Wednesday, January 30, 2013
Economic Contraction
This article talks about many of the factors of GDP (investment, exports, etc.) including GDP itself. It also talks about how residential investment increased, along with investment in software and equipment by businesses. The article claims that much of this contraction at the end of 2012 was due to the drop in military spending, which I believe was ridiculously high to begin with. What do you think about this article? Do these increases in investment mean good things for the economy in the future?
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Here is another perspective from Wonkblog:
ReplyDeletehttp://www.washingtonpost.com/blogs/wonkblog/
"SImilar thoughts in the article but Wonkblog also notes other spending cuts like the payroll tax cut.Still, there are reasons for concern in 2013: While consumer spending held up in the final months of 2012, that was before the payroll tax break expired in January, siphoning income from workers’ paychecks. And if negotiations over the sequester force steep cuts in defense and other government spending in the months ahead, GDP could suffer a steeper decline. In that sense, the portrait painted by the new numbers, of a private sector holding up but counterbalanced by a contracting public sector, may be an indicator of the new normal."
I personally hope that much of the defense cuts go into infrastructure and programs like education or conservation programs. Many of these programs and their respective agencies employ many people and also keep GDP growing.The future success of investments, will depend on what kinds of programs are invested in.
Yes increases in investment are extremely important for our recovery. That was touched on at the end of class on tuesday. A major problem right now is that a lot of the companies that received bailout money are just sitting on it. If they felt confident and used that money for investment we would be in a far different economical ball game.
ReplyDeleteDecreasing the budget in military spending and in some export products may contribute to invest in new sectors It is clear that United Stated needs to recapitalized and reinvest its budget in new areas with better returns. The "investments" that United Stated made in bailout had some bad repercussion in the US economy.
ReplyDeleteHowever, in my opinion, the solution is not stop investing, if not look for a better sector. As Quiggin said: "government should base its decision in benefit-cost". Governement is not a crisis savior by contrast it has an active role in economy, now more than ever, if we consider the risk of the recession.
I completely agree with Travis. The companies that the government has given bailouts too have not used the money wisely. The either sit on it or put it towards their debt and i dont believe that was the full intended purpose of the bailout. These companies should be investing and putting money towards stock that will help stimulate the economy.
ReplyDeleteI agree that investment is a key for recovering the economy now. However, it is important to control how the money is used in many companies. If those companies used the money for investment, the economy would be recovering soon.
ReplyDelete