More Bad News for 2011

Yesterday the Commerce Department came out with the 2nd quarter estimate of US GDP growth. The so-called "consensus" forecast of economists has predicted an anemic growth rate of 1.8%, but the actual growth rate fell to only 1.3%. You might recall that when the Commerce Department 3 months ago estimated the 1st quarter GDP growth rate at 1.8%, I predicated they would revise it downward, closer to 0%, and indeed they did revise it yesterday down to 1.4%. I predict that they will downgrade the 2nd quarter GDP growth rate from their initial estimate of 1.3% to close to 0% too.

Since GDP actually overstates national income by the amount of new investment that merely replaces old investment (sort of like calculating the income of a business without subtracting depreciation), in reality even aggregate national income isn't growing, and on a per-person basis it's clearly shrinking. We're not in any sort of recovery--we're living in the long-term recession state of the sort we haven't seen since the Great Depression.

We're likely to stay in the long-term recession economy too until the Federal Reserve Board stops inflating the money supply in a vain Keynesian attempt to trick the economy into real growth, and until we have a president and Congress willing to cut marginal income tax rates and at least slow the growth rate of federal spending.