Council of Economic Advisers

GDP Drop Blamed On Hurricane Sandy, Republicans

In the aftermath of Hurricane Sandy, some talking heads on the TV were saying how the U.S. economy would take a significant hit from all the destruction. I remember turning to my girlfriend and saying, “Well, there’s their out.” I went on to explain that if the economic numbers for the fourth quarter ended up being crummy, the White House would just go ahead and blame Sandy.

So while I was a little surprised to hear about the drop in GDP today (I thought enough “stimulus” was already coursing through the financial system), the same can’t be said about what the White House said this morning. Alan Krueger, Chairman of the Council of Economic Advisers, wrote on The White House Blog today:

According to the “advance” estimate released by the Bureau of Economic Analysis today, real GDP edged down 0.1 percent at an annual rate in the fourth quarter of 2012, amid signs that Hurricane Sandy disrupted economic activity and Federal defense spending declined precipitously, likely due to uncertainty stemming from the sequester. This was the first quarterly drop in real GDP in three-and-a-half years (see first chart below). Over the last fourteen quarters, the economy has expanded by 7.5 percent overall, and the private components of GDP have grown by 10.9 percent. During the four quarters of 2012, real GDP grew by 1.5 percent, the third consecutive year of economic expansion.

(Editor’s note: Italics added for emphasis)

Don’t get me started on that “economic expansion” bit, as it’s been oh-so-terrific for many Americans.

Hurricane Sandy’s economic impact and a decline in government spending last quarter is repeatedly mentioned in the blog post, leading some to believe that the Obama administration is blaming the economic contraction last quarter a good deal on that late October storm and the Republican Party. Reuters’ Mark Felsenthal wrote on Yahoo! News this afternoon:

The White House on Wednesday blamed the surprising contraction of the economy at the end of last year at least partly on Republican “political brinkmanship” for threatening to let defense cuts take effect.

White House spokesman Jay Carney said similar threats over a looming March 1 deadline when defense and other cuts take effect absent a broader budget deal could similarly hurt the U.S. economy and taxpayers.

“This is political brinkmanship with one primary victim, and that is American taxpayers and the American middle class,” Carney said at a briefing.

“Our economy is facing a major headwind … and that’s Republicans in Congress.”

(Editor’s note: Italics added for emphasis)

Since the campaign for the 2008 U.S. Presidential election, Barack Obama and the Democratic Party have consistently blamed George W. Bush and the Republican Party for the nation’s ongoing economic woes (I submit both major political parties are truly at fault and the damage began decades earlier). Believing that this strategy worked to retain the Oval Office in 2012, and based on Carney’s words today, be prepared to hear even more blamethrowing of this type going forward in President Obama’s second term.

In the meantime, the financial house of cards keeps growing more unstable with trillions of dollars of debt being continually heaped upon it.

Hurricane Sandy. The GOP. How about the “stimulus” being injected into the cancer (debt)-ridden patient is perhaps becoming less effective over time? Instead of a strong, sustainable economic recovery, we’re seeing a weak one that’s requiring constant assistance.

What QE are we on again?

Furthermore, Washington and the Fed are “running out of bullets.” It’s somewhat amazing they’ve managed to “kick the can down the road” this far.

Looking back on today’s GDP announcement and related events, it’s apparent the blamethrowers are alive and well in the nation’s capital.

And the proverbial brick wall- or our “financial reckoning day,” as some like to call it- keeps getting closer.

Be advised.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Krueger, Alan. “Advance Estimate of GDP for the Fourth Quarter of 2012.” The White House Blog. 30 Jan. 2013. (http://www.whitehouse.gov/blog/2013/01/30/advance-estimate-gdp-fourth-quarter-2012). 30 Jan. 2013.

Felsenthal, Mark. “White House blames Republican ‘brinkmanship’ for GDP contraction.” Reuters. 30 Jan. 2013. (http://news.yahoo.com/white-house-accuses-republicans-brinkmanship-spending-cuts-181022857–business.html). 30 Jan. 2013.

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Austan Goolsbee Departs President Obama’s Economic Team

These days, Americans consistently rate the economy as the most important issue they vote on. So it’s only makes sense that the White House strives to create favorable economic conditions. Problem is, key players of President Obama’s economic team keep leaving, the latest being Austan Goolsbee, chairman of President Barack Obama’s Council of Economic Advisers. From the Chicago Tribune’s Gail MarksJarvis last night:

Austan Goolsbee, President Barack Obama’s chief economic adviser, is leaving the administration and returning to the University of Chicago Booth School of Business to teach.

The announcement from the White House late Monday comes at a time when the U.S. unemployment rate is back above 9 percent, speculation is growing that the nation may be at risk of dipping back into a recession and amid intense political debate over whether to extend the nation’s debt ceiling.

So what were the reasons given for Goolsbee, who’s advised Barack Obama ever since he was an Illinois Senate candidate, to leave? According to the Chicago Sun-Times’ Lynn Sweet this morning:

Goolsbee decided to depart to preserve his tenure at the U. of C.

The school has “been beyond understanding of my public service,” Goolsbee told the Chicago Sun-Times.

Goolsbee’s resignation was the latest in a string of departures from President Obama’s economic team. MarksJarvis noted:

Goolsbee’s departure is one of several involving key economic positions. Larry Summers, who served as director of the National Economic Council, left a few months ago, as did Christina Romer, who had headed the Council of Economic Advisers. Last month, Vice President Joe Biden’s chief economic adviser Jared Bernstein left.

One more official who recently called it quits is Peter Orszag, former director of the Office of Management and Budget.

As Summers, Romer, Bernstein, Orszag, and Goolsbee were all economists, none no longer occupy a prominent position in the administration. It’s anticipated the White House will nominate another economist this summer to head the Council of Economic Advisers. In the meantime, it’s suspected that Treasury Secretary Timothy Geithner, a civil servant and central banker by trade, will exert more influence in the administration on economic matters. Zachary A. Goldfarb wrote on the Washington Post website yesterday:

Goolsbee’s departure further elevates the profile of Treasury Secretary Timothy F. Geithner, who is the only original member of the president’s economic team to endure.

Geithner now is a principal force shaping Obama’s thinking on the deficit, financial regulation, unemployment, Middle East sanctions and China. Geithner’s former counselor, Gene Sperling, directs the National Economic Council.

I suspect all these departures from President Obama’s economic team doesn’t do much in the way of instilling confidence on Main Street that the economy is headed in the right direction.

Sources:

MarksJarvis, Gail. “Top Obama economic adviser, Austan Goolsbee, will quit to return to University of Chicago.” Chicago Tribune. 6 June 2011. (http://www.chicagotribune.com/business/breaking/chi-goolsbee-quits-20110606,0,7903522.story). 7 June 2011.

Sweet, Lynn. “Austan Goolsbee resigning as Obama’s economic adviser, returning to Chicago.” Chicago Sun-Times. 7 June 2011. (http://www.suntimes.com/news/5817361-452/austan-goolsbee-resigning-as-obamas-economic-adviser-returning-to-chicago.html). 7 June 2011.

Goldfarb, Zachary A. “Obama’s head of economic council, Austan Goolsbee, to leave, plans return to academia.” Washington Post. 6 June 2011. (http://www.washingtonpost.com/business/economy/obamas-head-of-economic-council-austan-goolsbee-to-leave-plans-return-to-academia/2011/06/06/AGt9GdKH_story.html). 7 June 2011.

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Christopher E. Hill, Editor
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