June 26, 2014
MEGAN MCARDLE: Big Losers In The GDP Report: Democrats.
The last estimate had GDP shrinking slightly from the prior quarter. The current estimate has it shrinking a lot: 2.9 percent on an annualized basis. If this keeps up for another quarter, the economy will officially be in recession.
How did this happen? The White House line is that this was driven mostly by health care and net exports. But treat those figures carefully — which is what I’ve seen a lot of people on Twitter not doing.
Health-care spending is a major factor in the downward revision of Bureau of Economic Analysis estimates, because the BEA was overestimating it in prior reports. But it is not what is mainly driving the actual decline in GDP. That looks a lot more broad-based. . . .
The most worrisome potential explanation is that health expenditures fell because, well, health expenditures fall when the economy is contracting. I’m not exactly ready to call recession yet — consumption was still basically healthy, and the weather was awfully bad. But I’ll be crossing my fingers until the next report comes out.
And so, presumably, will Democrats: partly because they are patriotic Americans who want to see their country do well, but also because recessions are bad for incumbents and, one imagines, particularly bad for the party that claimed the other guys had driven the economy into the ditch and that they were just the folks to drive it out. If the economy heads back into a recession this year, things start looking pretty grim for the Democrats — not just for this year, but for 2016.
When you raise taxes dramatically and roll out tons of burdensome regulations, a contracting economy is only a surprise if you’re an idiot. Or a member of this Administration and the press. But I repeat myself.