When Is What’s Good, Bad? An Economic Enigma

The US got some bad news in April. Our GDP (Gross Domestic Product) declined by an annualized 1.4% in the 1st quarter; that’s a 0.37% decline so far this year. That’s bad right? It means the Economy grew less and might be a signal for a pending recession to come. But is it bad? How does one decide?

Perhaps a reasonable way would be to do a short test, an Intelligence Test of sorts. Answer some basic questions and then see if they lead to a logically consistent answer. Don’t worry the questions are not at all hard. It should be easy to answer each question in less than the time it takes to read the question. Don’t worry, no one will know how you did; perhaps not even you.

Question 1: In general, do Republicans agree that less government spending is good or bad?

Question 2: Do Economists recommend having positive GDP changes or negative GDP changes?

Question 3: Is strong Consumer Spending good or bad for the US Economy?

Question 4: Is weak Business Spending good or bad for the US Economy?

Question 5: Is the drop in GDP an indicator that President Biden has mishandled the Economy?

Now these were not hard questions, were they? It’s not a trick and this is not one of the “test” questions. It is a confirmation that it didn’t take long to answer these questions, did it? So, here are what I would expect the vast majority of people to answer about each question correctly. Answer to Question 1: Republicans advocate for less government spending as a rule.

Answer to Question 2: Economists recommend policies and actions that will produce a positive GDP target for the Economy.

Answer to Question 3: Strong Consumer Spending is considered good for the economy.

Answer to Question 4: Weak Business Spending is considered bad for the economy.

Answer to Question 5: Republican will mostly say yes, Democrats will mostly say no, and independents will tend toward yes.

Now let’s relate how these answers logically represent a consistent view or surely there can’t be an inconsistency from a proper understanding of the answers.

The drop in the GDP must mean economists would say the Economy is not moving in the right direction Q-2. Except most economists say that the Economy is doing well. Consumer Spending is strong Q-3, and Business Spending is strong Q-4. Add to this that government spending is down, which the Republicans should approve of but that doesn’t seem to be a factor that is guiding their assessment of the Economy. To have a negative assessment of the US Economy there must be something else that is producing a ‘bad’ Economy view. It could be the increase in Imports which paired with the decrease in government spending drags on the GDP. But how does the government restrict imports without perhaps harming either Consumer or Business Spending or both; and producing a drag on GDP? A conundrum indeed!

There might be a simpler explanation to the GDP drop. It is just a calculated measure and provides an indicator that the ‘experts’ ought to look at the underlying data to assess and determine what the ‘signal’ In the measure may be informing us about. The Economy can’t be doing well overall and that being a result of bad management by the government because the factors in the GDP calculation confirm that the Economy is strong and even robust despite all the factors which are disrupting more normal economic activities. There’s something wrong here!

What then is the grade America gets on it’s assessment of the GDP Drop for the 1st Quarter 2022? Let’s be nice and grade on the curve. So a generous C-.

The Short American Intelligence Test on Inflation looks like it might be worth a look.

COMMING SOON!