7.2% GDP growth in the third quarter

[Skunk]

Originally posted by Ronn_Bman: quote: Originally posted by Skunk: As for whether the opinion is based on a personal disklike for Bush - I refute that. You know, I absolutely *loathed* Reagan and Thatcher - but I give full credit for what they did for their respective economies. They took long term measures which served their respective countries very well.

Ah, but the question is, did you give full credit to those administrations initially, or only after the effects were proved? [/QUOTE]In the case of Reagan, I confess that I didn't know enough of what he was doing at the time to know whether it was useful or not - but held my judgement until after Bush snr, when the true effects of his legacy became apparent.

In Margaret Thatcher's case - I did approve of the measures - but not the speed. The reform measures were implemented too fast to allow people to adjust and so entire communities were decimated as a result - literally. But I did understand the what, why and wherefore and broadly agreed with the long-term consequences.

When Blair (another man I despise) removed the government's power to affect interest rates and handed the power over the Bank of England - I applauded that too. Free of political influence, interest rates could no longer be manipulated to improve electoral chances but were instead being manipulated to improve the health of the British economy. Wow! I had to bow to him on that one. And up until the Iraq war, the British economy has been run very well (about the only thing that the Labour party has done well since coming to power).

[ 11-03-2003, 06:20 AM: Message edited by: Skunk ]

[Ronn_Bman]

That's what I like about you, skunk, you're an intellectually honest guy. [img]smile.gif[/img]

[Cerek the Barbaric]

Originally posted by Skunk: Neither could 'giving' billions of dollars of US taxpayer's money to large Republican corporations via Iraq have anything to do with it either, eh? It's a short term boom as a result of heavy government spending and borrowing. It's a short term gain - at the expense of the long term economic health of the country.

I have to disagree with you, Skunk. Government spending doesn't improve the economy - consumer spending does. And the article mentioned the two most relevant factors that have led to an increase in consumer spending - mortgage refinances (presumably at lower interest rates) and the tax credit Bush signed into law in May. Both of these measures have put more "disposable income" in the hands of the consumers...who are turning around and spending it.

Even if they are buying foreign goods, they are purchasing them through domestic outlets. The local Wal-Marts and shopping malls are the ones taking in the cash the consumers are spending.

As a Finance Major, one of the first things we learned were to identify "leading" and "lagging" indicators regarding the economy. One of the most important leading factors is new construction. A new house or new office building is very expensive. Any increase in new construction indicates a that consumers now feel more comfortable spending that level of money....and I've noticed a lot of new construction in the small Georgia town where I work.

Incidentally, the most prominent lagging indicator regarding the economy is Congressional action. As one of my professors said, "When Congress takes action to improve the economy, it is a sure sign the economic crises was already over and had begun recovering".

The "billions" being given to corporationg through Iraq aren't benefitting the U.S. Economy, because the money is not being spent here...it is being spent in Iraq.

I'll agree the tax credit was a transparant move to buy votes by Bush, but he really can't take any credit for the economy improving. The economy runs in specific cycles and the fact is that it was long overdue to start improving anyway.

When it comes to improving (or reducing) the economy, the President has very little real power to affect it either way (regardless of party affiliation). The one man who DOES have the power to affect the economy single-handedly is Alan Greenspan, the head of the Federal REserve. He is the one who decides when to raise or lower interest rates and by how much. The increase in mortgage refinancing is a direct result of the interest rate on those loans being lowered.

[ 11-02-2003, 10:47 AM: Message edited by: Cerek the Barbaric ]

Originally posted by Cerek the Barbaric: I have to disagree with you, Skunk. Government spending doesn't improve the economy - consumer spending does. And the article mentioned the two most relevant factors that have led to an increase in consumer spending - mortgage refinances (presumably at lower interest rates) and the tax credit Bush signed into law in May. Both of these measures have put more "disposable income" in the hands of the consumers...who are turning around and spending it.

actually, cerek, you're correct in the first part but incorrect in the second.

http://www.australianfinancialreview...708068472.html

an article in the australian financial review this weekend confirmed that there was a 7.2% increase in GDP. that is, output. but, although there was a 0.3% increase in gross household income there was a 0.3% decrease in household spending.

so how could GDP be up so sharply? as skunk said, it is government spending.

