Tax hikes will boost economy.
Don't believe it's a mere coincidence that in the middle of the heated Fiscal Cliff debate (with Obama trying to deceive the public into believing that raising taxes on the rich is needed to bring down the deficit and debt and boost the economy) that suddenly we get a new GDP report from the Commerce Department for the third quarter revising growth from 2.0% to 2.7% (see). Just as Susan Rice's talking points on Benghazi were thoroughly policized so is this revised report from Commerce in my view.
This I believe is what's going on: In 2010 when Obama extended the Bush tax rates he justified it as necessary to avoid damaging the recovery. At the time GDP growth was at 2.4% whereas until today's report it was 2.0%, indicating a weaker economy than two years ago. But today's revised GDP changes all that. Now Obama can claim that the economy is stronger not weaker than in 2010 and that raising taxes wouldn't weaken the recovery like it would have done then, but, in fact, strengthen it. That is the game Obama's playing, so beware.
Postscript: The Set Up
At Obama's news conference last week it appears that he set things up for today's revised GDP report. When Obama was asked by a CNN reporter why we should believe that he won't cave in [to Republicans] like he did in 2010 and extend the Bush tax rates for the wealthy, Obama replied: " Two years ago the economy was in a different situation"-meaning that the economy is stronger today than it was then. As GDP growth was said to be 2.0% last week it looks like Obama was setting things up for today's revised bogus report of a stronger economy.
COMMENTS POSTED ON MARKET WATCH
One glance at today's second read of Q3 GDP may leave some with the false impression that the US economy is soaring, because after sliding to 1.3% in Q2, and after a preliminary read of2.0% in the first Q3 estimate, today's print, which missed estimates of a 2.8% print, did nonetheless rise to 2.7%. "A stunning success", the administration sycophants would say. Absolutely wrong. Because aquick glance at the underlying numbers shows the true picture of the economy which contracted far more than most expected, with personal consumption collapsing to 1.4% Q/Q, on hopes of a 1.9% rise, and down from 2.0%. In fact, at 0.99% personal consumption expenditures - the core driver of 70% of the US economy - were a tiny 36% of the headline number. Ironically today's second GDP revision was far worse when analyzed at the component level, than the first Q3 estimate, which while lower overall at 2.0%, at least had personal consumption nearly 50% higher at 1.42%, or well over half of the total contribution.
"Where is the mention of the 393,000 NEW JOBLESS claims for a total of 1,263,000 in the last three weeks? And there were only 126,000 new jobs created during the same time."
Also, the upward revision is largely driven by the INCREASE in inventories at the very time the consumer has decreased their spending. Ultimately, this will result in a further decrease in manufacturing (see Beige Book report yesterday). In short, this is a horrible report.
"Real federal government consumption expenditures and gross investment increased 9.5 percent in the third quarter, in contrast to a decrease of 0.2 percent in the second. National defense increased 12.9 percent, in contrast to a decrease of 0.2 percent. Nondefense increased 3.0 percent, in contrast to a decrease of 0.4 percent. Real state and local government consumption expenditures and gross investment decreased 0.4 percent, compared with a decrease of 1.0 percent."
So the military bought more guns and bombs.