Sunday, March 04, 2012

Chart of the Day: Private GDP Grew 4.7% in Q4

Last week's BEA report showed real GDP growing by 3% at an annual rate in Q4 2011.  But as First Trust Portfolios pointed out, the non-government, private components of GDP (consumption, investment and net exports) grew at 4.7% (see chart above) in Q4.  In contrast, there was a 4.4% decline in government purchases in Q4, which created a drag on overall economic growth and brought real GDP growth down to 3%.  The decrease in government spending was "driven by a wind-down of operations in Iraq and continued state and local spending cuts."


At 3/04/2012 11:04 AM, Blogger PeakTrader said...

And yet, U.S. households bought a million fewer houses, four million fewer autos, and millions of fewer other goods in 2011 compared to before the recession.

At 3/04/2012 11:16 AM, Blogger Mark J. Perry said...

Yes, it's true: In every silver lining, you can find a cloud.

At 3/04/2012 11:22 AM, Blogger juandos said...

"Yes, it's true: In every silver lining, you can find a cloud"...

One can in fact find a huge cloud...

At 3/04/2012 11:24 AM, Blogger PeakTrader said...

It looks like a crowding-out effect.

The federal government spent $1 trillion more in 2011 than 2007, while state and local governments raised taxes, fees, fines, fares, tolls, tuition, etc., and yet household consumption, along with state and local government consumption, shrunk.

At 3/04/2012 11:56 AM, Blogger Jon Murphy said...

Good to see private GDP numbers doing so well, especially when combined with some of the other numbers released this week:

Auto retail sales are above pre-recession levels (in total units sold)

The PMI is still above 50.0 (some weakness in the New Orders segment, but nothing unusual, historically).

Retail Sales (excluding autos, deflated) are approaching pre-recession levels.

Wholesale Trade (deflated) of durable and nondurable goods are at record levels.

Manufacturing New Orders come out this week, so I'm looking forward to that number.

Good signs for economic expansion in 2012.

At 3/04/2012 1:09 PM, Blogger juandos said...

"Good to see private GDP numbers doing so well, especially when combined with some of the other numbers released this week"...

Just how good are those numbers when compared to the US government debt?

At 3/04/2012 1:16 PM, Blogger kmg said...

This is exactly the opposite of what Obama would like to see.

It is good that the private sector is winning out despite the forces arrayed against it by the govt.

At 3/04/2012 1:17 PM, Blogger kmg said...


Can you extend this chart back 5 years? That would be even more interesting to see.

At 3/04/2012 1:33 PM, Blogger Benjamin Cole said...

The direction of the economy is good---I just wish the Fed was more aggressive in promoting growth.

And while state and local government have cut, Uncle Sam has not cut payroll.

Surely we could lop 500,000 employees off of this list:

Largest federal agencies financed by income taxes. Where should we cut?

Sheesh, just a 15 percent across the board in the top three agencies, and we take 500,000 economic parasites off of taxpayer's backs.

Defense 3,200,000
Veterans Affairs 240,000 

Homeland Security 200,000
Treasury 162,119 

Justice 124,870 

USDA 100,000 

DOT 100,000
Health and Human Services 62,999 

Interior 57,232 

Commerce 41,711 

NASA 19,198 

EPA 18,879
State 18,000 

Labor 16,818 

Energy 14,000 

GSA 14,000

At 3/04/2012 1:42 PM, Blogger Larry G said...

Bejamin - where is Education on that list?

At 3/04/2012 1:50 PM, Blogger PeakTrader said...

The federal government is $1 trillion a year larger (since it spent $1 trillion more in 2011 than 2007) and the private sector is $1 trillion a year smaller (since the output gap worsened from zero in 2007 to $1 trillion in 2011), and real GDP growth has been zero the past four years.

At 3/04/2012 1:52 PM, Blogger PeakTrader said...

Larry, education is on this list:

"Government Spending - Wikipedia:"

U.S. Federal, State, and Local Government spending was 40.0% of GDP in 2010, or $5.79 trillion.

Major categories of government spending 2010 in billions of dollars:

Pensions $939.2
Health Care $1028.8
Education $887.3
Defense $848.1
Welfare $727.3
Interest $296.3

At 3/04/2012 1:56 PM, Blogger Benjamin Cole said...

Larry G---

In 2007, the Department of Education had 5,000 employees. It is too small to make the list.

If you want to know where your income (not payroll) taxes go, about 75 percent is eaten up by Defense, Homeland Security, VA, USDA, Commerce and debt payments.

If you want responsible income tax cuts, you have to cut federal spending. This simple logic seems to elude the "cut taxes" crowd. They never identify where the cuts will come from--or that if they cut, they are cutting GOP programs and rural-pink lard.

