I’m currently away from my desk and can’t provide my usual update of per capita GDP with the stimulus spending stripped out. That’ll be coming in a few days. In the meantime, it’s important to note that blame for the weakness of the 2nd quarter GDP report is being laid squarely on imports. (See the attached Reuters article.) A 28.8% surge in imports, swamping a meager 10.3% growth in exports, resulted in a trade deficit that lopped more off of GDP than at any time since 1982.
Strip away growth in inventories, and the anemic 2.4% annual growth in GDP falls to only 1.3%. Strip away the growth in the construction industry due to the now-expired homebuyers’ tax credit, and GDP may very well go negative – a double-dip recession.
This from a president and congress who took office only months after a global financial and economic melt-down that the president himself blamed on global trade imbalances. Yet, he’s done absolutely nothing about the imbalance other than to cross his fingers and toes and hope that maybe we can export our way out of it.
But the president deserves only half of the blame. Congress has for decades been just as ambivalent about our trade imbalance. They’ve done nothing meaningful and see their best chances for gains in the next election coming from obstructing the other party instead of doing something of substance to fix broken policies.
Meanwhile, the president sits back and lets Congress dictate the pace of reform. Were I president, I’d have the leaders of both parties in front of my desk every day, demanding legislation on trade, an industrial policy, immigration policy and energy policy. And I’d be on television every night complaining about Congress’ inaction until something happened.
There is a very good chance that GDP will turn negative in the 3rd quarter, a report that will come out just before the mid-term election in November. It’d then be great sport to watch the you-know-what hit the fan if the whole situation weren’t so sad and hopeless.