Economy Grows at 4.4 Percent Rate, Faster Than Previously Estimated (Bush Boom!) - Darkforum.com - Dark Stories, Dark Art, Poetry, Photography, Debates and Discussions

Lawson

Economy Grows at 4.4 Percent Rate, Faster Than Previously Estimated

Thursday, May 27, 2004

WASHINGTON – The economy grew at a 4.4 percent annual rate in the first quarter of this year, slightly faster than previously thought and fresh evidence that the recovery possessed good momentum as it headed into the current quarter.
The increase in gross domestic product from January through March reported by the Commerce Department on Thursday marked an improvement from the 4.2 percent pace first estimated for the quarter a month ago and the 4.1 percent growth rate registered in the final quarter of 2003.

The GDP measures the value of all goods and services produced within the United States. While the latest reading was just shy of the 4.5 percent pace that some analysts were forecasting, it nevertheless represented a solid performance.

Separately, the Labor Department reported that new applications for unemployment benefits dropped last week by a seasonally adjusted 3,000 to 344,000, another hopeful sign for a labor market recovery.

Although consumers and the federal government did their part to support the economy in the first quarter, the better reading on GDP for the period in large part reflected stronger investment by businesses to build up inventories, a good sign that companies are more confident about the economy's prospects.

From April to June, the economy is expected to grow at a rate in the range of 4.5 percent to 5 percent, according to some analysts.

The economy has been among the issues that President Bush and presumptive Democratic nominee John Kerry have jousted over in the presidential campaign.

The country has lost a net 1.5 million jobs since Bush took office in January 2001, something Kerry points to as evidence that the president's economic policies aren't working. But Bush says they are, and that the best way to create jobs is to make the economy stronger.

The nation's payrolls, which had been posting lackluster gains, expanded by a sizable 288,000 in April on top of a hefty increase in March, leading some economists to believe that the long awaited for recovery in the labor market was finally coming about.

With the economy growing solidly and inflation beginning to stir, a growing number of economists believe the Federal Reserve might order its first rate increase in more than four years next month. Some, however, believe a rate rise won't come until August or later. The main short-term rate used by the Fed to influence economic activity has been at a 46-year low of 1 percent.

An inflation gauge tied to the GDP report and closely watched by Fed Chairman Alan Greenspan showed that core prices, excluding food and energy, rose at a 1.7 percent rate in the first quarter. Although that was lower than the 2 percent pace first estimated, it still represented a pickup from the 1.2 percent growth rate in the previous quarter.

Consumers, whose spending accounts for roughly two-thirds of all economic activity in the United States, increased their spending in the first quarter at a 3.9 percent rate. That was slightly stronger than previously estimated and up from a 3.2 percent growth rate in the fourth quarter.

Businesses boosted spending on equipment and software in the first quarter at a 9.8 percent rate. Though that was less brisk than first estimated and down from a 14.9 percent growth rate in the fourth quarter, it still represented a sizable advance.

Stronger inventory-building by businesses in the first quarter added 0.75 percentage point to the GDP, compared with a 0.27 percentage-point gain first estimated. That marked the largest contribution to GDP from inventories since the third quarter of 2002 and was a key reason why first-quarter GDP was revised upward.

Other reasons: stronger growth in exports during the quarter and a smaller cut in spending by state and local governments.

Military spending by the federal government grew at a 13.2 percent pace in the first quarter, down from the previous estimate but a big pickup from the previous quarter's 3 percent growth rate.

© 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.

Thank God we cut taxes, just like the Republicans said we should!

Aeternus · 05-31-04

Hate to say it... But booming the economy with money that isn't there is a timebomb for future generations. Bush increases spending, reduces taxes... Which leads to a shortfall on the cashflow. The only way to get that budget is by loaning LOTS. And loans have to be paid off in the future... And guess who has to pay for them?

... exactly, the next governments.