[edit] as you rightly point out, cerek, government spending does not improve the economy, it only improves an economic indicator. in this case, it's in the hopes that the public wont realise the fleecing they're getting at dubya's hands.

[ 11-02-2003, 06:39 PM: Message edited by: sultan ]

[Azimaith]

Originally posted by HolyWarrior: from USA Today quote: 7.2% GDP growth fastest in 19 years By Barbara Hagenbaugh, USA TODAY WASHINGTON — The U.S. economy grew at the fastest pace in nearly two decades in the third quarter, signaling the three-year slowdown that has left millions of Americans jobless might finally be over. Gross domestic product — the broadest gauge of activity within the USA — grew an annualized 7.2% in July, August and September, the biggest gain since 1984 and more than twice the 3.3% increase measured in the second quarter, the Commerce Department said Thursday. "Pop the champagne corks," Bank One chief economist Diane Swonk says. "It's very much vindication that the U.S. economy is moving from a lackluster economy to a more rooted recovery." Economists credited record mortgage refinancings, which pared monthly payments and freed cash, and tax cuts signed into law in late May. That included a $14 billion bonus for parents that hit mailboxes right before the back-to-school shopping season. Consumer spending, which accounts for 70% of all activity in the $10 trillion economy, soared 6.6%, the biggest gain in more than five years.

Hmm...biggest in 19 years. Quick quiz: Who was in office 19 years ago?

That crashing sound you heard was the hopes of the Democrat candidates in 2004 [img]graemlins/evillaughter1.gif[/img] [/QUOTE]Were not going to be able to tell if the Bush tax cut did it or not. Hes going to focus on this of course, and say that he improved the economy, if he did or not I don't know. The Democrats are going to have a bigger problem than before in winning. Whether you like it or not, many of the democrat representatives are giving the entire party a really bad name. The Democrat battle cry used to be SOCIAL REFORM! now its more like WAAAH ITS NOT FAIR!!! WAAAH! their party needs some people to shut the heck up so the real politicians can actually put forth their view.

[Skunk]

Originally posted by Cerek the Barbaric: Even if they are buying foreign goods, they are purchasing them through domestic outlets. The local Wal-Marts and shopping malls are the ones taking in the cash the consumers are spending.

Agreed - and that is where the sudden upsurge has come from but, (and it's a big but), in order for the spending boom to remain sustained, there has to be an equilivent rise in jobs and/or salaries - yet both have dropped.

Originally posted by Cerek the Barbaric: The "billions" being given to corporationg through Iraq aren't benefitting the U.S. Economy, because the money is not being spent here...it is being spent in Iraq.

Ah, but the money ends up in the hands of US firms who are being contracted to do virtually all of the work. These firms then report wonderful balance sheets - which in turn affect the GDP figures. It doesn't really matter whether the contractor is working in the US or in Iraq - so long as it gets the money and is headquartered/taxed in the US, the US GDP figures benefit. In other words, it makes the economy look good on paper.

Originally posted by Cerek the Barbaric: When it comes to improving (or reducing) the economy, the President has very little real power to affect it either way (regardless of party affiliation). The one man who DOES have the power to affect the economy single-handedly is Alan Greenspan, the head of the Federal REserve. He is the one who decides when to raise or lower interest rates and by how much. The increase in mortgage refinancing is a direct result of the interest rate on those loans being lowered.

Well, it is certainly true that the President can not affect interest rates - but interest rates are not the only way to manipulate the economy. In fact, I would even argue that manipulating interest rates can never have a long term positive structural effect upon the economy anyway.
For me, interest rate manipulation is akin to borrowing off one credit card to settle the bill off another credit card - you simply buy yourself time to reorganise your finances, but the act itself does nothing towards resolving the problem.

If Bush really wanted to improve the economy with tax cuts, he would have targeted all of his tax cuts towards the manufacturing, industrial and services sector - so that they could reduce their prices and compete more effectively on the world market.

