New GDP report out today; slightly stronger than expected, but still very weak. So what’s holding back recovery?The GDP grew at 1.5% over last quarter. Hardly something that I would use the term "stronger" in any comparison. So Mr. Krugman presents a chart that shows that business investment has risen since 4th quarter 2009 and the government purchases of goods and services has declined since roughly the 3rd quarter 2010. He observes:
You know what the usual suspects are saying: big government! Bad Obama! Insulting businessmen!
Business investment has actually gone up a lot; maybe you think it should have gone up even more, but it’s not the heart of the problem. On the other hand, we’ve had a lot of cutbacks in government — mainly at the state and local level, but federal aid could have avoided that.The implication is that more "stimulus" spending (allegedly what he means by "cutbacks in government") by having government at various levels buy more goods and services would improve the recovery. He phrases it as follows:
This isn’t a picture of an economy hobbled by Big Government; it’s a picture of an economy hobbled by premature austerity.Yes, investment in business has increased and government spending has been cut - one might term that austerity, although I would disagree. However what Mr. Krugman avoids discussing about Big Government is the increase in regulations and the uncertainty for the last 18 months or so with regards to the Affordable Care Act (a/k/a/ ObamaCare) and its future impact on businesses. Private industry doesn't like uncertainty. Plans are made and measured against and, primarily for public companies, have significant repercussions.