Impressions from a Declining Country

Sometimes the order in which one processes information can create broader impressions than the individual items suggest. For just such an experience, first watch Steven Crowder’s short video about the crumbling, desolate city of Detroit, whose condition he attributes to the loving manipulations of big government.
Now consider this news:

Almost two months ago, the Commerce Department cheered the announcement that the third quarter GDP had grown at an annualized rate of 3.5%. The Obama administration hailed it as a sign that their economic policies had spurred real growth. Even when Commerce sharply revised the number downward a month later to 2.8%, the White House continued to argue that the lower number still meant that the US had turned the corner, even after a number of critics asked how Commerce could have missed the number so widely. …

Today, Commerce backtracked even further. The annualized growth number for Q3 turns out to have been 2.2%, a revision of over a third from its original estimate two months ago…

… The Cash for Clunkers program and the first-time homebuyer tax credit was estimated to have contributed as much as half of the original Commerce estimate of 3.5%. Assuming that to still have contributed at least 1.5% of the final GDP, that leaves a rather pathetic 0.7% growth in Q3 without it. It’s barely a recovery at that level.

And this morning, we learn:

November saw a dramatic increase in the number of houses sold in Rhode Island — up 61.1 percent compared with November 2008, according to statistics compiled by the Rhode Island Association of Realtors.

Part of the increase can be explained by a one-month-only $8,000 tax credit that expired at the end of November. Part of it may be related to the false prediction of growth. No doubt, there’s also a genuine improvement of buyer mood; people who have been in the market for a home are more comfortable with the probability that prices are at or near their new bottom and that interest rates aren’t going any lower. University of Rhode Island Economics Professor Len Lardaro puts it thus: “we’re [now] in a typical recession, not a free-fall, like we were in a year ago.”
Nowhere, however, has anybody explained what specifically is going to turn things around. Even up to the Commerce Department, it seems as if economic forecasts are taking as an assumption that 4% or so is simply “normal” growth, to which the economy will return as a function of its essential nature. The picture that is actually beginning to emerge more resembles an old car, and all variety of government officials, economists, and media cheerleaders are standing around trying various tricks and gimmicks to get the beast moving — not the least by employing positive thinking: “It’s just about to go, now!” It whines and whirs and sputters, but it isn’t turning over. And it’s cold outside.
Of course, economic movement is only necessary for certain destinations. We can trust, for example, that Detroit will come to us. Rhode Islanders should be especially aware of the fact that, by contrast, economic turnaround and improvement must be pursued, not awaited

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Tim
Tim
11 years ago

There is no “turning around” coming.
States are broke.
Federal government is broke.
Unemployment is 10%.
The evil-doers in Washington (far more dangerous to America and Americans than al Qaeda) continue their assault on our national and individual sovereignty.
And the truly frightening part??
We haven’t even begun to pay.
States are broke, unemployment is 10%, the evil-doers are spending and regulating and printing monopoly money like never before yet we haven’t even gotten that bill.
Look at the weakness of this economy right now when inflation is non-existent and interest rates are low.
Just imagine what this economy is going to look like when the actual bill comes due for the deeds of the evil with significant increases in taxation and inflation.
Scary stuff and it’s right around the corner.

Patrick
Patrick
11 years ago

How much of all this mess is due to the outsourcing of jobs to Asia? I personally lost a job because of it and it stinks. The US was previously known for its manufacturing. Now China is the main manufacturer. Now we owe China trillions of dollars. Why doesn’t Congress do what it is supposed to do, act in the best interest of the country and its citizens and pass laws making it less financially feasible to do these two things. Remove tax benefits or tax companies more heavily for employing people in other countries. Businesses will always want to do business in the US, so I don’t think there’s much worry that they’ll just pick up and move completely out of the US and take their business with them. As for the manufacturing, why not put such high tariffs on imports from China that it ends up costing $5 to buy one of those stupid plastic ducks? Even American unions can compete with that price.

Warrington Faust
Warrington Faust
11 years ago

About Detroit, I couldn’t bring the video up, but I can assume the content. Hard as it is to accept when you are in the middle of it, history is full of examples of cities which simply failed. Vienna has 1/2 the population it had in 1900. Providence has a population almost 40% smaller than it was in 1950. Detroit failed because it relied almost solelyon the auto industry. That industry is almost gone. We have to accept it.
About the comments above on China and the need for our government to stop it.What we are seeing is classic economics. China has a “relative advantage” for industry, the U.S. is at a “relative disadvantage”. Any attempt by the government to simply hold back the tide will fail. What government might do is try to remove as many obstacles to American industry as it can. One problem we have is that our society has developed in a way that everyone wants to be a physicist, no one wants to be an industrial worker. In China, industrial work is a big step up from a rice paddy.

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