Or Bush could have spent the loans on improving the infrastructure - fore example, giving Federal aid to local states to help them improve transportation links (which reduces business costs and again, allows firms to drop the price of their goods). And so on...

Taking out a loan is *not* a bad thing when you use it to fund a college degree (which will generate more income in the long run) or when you use it to add a conservatory to your home (which will improve the value of your house). In both cases, the interest costs incurred will be more than offset by the increased income/increase in value of your asset.

However, what Bush has effectively done is to take out a loan to pay for a holiday. Yes, that will make you feel good for a short period - but you will still have to pay it off over the cold winter months and it will not improve your long term finances: it will adversely affect them.

[ 11-03-2003, 06:22 AM: Message edited by: Skunk ]

[Seraph]

It doesn't really matter whether the contractor is working in the US or in Iraq - so long as it gets the money and is headquartered/taxed in the US, the US GDP figures benefit.

GDP is the market value of all the goods and services produced within the borders of a nation during a specified period. As Iraq is outside the borders of the United States, wouldn't this mean that a lot of the work done by contractors in Iraq actually be part of Iraqs GDP, not the US GDP?

[Skunk]

No, because neither the company's main base of operations nor it's registered corporate address is located in the Iraq.

For the purposes of GDP then, this would count as a 'services export', and be included in US figures.

[Cerek the Barbaric]

Originally posted by Skunk: If Bush really wanted to improve the economy with tax cuts, he would have targeted all of his tax cuts towards the manufacturing, industrial and services sector - so that they could reduce their prices and compete more effectively on the world market. Or Bush could have spent the loans on improving the infrastructure - fore example, giving Federal aid to local states to help them improve transportation links (which reduces business costs and again, allows firms to drop the price of their goods). And so on...

This part of your reply highlights another pet peeve of mine regarding manufacturing firms in the U.S. President Bush (or any President for that matter) could give businesses all manners of tax cuts and I don't believe the consumers would ever see a drop in retail prices.

Case in point - the infamous NAFTAA legislation that allowed several textile industries to move thier plants to foreign countries in order to reduce the cost of manufacturing their goods. The companies made the move and built new plants in Mexico, South America, etc where they could hire workers for a fraction of the cost they paid in the U.S. Yet, have the price of jeans gone down at all?? NO!!! Levi's, Lee's, and other "American made" jeans and other procucts still cost just as much as they did before the move, if not more.

So the net result of NAFTAA was that thousands of people in America lost their jobs - and for some, their entire livelihood - yet the consumer hasn't seen any of the promised benefit that was supposed to be gained by reducing manufacturing costs. The former employees are out of work and the price of jeans has continued to go up.

As I said, this is a pet peeve of mine and represents an admittedly narrow focus. But there was a big Levi's plant in my hometown and a Lee plant in the next town down the road, and I saw first-hand how devastating the loss of jobs was to people I knew and had grown up with. And the continued high cost of thier products just adds more salt to the wound.

[Skunk]

Originally posted by Cerek the Barbaric: This part of your reply highlights another pet peeve of mine regarding manufacturing firms in the U.S. President Bush (or any President for that matter) could give businesses all manners of tax cuts and I don't believe the consumers would ever see a drop in retail prices.

You are absolutely right there - domestic consumers will almost never see a drop in prices. However it does give the company a good deal of profit margin when selling those goods abroad, allowing them to price themselves in line with local wages and competition. For example, a pair of Levi's 501's will cost $20 dollars less in Spain than Germany.

The real problem comes (as you say) when companies relocate their manufacturing operations abroad as both a large proportion of the taxes and jobs dissappear. That said, the companies moved because it was cheaper operate somewhere else - so the real trick to bringing them back is to make the operational costs in the US comparitively favourable with other locations - and this is where structural economic improvements (transport links, energy etc.) make their mark most.

In the end however, labour intensive industries (which can not be automated) and those jobs which require employees of only the most basic education will inevitably flee to third-world countries where wages (their biggest expense) are low. There is nothing that can be done to halt this - so instead the tax breaks should be targeted at higher tech industries which require fewer (but higher educated) employees. Tax cuts should always be targeted - rather than blanket.