America is not growing, it’s contracting
The Guardian’s Heidi Moore wrote an epic screed about the illusion of economic recovery and waded through a river of micro data to prove her point. She highlighted how the housing recovery was driven by banks withholding their foreclosure inventories from markets and how three large banks halted foreclosures, which slowed supply. Unfortunately, she only had anecdotal evidence to support these ideas. She berated consumers for their increasing confidence in the economy and called it unfounded. She blasted the federal government, Congress and corporate CEOs for doing nothing to revive employment and stimulate economic growth. Moore writes:
The reason to maintain skepticism of good times a-coming is that an economic recovery can – and is – used to package a lot of political snake oil. As long as people believe in a recovery, Congress can keep ignoring the unemployment and equality crises and enjoy ginning up imaginary problems like the plague of corporate tax rates.
Actually, Congress is doing a lot to address the economy and unemployment. You can see it if you look at the macro data; specifically GDP growth versus the amount of debt that the U.S. Treasury is issuing. In fact, total U.S. growth in Q1 2013 came from issuing Treasury debt; not an increase in economic activity ($339 billion of new debt issued from 1/2/13 to 3/31/13 while GDP grew only $140 billion in same period).
In Q1 2013 the U.S. Treasury issued two and a half times more debt, which flows into the economy as cash stimulus through government spending, than the U.S. had in overall economic growth. To put that in reverse: If the Treasury had not issued that debt, the economy would have shrunk by approximately $199 billion. Instead it grew by 2.4 percent.
It could be argued that Congress and the federal government are doing more by issuing debt (deficit spending) than the Federal Reserve is doing by suppressing interest rates through bond purchases. Moore is on the right path, but she misses the point. Congress is issuing debt to keep America out of recession. Without that debt issuance, America would be contracting.
BEA and US Treasury: Graph data
MuniLand: Is the U.S. growing, or just issuing debt?