No, the D-Party is no better.

Truth to tell, I would eliminate the Education Department and USDA, and cut defense spending by 75 percent, privatize the VA, and wipe out Homeland Security.

Monetizing the debt is another good plan.

Yes, we need QE and monetization of some national debt. Enough to crank the nominal GDP up towards 7 percent or so for several years.

BTW, have any economists ever thought about monetizing the debt, and its effect on taxpayers, especially income-tax payers and especially rich income tax payers?

Right now, we use income taxes to pay down the debt, largely levied on rich people. So, with QE we are reducing their future tax rates (also through inflation-deleveraging).

(Remember, the huge entitlement programs are financed with payroll taxes. Income taxes are used to finance agency spending, and borrowing.

Removing this huge future debt-tax burden should make the wealthy more likely to invest and spend.

I bring this up largely for political reasons. There seems to be a large portion of our political parties and punditry deeply concerned with our top income tax rates. The plight of America’s wealthiest brings forth a Niagara of tears in some quarters.

By highlighting the benefits of QE and debt monetization for the richest Americans, I hope to generate a base inside the GOP for aggressive QE.

At 3/04/2012 2:15 PM, Blogger PeakTrader said...

Actually, roughly 100% of the increase in nominal GDP since 2007 went to federal government spending:

Nominal GDP

Q4 2011 $15.3 trillion
Q4 2007 $14.3 trillion

Real GDP

Q4 2011 $13.4 trillion
Q4 2007 $13.3 trillion

At 3/04/2012 2:17 PM, Blogger Larry G said...

Thanks, Benjamin...

re: FICA/entitlements

Actually Medicare Parts B,C,D are appropriated entitlements from the General Fund - as well is MedicAid.

between the two of them they comprise about $500 billion of the budget of the 3.1 trillion budget.

At 3/04/2012 2:20 PM, Blogger PeakTrader said...

However, the $1 trillion worsening of the output gap in 2011 compared to 2007 is in real dollars.

At 3/04/2012 3:10 PM, Blogger Benjamin Cole said...


I will have to look into that.

Thanks for your posts and commentary. Even when I disagree with you, you are intelligent and civilized.

At 3/04/2012 3:36 PM, Blogger juandos said...

With his usual flair for folly pseudo benny seems to have missed the big picture again...

According to the IRS this is how your extorted tax dollars are spent: Pie Chart page 40 of 43 of the 1040 EZ form instructions...

At 3/04/2012 3:57 PM, Blogger Larry G said...

of course another big contributor to the deficit and debt is tax-free health insurance.

If the average person could get his health insurance taken directly off his taxes as a credit - what would happen?

we'd have an even bigger deficit, eh?


p.s. thanks Benny.. I ALWAYS try to treat people as I would like to be treated.

At 3/04/2012 4:30 PM, Blogger Benjamin Cole said...


You seem unable to understand this concept: Payroll taxes are not used to run the government. They are used for Social Security and Medicare. They go into a separate pot.

Income taxes are what are used to run federal agencies and pay off the national debt.

If you parcel out the income taxes, you will find they are 75 percent consumed by debt, Defense, Homeland Security, VA, USDA and Commerce.

Sheesh we spend $1 trillion a year just on Defense, Homeland Security and the VA---that's $3,333 for every man, women and child in the USA, or about $13k for a typical family of four. Romney says it is not enough.

Obviously, we have to balance the federal budget. We can raise income taxes, or cut agency spending to get there.

I prefer to cut agency spending.

I see no need for a huge, coprolitic, parasitic Cold War dinosaur military-VA-Homeland Security archipelago anymore. Most of that money is wasted on lard, patronage and pensions.

At 3/04/2012 5:46 PM, Blogger PeakTrader said...

Tracking GDP and Jobs
February 3, 2012

"We just aren’t recovering. The figure below plots the ratio of actual GDP to potential GDP...for the past year or more we have made essentially no progress on this front.

GDP growth can come in positive forever without actually moving the economy any closer to full recovery.

Each month/quarter/year that we do not close the gap...we’re simply leaving hundreds of billions of dollars on the table (cumulatively around $3 trillion and counting since the start of the recession)."


