Business

1Q 2018 GDP: Growth Cools, Spending Dips

“Republican” tax cuts not sparking a consumer renaissance …

AMERICA’S ECONOMIC MOMENTUM SLOWED DURING THE FIRST QUARTER OF 2018 … CAN IT BOUNCE BACK?

The American economy expanded at a 2.3 percent clip during the first quarter of 2018, according to the first (or “advance”) gross domestic product estimate released by the U.S. Bureau of Economic Analysis (BEA).

That’s down from the 2.9 percent growth rate it recorded during the fourth quarter of last year – and well below the 3.1 percent and 3.2 percent growth rates it registered during the second and third quarters of 2017, respectively.  It bested estimates of 2 percent growth, though, and is roughly even with the final annual print for 2017: 2.3 percent.

Take a look …

(Click to view)

(Via: BEA)

Why do these numbers matter?  Easy: If the economy doesn’t eclipse the three percent growth rate each year for the next ten years – our nation is basically staring down fiscal armageddon.  In fact, our nation is probably staring down fiscal armageddon even if it does hit that benchmark.

That’s why we’ve been so disappointed in U.S. president Donald Trump’s habitual failure to rein in spending in Washington, D.C. (click here and here) – and his failure to insist upon a larger tax cut targeting more relief to middle income earners.  As this news site consistently argued during the “tax reform” debate, the bill Trump ultimately signed failed to cut deep enough, failed to cut in the right places and failed to make corresponding cuts to government.

That’s why we called the legislation what it was – a “missed opportunity.”  Because it left true “stimulus” on the table …

As we’ve frequently noted, America’s economy hasn’t grown at a three percent rate in more than a dozen years. It hasn’t eclipsed the four percent threshold since 2000 – former U.S. president Bill Clinton’s final year in office. By contrast, growth exceeded five percent in twelve out of thirty years from 1950-1980.  And it exceeded four percent in seventeen out of those thirty years.

In other words, the ongoing era of obscenely big government has not been good for American prosperity.  At all.

Former U.S. president Barack Obama – the biggest big government president of all time – was the first U.S. chief executive since Herbert Hoover not to preside over at least one year in which the economy expanded at a rate of three percent or higher.

Which tells you all you need to know about the inefficacy of government “stimulus.”

So … where does the economy go from here?

We’d love to argue that three percent annual growth rates are realistic … but we just don’t see it.

Consumer spending – which accounts for roughly 70 percent of economic activity – posted an anemic 1.1 percent print from January through the end of March, it’s lowest quarterly print in five years.   That’s well below the 4.0 percent print posted during the fourth quarter of last year.

And while we do believe GDP growth will pick up over the next three quarters, “Republican” politicians counting on a significant stimulus from the tax cuts are likely to be disappointed.

In fact we now have some hard data to support the anecdotal evidence presented earlier this year that the tax cuts are not sparking a consumer renaissance …

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