I have been trying to find the right analogy for what the federal government is doing to the nation's finances. I am torn between "the Treasury getting beaten at a game of Monopoly" and "fiscal policy as a game of Angry Birds." If you would like to take a break from either one and read a sober assessment of our current macroeconomic outlook, with some surprising optimism about the construction sector, spend a little time with Brad DeLong here. Here are the two paragraph that resonated most with me:
If these statements from The Washington Post are true:
Sources said the White House is considering whether to choose a candidate who could blunt criticism that the administration has been anti-business, such as a corporate chieftain or prominent investor.
Administration officials are also eager to find a woman to fill a top economic role, since Romer's departure left Obama with an all-male group of principals at his daily economic briefing.
Then President Obama's first choice to succeed Larry Summers as Director of the National Economic Council should be Anne Mulcahy, former CEO and chairwoman of Xerox.
Now having had a chance to study the revised data on Gross Domestic Product and Gross Domestic Income, the NBER Business Cycle Dating Committee has determined that the recession that began in December 2007 ended in June 2009. What is salient about the determination is the assertion that the intervening period has been an expansion, however weak, and that any new downturn would be a new recession. I don't know how that will be spun by the political talking heads -- perhaps that any new recession is "Obama's recession."
The explanation is a carefully written statement, with important caveats, among them:
A recession is a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. The trough marks the end of the declining phase and the start of the rising phase of the business cycle. Economic activity is typically below normal in the early stages of an expansion, and it sometimes remains so well into the expansion.
A major recurrent theme in economics is whether to adhere to conventional wisdom or to deviate to cope with new circumstances.
The BEA has released the preliminary (or second estimate) GDP figures for the third quarter. Compared to the advance estimates released at the end of last month, the annual growth rate is down from 3.5 to 2.8 percent.
The second estimate of the third-quarter increase in real GDP is 0.7 percentage point lower, or $23.7 billion, than the advance estimate issued last month, primarily reflecting an upward revision to imports and downward revisions to personal consumption expenditures and to nonresidential fixed investment that were partly offset by an upward revision to exports.
Taking stock of where we are, it is clear that the third quarter was heavily influenced by government spending at the federal level. Some highlights: