerpt:

In the third quar­ter, cor­po­rate earn­ings were $1.75 tril­lion, up 18.6% from a year ago, accord­ing to last week’s gross domes­tic prod­uct report. That took after-​​tax prof­its to their great­est per­cent­age of GDP in history.

But the record prof­its come at the same time that work­ers’ wages have fallen to their lowest-​​ever share of GDP.

“That’s how it works,” said Robert Brusca, econ­o­mist with FAO Research in New York, who said there is a nat­ural ten­sion between prof­its and the cost of labor. “If one gets big­ger, the other gets smaller.” (more…)

Unbalanced Budget Amendment

12
1 year ago
by dcpetterson in
This is a graph of U.S. gross federal governme...

US Fed­eral debt, 1940–2010 as % of GDP

As part of the deal that raised the debt ceil­ing and cre­ated the deficit super­com­mit­tee, Con­gress must vote on a Bal­anced Bud­get Amend­ment. The House is sched­uled to do so on Fri­day. The Sen­ate will take up the bill within the next two weeks.

The text of the bill before the House, S.J.Res.10, can be found here. The Amend­ment it pro­poses (the text of which is included in the bill), is a stun­ningly bad idea. The con­cepts it embod­ies are based on eco­nomic the­o­ries already proven false. It has no viable enforce­ment mech­a­nism. It imposes impos­si­ble require­ments. It con­tains lim­its on the bud­get that can­not be real­is­ti­cally deter­mined. It makes pos­si­ble (and even likely) some cat­a­strophic sit­u­a­tions. It is a dan­ger­ous piece of destruc­tive propaganda.

To show you what I mean, let’s exam­ine some of its more obvi­ous fail­ings by going through its pro­vi­sions, one at a time. (more…)

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