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GDP drops for the first time in over 3 years
Posted by Randy | January 31, 2013

I want to share with you a recent CNBC article  showing that GDP in the United States fell for the first time since 2009.  Both the article and the chart below, indicate that the 0.1 percent decline is due in large part to the largest cuts to defense spending our nation has seen in 40 years. 

Since 2011, when sequestration was introduced as a means to reduce spending, I have been warming against drastic and dangerous cuts to our military.  I opposed the Budget Control Act, which will implement sequestration and slash defense spending on March 1, 2013, and have consistently supported alternative plans to address the debt and reign in spending in Washington.  Given this latest economic report, do you agree that a strong defense is necessary to maintain a strong America?

 
GDP Shows Surprise Drop for US in Fourth Quarter
Published: Wednesday, 30 Jan 2013 | 8:11 AM ET

The U.S. economy posted a stunning drop of 0.1 percent in the fourth quarter, defying expectations for slow growth and possibly providing incentive for more Federal Reserve stimulus.

The economy shrank from October through December for the first time since the recession ended, hurt by the biggest cut in defense spending in 40 years, fewer exports and sluggish growth in company stockpiles.

The Commerce Department said Wednesday that the economy contracted at an annual rate of 0.1 percent in the fourth quarter. That's a sharp slowdown from the 3.1 percent growth rate in the July-September quarter.

The surprise contraction could raise fears about the economy's ability to handle tax increases that took effect in January and looming spending cuts.

Still, the weakness may be because of one-time factors. Government spending cuts and slower inventory growth subtracted a total of 2.6 percentage points from growth.

And those volatile categories offset faster growth in consumer spending, business investment and housing -- the economy's core drivers of growth.

Another positive aspect of the report: For all of 2012, the economy expanded 2.2 percent, better than 2011's growth of 1.8 percent.

The economy may stay weak at the start of the year because Americans are coming to grips with an increase in Social Security taxes that has left them with less take-home pay.

Subpar growth has held back hiring. The economy has created about 150,000 jobs a month, on average, for the past two years. That's barely enough to reduce the unemployment rate, which has been 7.8 percent for the past two months.

Economists forecast that unemployment stayed at the still-high rate again this month. The government releases the January jobs report Friday.

The slower growth in stockpiles comes after a big jump in the third quarter. Companies frequently cut back on inventories if they anticipate a slowdown in sales. Slower inventory growth means factories likely produced less.

Heavy equipment maker Caterpillar, Inc. said this week that it reduced its inventories by $2 billion in the fourth quarter as global sales declined from a year earlier.

The biggest question going forward is how consumers react to the expiration of a Social Security tax cut. Congress and the White House allowed the temporary tax cut to expire in January, but reached a deal to keep income taxes from rising on most Americans.

The tax increase will lower take home pay this year by about 2 percent. That means a household earning $50,000 a year will have about $1,000 less to spend. A household with two high-paid workers will have up to $4,500 less.

Already, a key measure of consumer confidence plummeted this month after Americans noticed the reduction in their paychecks, the Conference Board reported Tuesday.