And to add a little suggestive comment of my own: Hitler did exactly the same thing to get Nazi-germany out of an economic depression... Feed lots of $ into the warmachine... See where that got us 60 yrs back.

Lawson · 05-31-04

Quote:

Originally Posted by Aeternus

Hate to say it... But booming the economy with money that isn't there is a timebomb for future generations. Bush increases spending, reduces taxes... Which leads to a shortfall on the cashflow. The only way to get that budget is by loaning LOTS. And loans have to be paid off in the future... And guess who has to pay for them?

... exactly, the next governments.

And to add a little suggestive comment of my own: Hitler did exactly the same thing to get Nazi-germany out of an economic depression... Feed lots of $ into the warmachine... See where that got us 60 yrs back.

Except that revenues to the Treasury are up, which happens every time taxes are cut.

Bush was right.

Quote:

The Congressional Budget Office reports that profits are rising so fast that corporate income-tax revenues are 45 percent above their level this time last year. It also reports higher payroll-tax revenues that are consistent with expanding employment. Overall, the economic picture has brightened so much that CBO now sees $30 billion to $40 billion more in federal revenue than it anticipated.

http://www.nationalreview.com/nrof_b...0405100826.asp

SirVLCIV · 05-31-04

Oh, but Aeternus, Bush doesn't care about the future. And do you know which countries are making a FORTUNE on those loans? China and Japan.

Lawson · 05-31-04

Quote:

Originally Posted by SirVLCIV

Oh, but Aeternus, Bush doesn't care about the future. And do you know which countries are making a FORTUNE on those loans? China and Japan.

Sorry, the loans are from the US Treasury, at the lowest rates in 40 years.

Bravo Bush!

SirVLCIV · 05-31-04

This country will no longer be a superpower in 20 years at its current pace. Vote Bush! Guaranteed to run this country into the ground!

Lawson · 05-31-04

Quote:

Originally Posted by SirVLCIV

This country will no longer be a superpower in 20 years at its current pace. Vote Bush! Guaranteed to run this country into the ground!

Things are only getting better under Bush.

You will learn that when you grow up.

Arty · 06-02-04

Quote:

Originally Posted by Lawson

Sorry, the loans are from the US Treasury, at the lowest rates in 40 years.

Bravo Bush!

The US Treasury doesn't loan money to itself. Why do I even need to say this? It's just SO OBVIOUS that no one can loan money to themselves. Governments get money from issuing securities, which can be bought by foreign governments. I suspect that the fact that you think that the Treasury lends itself money suggests that you really haven't thought about this through, and you're just parrotting (incorrectly) what you've read elsewhere.

As for the rates, this is how it works:

http://www.forbes.com/finance/eventc...eventid=833431

So, given that the deficit is large and they need to sell loads of bonds, I'm guessing that they're going cheap.

Quote:

Except that revenues to the Treasury are up, which happens every time taxes are cut.

You're confused, on both points. I'll take the second point first, that tax revenues always go up when taxes are cut. It's nonsense. It's based on the idea of the Laffer curve, which isn't nonsense in itself. Laffer noticed that if income tax was 0% then no tax would be collected, and also that if it was 100% then no tax would be collected (because no one would bother working). If it is, say, 50%, then some tax will be collected. So, the tax revenue curve meets 0 at both ends, and is higher between those points. Somewhere in the middle is a point, (called B, for reasons I can't remember), where revenues are maximised. If the current tax rate is above that, then by cutting taxes you will increase revenues. So SOMETIMES revenues will increase when you cut tax.

Also, cutting taxes will ALWAYS produce a higher revenue than the amount which it was theoretically reduced to. So, if you cut tax by 30% then receipts will always be greater than 70% of the original receipts. However, there is no guarantee at all that taxes will be greater than 100% of the original receipts.

