The Advance Estimate for the first quarter of 2006 is out reporting 4.8% real GDP growth on an annualized basis, which basically makes up for the weak 1.7% figure for the last quarter of 2005. Investment growth remains strong and consumption grew relative to GDP. Andrew Samwick is worried that private savings remains low.
Rubinomics types like myself might take some delight in the fact that overall government purchases have not been growing that rapidly over the past 6 months – even if Federal purchases did grow by more than 10% on an annualized basis during the first quarter of 2006. I guess fiscal responsibility is a local affair – but not one we should expect our of Washington, D.C. Brad DeLong writes:
If households are myopic and are saving too little, the government should offset this and save for them – i.e., we should raise taxes to fund big budget surpluses.
Brad is right – but I’m not holding my breath expecting President Bush to listen to such good economic reasoning.
Update: Brian Riedl asks “Is spending restraint really gaining steam?” His NRO op-ed has a lot of praise for Senator Tom Coburn who does sound serious about spending restraint – but consider the “facts” as Mr. Riedl notes:
Since 2001, the federal government has expanded by 45 percent, as Congress enacted the most expensive agriculture, education, Medicare, and highway bills in American history. Additionally, the number of pork projects more than doubled as the “Bridge to Nowhere” came to symbolize Congress’s isplaced priorities.
OK, that’s misplaced not isplaced (not as funny as Jonah Goldberg calling himself a “hetersexual male of the species with a job“) but sort of on the right track – even if Federal spending in 2006QI was only 40 higher than it was in 2000QIV if one is looking at line 19 of BEA NIPA table 3.2. If Riedl meant to say Federal purchases rose a lot – they did rise by 59% at least in nominal terms. In real terms, this increase was only 32%. So I’m not sure what his 45% means.
But let’s take a look at Federal expenditure as a share of GDP and Federal purchases as a share of GDP. In either case, I see no evidence of fiscal restraint. It would seem that the White House is not really listening to Senator Coburn on spending or to Brad DeLong on taxes. Ahem!