Friday, May 4, 2012

Government, the economy's best friend??

A CNBC senior staff writer writes"Government has become its own worst enemy when it comes to the economy, with public spending putting a damper on growth that otherwise continues at a steady if unspectacular pace."

Amen Brother!! Finally the mainstream (CNBC?) media is starting to publish a little logic, or so I thought upon reading paragraph one of last Friday's article Economy's Biggest Drag Right Now Is Government. Of course I should have known that Mr. Cox was simply stating statistical fact... In that GDP is the sum of consumer spending, investment, government purchases, and net exports, as represented by the equation:

Y= C + I + G + NX

The two factors I wouldn't sweat are government spending (except of course when it rises) and net exports. Think about it, while for the moment, less government spending lowers GDP, less government spending 'ultimately' means more resources remaining in the private sector (consumer, investment). As for net exports; lower NX = higher FCI (foreign capital investment [they do something with those dollars]).

I would say that Government, when it spends less, may indeed be "its own worst enemy", but, longer-term, it's the economy's best friend.

1 comment:

  1. [...] favor) at whatever price ($16 trillion in debt and counting) it takes. Now read my short article Government, the Economy’s Best Friend?? from May, when the GDP number showed less government [...]