Extreme supply-siders such as yourself seem to make the logical error of thinking that, because cutting taxes can sometimes increase revenue, that this will always happen. The fact is that no one knows where point B is, or which side of it any tax system is on. It's almost certainly different for different taxes (income tax/ corporation tax etc), and it almost certainly isn't fixed, but in general the evidence suggests that point B is quite high and that cutting taxes will NOT yet increase revenues, which leads me on to your other point, which was that tax revenues have increased under Bush.

Oddly, I found this almost impossible to determine by looking at the internet. However, the fact that you aren't scheduled to come back into the black for as far as the White House predictions go, which is up to 2008, might suggest that it has not happened. However, as you made the claim I'm sure you know where the stats can be found so will enlighten us as to the exact statistics with a helpful cite.

Lawson · 06-02-04

Quote:

Originally Posted by Arty

The US Treasury doesn't loan money to itself. Why do I even need to say this? It's just SO OBVIOUS that no one can loan money to themselves. Governments get money from issuing securities, which can be bought by foreign governments. I suspect that the fact that you think that the Treasury lends itself money suggests that you really haven't thought about this through, and you're just parrotting (incorrectly) what you've read elsewhere.

I know the Treasury does not loan money to themselves. Sir said that other nations were making a fortune off of those loans, which is ridiculous. We are borrowing at the lowest rates in 50 years. That was what I was addressing.

I should have said the loans TO the Treasury, but misspoke.

As for the rates, this is how it works:

Quote:

So, given that the deficit is large and they need to sell loads of bonds, I'm guessing that they're going cheap.

The debt load on them is super cheap.

Quote:

You're confused, on both points. I'll take the second point first, that tax revenues always go up when taxes are cut. It's nonsense. It's based on the idea of the Laffer curve, which isn't nonsense in itself. Laffer noticed that if income tax was 0% then no tax would be collected, and also that if it was 100% then no tax would be collected (because no one would bother working). If it is, say, 50%, then some tax will be collected. So, the tax revenue curve meets 0 at both ends, and is higher between those points. Somewhere in the middle is a point, (called B, for reasons I can't remember), where revenues are maximised. If the current tax rate is above that, then by cutting taxes you will increase revenues. So SOMETIMES revenues will increase when you cut tax.

I know the Laffer Curve. We are nowhere near the area where if you cut taxes the revenue stream goes down.

Revenues DOUBLED when Reagan was in office.

Revenues are already $100 BILLION dollars higher than were predicted, and that's only after 9 months.

Quote:

Also, cutting taxes will ALWAYS produce a higher revenue than the amount which it was theoretically reduced to. So, if you cut tax by 30% then receipts will always be greater than 70% of the original receipts. However, there is no guarantee at all that taxes will be greater than 100% of the original receipts.

There is history, which has always shown tax cuts to produce more revenue, at least at the parameters which have been used so far.

Reality is on my side.

Quote:

Extreme supply-siders such as yourself seem to make the logical error of thinking that, because cutting taxes can sometimes increase revenue, that this will always happen. The fact is that no one knows where point B is, or which side of it any tax system is on. It's almost certainly different for different taxes (income tax/ corporation tax etc), and it almost certainly isn't fixed, but in general the evidence suggests that point B is quite high and that cutting taxes will NOT yet increase revenues, which leads me on to your other point, which was that tax revenues have increased under Bush.

Oddly, I found this almost impossible to determine by looking at the internet. However, the fact that you aren't scheduled to come back into the black for as far as the White House predictions go, which is up to 2008, might suggest that it has not happened. However, as you made the claim I'm sure you know where the stats can be found so will enlighten us as to the exact statistics with a helpful cite.

Once again, the proof is in the pudding:

Quote:

Federal Deficit Likely to Narrow By $100 Billion
Tax Receipts Pare Borrowing
By Jonathan Weisman
Washington Post Staff Writer
Tuesday, May 4, 2004; Page E01

http://www.washingtonpost.com/wp-dy...0-2004May3.html

Smaller-than-expected tax refunds and rising individual tax receipts will pare back federal borrowing significantly for the first half of this year and could reduce the $521 billion deficit projected for the fiscal year by as much as $100 billion, Treasury and congressional budget officials said yesterday.

