The Dip Is Here
The fourth quarter contraction in the US economy is the result of austerity. The military has a lot of inertia, so they starting cutting based on their guess that a deal would not be forth coming on deficit reduction and the automatic cuts would take place. The Pentagon also believes that climate change is real and a very bad thing. Getting shot up and dealing with things that can go boom, helps you to focus.
Locally the Air Force has a hiring freeze and is laying off temporary workers. They are also reducing their energy use in ways that are visible. There have been fewer than normal training flights over my house, so they are cutting that back too.
As everyone who actually stayed awake for a real Economics 101 course could tell you, this drop in spending by a major consumer is dragging down the economy. This was the fourth quarter, which includes Christmas shopping, so it is a lot worse than the talking heads are admitting. Until Congress gets its act together, the military is going to continue to make cuts, which will hit the economy. Stalling by Congress, and kicking the can down the road are almost guaranteeing a second negative quarter and an official recession.
The stock market is up, but that gambling den has minimal impact on the real economy. Bernacke is pouring money into it, so of course it is happy. If they poured as much money into the budgets of the bottom 50% as they do into the stock market, things would be a lot further along.
January 31, 2013 4 Comments
