Obama’s Government Recession

The economy grew at a below average annualized rate of 2.5% in 2013 I.

Part of the reason is cuts in government spending.

How is that possible given the level of spending coming out of D.C.?

The reason is that what we commonly hear in the legacy media as government spending is actually government outlays. In short, every check they write. But outlays includes both government consumption and investment (what used to be called government purchases of goods and services) and transfer payments.

But, only the former enters into GDP directly. Transfer payments enter into GDP as private consumption and investment.

So, the explanation is that Obama had doubled-down on the progressives’ nightmare: increasing transfer payments more than government consumption and investment. Thus, total outlays go up, while creating a direct drag on the economy.

You can see this in Table 1.3.3. in Section 1 here. It shows the components of GDP in index form: Federal government consumption and investment has declined for 6 straight quarters.