At 3/04/2012 5:49 PM, Blogger morganovich said...


no, it is you who are missing the concept, and what's more, you know it. this has been explained to you about a dozen times. why continue lying? is it deliberate or can you just not absorb new information?

fica taxes were supposed to be seperate, but that's not what happened.

all the surpluses (the so called trust fund) got spent by the general fund. fica's whole surplus is IOU's. they need to be paid out of income tax revenue.

fica no longer supports medi and SS. it has gone into deficit and will likely remain there until paygo kicks in (if it is allowed to, which is doubtful) when benefits get cut. but that's just SS. medi is even more out of control and is poised to eat fica entirely all by itself before long.

even the GAO is predicting that entitlements will exceed all federal revenues (fica, income tax, and everyhting else) in about 20 years.

so why repeat this same false nonsense over and over?

it really does get tiresome.

At 3/04/2012 5:58 PM, Blogger morganovich said...


another way to look at that is the census per capita income series.

i like it as it takes out growth just from population expansion and also uses chained dollars as opposed to the increasingly suspect gdp deflator that diverged from cpi so aggressively in the last couples q's.

that series show 2010 income of $26,487. 2011 is not officially out yet, but it will be lower. 1.7% gdp growth last year would have been barely positive using cpi to deflate it and population growth was about 1%.

2011 will be at about the real level of 1997.

this series has basically gone nowhere for 15 years.

At 3/04/2012 6:23 PM, Blogger Benjamin Cole said...


I am well aware that the payroll taxes were used to finance the fed government, a GOP-overseen regressive tax scheme and tax cut for the rich.

That said, the money was invested in federal debt and is there to be used.

The fact is still clear; You want lower non-payroll taxes, you have to cut agency spending. Or keep running debts.

I am all for trimming entitlements too. Euthanasia needs to become accepted inside of Medicare, and perhaps raising the retirement age.

The GOP craps in its pants at the thought of euthanasia, and quivers before old voters on raising the retirement age. And the GOP thinks we should waste more money on Defense, VA and Homeland Security.

ergo, the GOP cannot balance the budget, only scream about abortion, creationism, guns and gold.

The D-Party is not much better.

At 3/04/2012 7:04 PM, Blogger PeakTrader said...

Morganovich, the data I've seen, which include real compensation, net wealth, trade deficits, etc. imply U.S. living standards improved substantially from 1982-07, at least for most Americans.

However, over the past four years, living standards have generally been stagnant at best, and will decline sharply soon, if we remain on the present course.

At 3/04/2012 7:09 PM, Blogger Paul said...

This comment has been removed by the author.

At 3/04/2012 7:10 PM, Blogger Paul said...

From the idiot who voted for the moron who has ran up 5 trillion in debt and counting:

"ergo, the GOP cannot balance the budget, only scream about abortion, creationism, guns and gold."

Quite impressive deductive reasoning. You're a modern day Socrates, Benji.

At 3/04/2012 7:22 PM, Blogger Benjamin Cole said...


Try to improve your manners.

If you have different point of view, express it.

Why the chronic, obsessive ad hominem attacks?

Yes, I think the GOP is is a confederal of jackanapes and poltroons, a Grifters on Parade (GOP). I think the D-Party does not understand the economy.

Those are my views. Big deal.

At 3/04/2012 7:47 PM, Blogger Larry G said...

It's TRUE that the Trust Fund is what holds the SURPLUS for FICA that was supposed to level fund SS and MedA as the boomers started to retire.

But it was and is a LIMITED amount of money that would not last past 2037 anyhow.

At some point, FICA would no longer be able to pay full benefits.

But it WOULD CONTINUE to pay benefits at a 75% rate - for a long, long time.

FICA is the ONLY Federal program that is explicitly designed to NOT run a deficit, to automatically reduce benefits to match revenues.

If we had that same approach for Medicare Part B (C,d) - which are appropriated entitlements, - we'd keep the payments equal to the revenues - which is basically what Paul Ryan is suggesting for Medicare - Part B.

Medicare Part A and Social Security already operate exactly that way.

At 3/04/2012 8:11 PM, Blogger juandos said...

"Why the chronic, obsessive ad hominem attacks?"...

That's just pseudo benny, they're not attacks paul is tossing your way but apt descriptions of what pass for your comments...

Your comments would at the very least it seems make one wonder what sort of reality you're tethered to...

At 3/04/2012 8:29 PM, Blogger Larry G said...

make no mistake, they ARE INDEED ad hominem attacks that come from several folks in this forum on a regular basis.

At 3/04/2012 8:29 PM, Blogger Benjamin Cole said...

From Ron Paul website:

The reason Ron Paul can offer $1 trillion in spending cuts and the other Republican candidates offer nothing is because the other Republicans behave like liberals when it comes to Pentagon spending. In fact, when Mitt Romney, Newt Gingrich and Rick Santorum say President Obama is “gutting” the military, they use the same argument liberal Democrats once leveled at President Reagan. Explains Doug Bandow at The American Conservative:

The third idea spendthrift militarists have recycled from the liberals of yesteryear is using “baseline budgeting” to complain that Barack Obama has “cut” defense outlays. This is the same way Democrats once charged that Ronald Reagan drastically “cut” domestic spending—by reducing the rate of increase.

