AN ECONOMIC MODEL IN PRACTICE…. The previous estimates found that the U.S. economy picked up a little speed in the fourth quarter of 2010 — October through December — experiencing 3.2% GDP growth.
Revised estimates put the number a little lower. That’s discouraging, of course, but for political purposes, it’s worth appreciating why growth was more sluggish than originally thought.
Deeper spending cuts by state and local governments weighed down U.S. economic growth in the final three months of last year. The government’s revised estimate for the October-December quarter illustrates how growing state budget crises could hold back the economic recovery.
The Commerce Department reported Friday that economic growth increased at an annual rate of 2.8 percent in the final quarter of last year. That was down from the initial estimate of 3.2 percent.
State and local governments, wrestling with budget shortfalls, cut spending at a 2.4 percent pace. That was much deeper than the 0.9 percent annualized cut first estimated and was the most since the start of 2010.
Just to clarify, the lower revised figure isn’t reason to panic. There’s no doubt that 2.8% growth isn’t nearly good enough, but it still showed incremental progress — the third quarter of 2010 was better than the second, and the fourth was better than the third.
What I found important about this, though, is the fact that the economy would have been stronger in the fourth quarter had it not been for “spending cuts by state and local governments.” Those cuts were avoidable — the federal government could have intervened to prevent them — but Republican policy dictates that such intervention is outrageous and unacceptable. The GOP wants these cuts to occur; it’s the foundation of the party’s economic policy.
But let’s also take the next step with this — congressional Republicans see state and local governments cutting spending and believe federal officials should do the exact same thing.
It leads me to wonder if maybe Republicans in D.C. just aren’t paying close enough attention to current events. In England, British policymakers cut spending and it slowed their economy. In Germany, German officials cut spending it slowed their economy. In American cities and states, officials cut spending, it slowed the broader national economy.
And now in the midst of a budget fight, congressional Republicans are absolutely convinced that what the country really needs is to follow the lead of the British, the Germans, and the states.
They feel so strongly about this, they’re prepared to shut down the government to get what they want.
The Republican line is backwards, bogus, and blind.
Update: All of this, by the way, comes against the backdrop of independent estimates showing that GOP-approved cuts would push the U.S. economy back towards a recession — data that Republicans haven’t even tried to refute.