Economists expected the first reading on gross domestic product to show growth of 1 percent, down from the third quarter's reading of 3.1 percent.
Comments
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  • Gregg J commented on 1/31/2013
    Wise cuts to defense spending are necessary in addition to other spending cuts. First place to cut defense spending is a mandatory 30% reduction in the O-7 through O-10 ranks. Also the comissioned officer ranks need a reduction in high year of tenure, down from 40 years to a maximum of 35 years. These cuts are needed to reduce a very top heavy military and eliminate red tape and wasteful spending. Second place to cut defense spending is DoD civilians. According to reports, 40% of the Air Force budget pays for civilians. These civilians do not deploy to defend America so why is the Air Force saddled with such a burden? Think about this, a 50% reduction in AF civilian staffing adds 20% to AF spending. That 20% could pay for KC-46 tankers and other needed items.
  • Thomas G commented on 2/1/2013
    Please congressman...can't you people do SOMETHING? Just do SOMETHING will you? What is it going to take to reach you people in Washington. I fully expected you to post on this blog this information while failing to tell all the voters the depth of what brought this about sir...and it is YOU...constantly misleading the public, constantly obstructing, and constantly laying claim to policy that has miserably failed over decades, and has completely discredited your theories for 12 years now. That is an astonishingly poor record congressman, and you poll us and ask how you and your staff are doing? Do you not read the newspapers sir, with the citizens having lost all confidence in your, the republican caucus and congressional failure. You are the only person in the district who doesn't grasp the scope of the failure congressman. Please just do SOMETHING...other than obstruct. When are you going to rescind the Grover Norquist blackmail pledge of obstruction, that you called 'just a piece of paper' in a personal letter to me? You have to do that sir, otherwise you really do not have an ounce of credibility on economic matters sir...not an ounce, and your record makes that very clear. Do SOMETHING sir...this is what the voters want...show up to work, hold meetings in your district so the public can actually ask you questions....answer your mail TIMELY congressman....but for heavens sake...just ACT will you please?
  • Thomas G commented on 2/2/2013
    Congressman, warning about impact and actually doing something about it are too different things. For example, you were warned that the Bush tax cuts would lead to disaster sir. You were warned by Bush's own Treasury secretary. You were warned by both past and present Treasury secretaries. You were warned by the IMF, past and present chairmen of the Federal Reserve, Nobel prize winning economists, economic scholars from academia, CEO's of the nation's largest corporations. You were warned by your own constituents, time after time after time. You were warned sir, and you did nothing but deny reality. You did nothing to face the voters honestly with the facts of your discredited theory sir. You have misled on regulations, the growth of spending which is actually the lowest since Eisenhower, the will of the public with respect to the Affordable Care Act, the Keystone pipeline and beyond. What we got from you sir was a dramatic increase in the income inequality, rise in poverty, opposition to essential financial industry reforms, and total silence as a member of the Judiciary committee on blatant acts of voter suppression in America. Sir, this constituency can only be served if you abandon the failures of the past and just face reality, rescind your commitment to the Grover Norquist blackmail pledge, start being intellectually honest with the voters and work with your colleagues. You wrote me a personal letter saying you will work with anybody....who congressman? Just name 1 person...who? Publish it here and lets take a look at the record.
  • Leslie Gaiter commented on 2/5/2013
    Congressman, defense spending is our problem. Due to the continuing increases in defense spending we have neglected the education of our children, the maintenance of our infrastructure and the health of our society. We spend more on defense than the remainder of the world combined when you include DEA, Homeland Security and Coast Guard functions normally under the defense budget in other countries. Who exactly is our enemy? Why are we mortgaging our future to fight a handful radicals that have caused less deaths in this country than we have inflected upon ourselves? The policy of our past have brought us to this point in time where we are viewed as the bully on the corner. We have preached democracy and financially supported dictators around the world, Egypt being a good example. We have invade countries and overturned legally elected governments for our gain. The history of this country has seldom been about supporting freedom or democracy and more about the support of capital gain.
  • LeeAnn C commented on 2/5/2013
    I wholeheartedly agree with Thomas G. It is time for Washington politicians to quit pointing fingers and begin to find real solutions to the real problems this nation is facing. Yes, on some level we should all take responsibility for the current state of our economy; from those of us who have filled our homes with cheap foreign products at the expense of the American labor force, to individuals who have for years, lived far beyond their means, to Senators and Congressmen who have left a legacy of bad, shortsighted decisions based on the polictal clout it would buy them. Politics as usual will do nothing to improve the dire state of our economy. Roll up your sleeves Congressman; if you have truly offered realistic ways to eliminate the waste in Washington DC,than you will have the support of the entire nation behind you. What specifically, have you suggested? Where can I find the catalog of reforms that you have proposed? I am sure there are literally thousands of ways to cut spending and ease the burden you and your fellow Congressmen have placed squarely on the shoulders of the taxpayers. Cut back on ineffectual military programs, pare down bloated government contracts, or here's and idea; quit sending our young men to fight in conflicts that will never be resolved. Perhaps then we will not be faced with "blanket" military spending cuts. The American public is not ignorant Congressman, so please stop disseminating partial information in order to further your political agenda. If you want us to take you seriously, get to work and find a way to be a productive part of the solution.