Total military outlays were $306 billion in 2001. Since then they have risen steadily, breaching the $700 billion barrier under Barack Obama in 2011. In real, inflation-adjusted terms, expenditures increased 74.5 percent over the last decade. In the Obama administration’s first two years inflation-adjusted military spending rose 16.8 percent. Outlays last year, in real terms, were 23.5 percent above the Korean War peak in 1953, 22.5 percent above the Vietnam War peak in 1968, and 35.8 percent above the Reagan build-up peak in 1989.

Spending will stop racing ahead this year but not because of real cuts: the administration has only proposed reducing planned increases over the coming decade by $487 billion. As former House Majority Leader Richard Armey observed, these “cuts” are “only from the bloated CBO baseline. This means that [Obama] is merely reducing projected military spending, as opposed to cutting current spending.”

At 3/04/2012 8:37 PM, Blogger Bobby Caygeon said...

Wait, Larry and Benji are cordial with each other? I wonder why that is? Is it because they are both leftist ideologues or is it because they are both Gemini's?

At 3/04/2012 8:50 PM, Blogger Larry G said...

IN this forum anyone to the left of Attila the Hun is a left wing ideologue!

:-) this forum Ron Paul is a limp-wrist weenie!

At 3/04/2012 9:55 PM, Blogger Benjamin Cole said...

Yes, Ron Paul, Dick Armey, Larry G and Benjamin are al in cahoots.

We are secretly gay liberal pot-smokers who favor socialism.

I like the USDA and I love the home mortgage tax deduction, and huge federal agencies like the biggest three of all, Defense, Homeland Security and the VA.

I love it when my government can decide I am a terrorist, without ever telling a jury anywhere, and then execute me. We didn't need such powers when we were standing down the Soviets, but now we have some toughies on our hands: Terrorists armed with homemade bombs and box cutters. That's worth giving up al our freedoms.

I support the ethanol program--I admit it, I live government solutions to everything.

At 3/04/2012 9:57 PM, Blogger Paul said...


"Why the chronic, obsessive ad hominem attacks?"

I'll "improve my manners" when you improve your accuracy. Your Alinskyite boyfriend is strangling the private sector and spending us to oblivion, and all you ever do here is spew ignorant attacks on the Tea Party and the GOP.

Case in point: "ergo, the GOP cannot balance the budget, only scream about abortion, creationism, guns and gold."

Not accurate and staggeringly missing the point while your boyfriend plots and schemes his way towards re-election and the end of the USA as we know it.

At 3/04/2012 9:59 PM, Blogger Paul said...

"Yes, Ron Paul, Dick Armey, Larry G and Benjamin are al in cahoots."

I don't get the joke. Only 2 of the above were dumb enough to vote for your boyfriend.

At 3/04/2012 10:03 PM, Blogger Paul said...

" this forum Ron Paul is a limp-wrist weenie!"

No, he's just a Congressional layabout who pens articles that appeal to anti-semites, and porks up spending bills and then votes against them out of "principle." He can always be counted on to point fingers but never lend a hand in actually moving the ball up the field.

At 3/05/2012 9:06 AM, Blogger VangelV said...

Yes, it's true: In every silver lining, you can find a cloud.

Particularly when there is no silver lining to begin with.

At 3/05/2012 9:53 AM, Blogger morganovich said...


that is not what the census data shows.

download "all races" table from the top.

look at the 2010 $'s column, which puts it into current dollars.

2011 will be below 2010 as cpi ran higher than gdp-d by a great deal (and real gdp was only 1.7%) and population grew 1%.

per capita income has been stalled for 10-15 years.

the period from 2000-2007 had only 1 year in which the number exceeded 2000 and that only by about 0.5%.

from 2000-2010, real per capita income growth was negative in 8 or 10 years.

it was a period of debt accumulation and stagnation, not growth.

At 3/05/2012 9:58 AM, Blogger morganovich said...

"That said, the money was invested in federal debt and is there to be used. "

no, it was not. it exists only in the form of IOU's that bear essentially no interest. it's not bonds that could be sold.

when those ious are called in, they must be paid for by other taxes (income etc).

the fact is even more clear that if entitlements are not cut, they will eat all of fica, income, and every other tax within 20 years.

if all other expenditures went to ZERO, entitlements would still break us.

add in any even remotely reasonable amount of federal spending (not to mention the unavoidable debt service) and it will be sooner.

you are in a burning house looking to fix a squeaky hinge.

hell, i even agree with you that we need to cut agency spending etc, but unless we rein in entitlements, it's not going to make any difference.

it's like giving aspirin to someone with ebloa.