The Treasury Department's borrowing estimates may prove to be more good news for President Bush on the economic front, as opponents attempt to make his fiscal stewardship a campaign issue. The $184 billion the government is now expected to borrow through June is a 27 percent improvement from Treasury's February projection of $252 billion, the department said.
G. William Hoagland, a senior economic aide to Senate Majority Leader Bill Frist (R-Tenn.), said he dashed off a memo to GOP leadership predicting the 2004 deficit could be trimmed to $420 billion, a record in dollar terms but considerably lower than the White House's $521 billion projection.

"This is better than what everybody expected," Hoagland said.

Democratic and Republican budget aides in the House warned yesterday that it was too early to reach conclusions. Spending could still take an unexpected jump because of surging hostilities in Iraq. The improving federal borrowing picture, they said, may just be bringing the administration's $521 billion deficit forecast more into line with the $477 billion deficit predicted by the nonpartisan Congressional Budget Office, Capitol Hill's official budget scorekeeper.

Individual disappointments last month could prove to be to the government's fiscal advantage. Earlier this year, Bush had boasted that this year's average income tax refund would be $300 larger than it would have been without last year's tax cut. But refunds have fallen well short of that mark. Treasury officials also cited lower-than-expected government spending and higher payroll and individual income taxes as reasons that less borrowing may be needed.

All of this indicates that the improving economy is beginning to slow a three-year slide in overall tax receipts.

"The 5.5 percent average [economic growth] pace in the latest three quarters was the largest since 1984," said Mark J. Warshawsky, assistant Treasury secretary for economic policy, in a statement to the department's borrowing advisory committee. "With the assistance of tax cuts, growth has become self-sustaining."

An improving picture could strengthen the political hands of the president and House Republican leaders as they wrangle with the Senate over more tax cuts and a budget blueprint for the fiscal year that begins Oct. 1. For weeks, the negotiations have been stalled, with a majority of the Senate demanding new procedural hurdles for further tax cutting and the House and White House steadfastly refusing.

The latest compromise would mandate that tax cuts over the next three years be offset by equal tax increases or spending cuts, unless 60 Senate votes could be mustered to set the restriction aside. However, under the compromise being floated, some tax cuts -- $92 billion worth in 2005 -- would be exempted from that restriction under Congress's annual budget resolution.

So far, House tax cutters have been undaunted by federal red ink. Last week, lawmakers in both parties voted overwhelmingly to make permanent Bush's tax cuts for married couples, a bill that would cost the Treasury $105 billion over 10 years. For the next three weeks, the House has scheduled successive votes on more tax cuts totaling hundreds of billions of dollars.

© 2004 The Washington Post Company

Arty · 06-03-04

No, you're still confused. Tax revenues are higher than they were last year, but are they as high as they were when Bush made his first tax cuts in 2001? That is the important question. And I'm highly sceptical of the claim that tax revenues doubled under Reagan, so prove it to me.

Lawson · 06-03-04

Quote:

Originally Posted by Arty

No, you're still confused. Tax revenues are higher than they were last year, but are they as high as they were when Bush made his first tax cuts in 2001? That is the important question. And I'm highly sceptical of the claim that tax revenues doubled under Reagan, so prove it to me.

We don't have the numbers yet for 2004, so we will soon see. Since it's the best economy since '83, I would expect it to be much better, revenue wise.

As for Reagan:

Total Revenue Growth. Nominal federal revenues doubled in the 1980s from $517 billion to $1.031 trillion.
http://cato.org/pubs/pas/pa-261.html

You can check these numbers on the Congressional Budget Office home page here: http://www.cbo.gov/showdoc.cfm?index=1821&sequence=0

Get back to me with your thoughts.