At 3/05/2012 10:11 AM, Blogger PeakTrader said...

Morganovich says: "per capita income has been stalled for 10-15 years."

I see a huge increase in real per capita income from 1995 to 2007, and that doesn't even include the huge gains in net wealth and international trade.

At 3/05/2012 10:30 AM, Blogger PeakTrader said...

Here's Dr Perry's chart on real per capita GDP growth:

At 3/05/2012 12:02 PM, Blogger juandos said...

"make no mistake, they ARE INDEED ad hominem attacks that come from several folks in this forum on a regular basis"...

Well larry g you call them attacks others might consider them merely apt descriptions...

At 3/05/2012 12:08 PM, Blogger juandos said...

This comment has been removed by the author.

At 3/05/2012 12:55 PM, Blogger Ron H. said...

juandos: "Do you mean this hypocritical Ron Paul?"

And, the REAL link is...

At 3/05/2012 12:56 PM, Blogger bart said...

Although total real GDP (using a much more correct inflation data set than the bogus deflator) is indeed better than at the bottom in 2008, the most recent data shows a year over year drop of over 4%.

At 3/05/2012 1:41 PM, Blogger morganovich said...


"I see a huge increase in real per capita income from 1995 to 2007, and that doesn't even include the huge gains in net wealth and international trade."

then you are not looking at the numbers correctly.

you need to use the 2010 dollars column which is price adjusted (chained dollars).

there was grwoth from 1997-2000.

at that point, it stopped.

every year since 2000 has been lower that it was apart from 2007, which was maybe 0.5% higher.

0.5% growth in 7 years is close enough to zero as makes no difference. you're talking about compounding at 7 basis points.

8 of 10 years post 2000 showed negative growth form the year before. 2011 will be lower than 2010 making it 9 of 11. that's a pretty dismal result.

it will be at a level very close to 1997.

we can quibble about 1997-2000, but since 2000, there has been no growth. maybe it's 11-12 years and no 15, but i think you are just trying to cherry pick start and end points and ignore the middle to get the result you want.

At 3/05/2012 1:53 PM, Blogger morganovich said...


here's another way to look at it:

in the 30 years from 1970 to 2000, there were only 5 years with negative real per capita income growth vs the prior year.

from 2000-11, there were 9 (and only 2 years of positive growth, and very low growth at that, never even breaking above 2% vs the high 3's to mid 4's that were common in prior decades.)

At 3/05/2012 2:06 PM, Blogger juandos said...

"And, the REAL link is..."

Damn it? Sorry ron h, that's what I get for trying to do two things at once...

The link is hypocritical Ron Paul...

Yeah ron I can't walk and chew gum at the same time...:-(

At 3/05/2012 2:23 PM, Blogger juandos said...

" But as First Trust Portfolios pointed out, the non-government, private components of GDP (consumption, investment and net exports) grew at 4.7% (see chart above) in Q4"...

Hmmm, there's a bit of a problem here with someone's numbers...

From the questionable Census Dept: New orders for manufactured goods in January, down following two consecutive monthly increases, decreased $4.8 billion or 1.0 percent to $462.6 billion, the U.S. Census Bureau reported today...

So just what is the import of the Census Dept. statement? A short term, temporary downward spike or an indicator of something else?

At 3/05/2012 3:34 PM, Blogger morganovich said...


i think you are calling the wrong guy questionable.

the census is putting out the most credible data of any federal department.

that GDP number for Q4 was pure fiction.

they used a GDP deflator 67% lower than CPI. (1.1% vs 3.3%)

deflated at CPI, q4 gdp was about 80bp, which does not even keep up with population growth.

q3 had similar problems. that 1.3% real number used a 2.0% deflator vs cpi of about 3.7%, meaning it was a real contraction using bls prices.

the bea numbers have looked really dodgy for the last 6 months and if you use CPI, there has been essentially no growth at all and thus a big drop in per capita gdp and income.

first trust is just taking the dodgy bea price assumptions and using them to make their case as they cheer lead for equity purchases to help their business.

At 3/05/2012 3:37 PM, Blogger morganovich said...


capital goods are going to have some weirdness around dec 31,

lat year you could buy capital goods and depreciate them in one year. that tax treatment went away for 2012.

thus, a lot of q1 2012 purchases got pulled into q4 2011 to take advantage.

this likely boosted q4 and will slow q1 a bit, but it's not nesc a trend you want to draw a trendline from.


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