  • Timothy R commented on 2/5/2013
    What kind of debt are we going saddle our children with? We need to stop being the worlds policeman and stop now! Nope, instead we're building on drone base in West Africa. The Military Industrial Complex is a cancer that's grown throughout our economy, making it difficult to extract. Businesses which are totally dependent on the government teat, which considering our economic mess is totally unacceptable. We are all in this together and we all must sacrifice, especially those that rely on Federal support. Oh and don't get me started on the "double dippers", retired Admirals who's Military pension is 6 digits and their "consulting" job with a federal contractor is 6 digits as well! CUT DOUBLE DIPPING!
  • Patricia V commented on 2/5/2013
    Yes, securing our country through a strong defense is an important constitional requirement of our federal government and yes the decisions of our elected officials are well on their way to destroying that capability. It will hit Suffolk and Hampton Roads when Congressional stalemate will not prevent sequestration and your DoD civilians loss 1/12th of their salaries. The ramifications, will hit every business in the area. That is of course secondary to the loss of military might, readiness, etc. My question back to you is why did Congress so worried about the debt that they are destroying the best military force in the world, but approves a $60.4 billion bill that has only $17 billion in Sandy relief? That is $43.4 billion in pork. Includes $150 mil for Alaskan fisheries, $2 mil for the smithsonian, $8 mil for cars dor the department of homeland security, $5.8 mil for reforestation, $17 bil for community block grants and $10.78 bil for public transportation - future growth. Do I believe that cars, fisheries, reforestation are more important than our nation's security? The answer is NO. Only 545 people can take credit for the decisions that are destroying our country and you are one of those individuals. Stop writing checks riddled with pork, exempting yourselves from the laws you pass, and become accountable for being a member of Congress. Stalemate does nothing but destroy our country. I like your ideas - make them reality. I'm becoming of the opinion that everyone elected to a federal office needs to be replaced. We need to start over with a fresh slate.
  • clarence logan commented on 2/5/2013
    you and your republican allies blackmailed the democrats into signing onto this plan just so they could keep the country running at the time,right ? ever since since you've been complaing that the dem.'s hadn't been able to come up with a plan to prevent the sequester that the republicans could support. you refused to try to raise revenue or take any positive action to bring our jobs back.the only thing you can come up with is cut medicare, medicaid, social security,food stamps and any aid to the poor including cuts to unemployment benefits even after you voted for the job stealing free trade agreements. if it doesn't make the rich, richer and the poor, poorer, you don't want anything to do with it. RAISE REVENUE, REPEAL FREE TRADE AGREEMENTS, REPEAL BUSH ERA TAX CUTS ON INCOMES ABOVE 150K, INITIATE AN IMPORT TAX ON ALL MANUFACTURED GOODS, CREATE A BORDER CROSSING FEE,START A NATIONA LOTTERY, DO SOMETHING BESIDES WORK YOUR JAW !
  • Rebecca Hoffpauir commented on 2/5/2013
    As a trained psychologist for 28 years and a Virginia resident who moved from New Orleans in 1986, what I most believe in is logical consequences. I have to live within my budget and I had to make a conscious decision to make adjustments to my residency and my domicile. I learned as an adolescent how to prioritize spending and plan for the future, knowing it is GOING to come. I believe in a strong military, one that should be trained and deployed AT HOME when needed. We don't need to go enforce peace wherever capital interests are invested as a way to stay prepared for an attack on our home soil. Having a weak defense makes us an easy target, and hostile rhetoric makes us a prime target. What I'd like to see is better training for military that can directly translate to the private sector and individual empowerment. I want you to approve military spending for active duty training for the possibility of conflicts here at home, while putting reserve peace keeping forces in high crime areas where the subculture wages war against itself. Military service does a great job of instilling discipline and a common mind set that is proactive and demonstrates a "can-do" spirit. Add to that, such a large percentage of our troops choose the military as a way of getting an education, earning a living, or escaping their plight at home. If we are going to stay an all-volunteer military, we need to do a better job of making our team the best, brightest, and most prepared. Maybe if the draft were still in effect, we would be less likely to get into or stay in conflicts that result in so many casualties of service. What we seem to have done is enlist a lot of working class kids to go perform as mercenaries. I'd rather have a huge peacetime reserve to study possible environmental solutions and create better training and education for students/adults, all of whom could be pulled to action when/as justified.. I'd rather have military generals co-create solutions with scientists and finance wizards so that we don't need to provide food-filled backpacks for the weekend, non-nutritious meals for free and reduced breakfast and lunch in schools, subsidized health-care, & nutrition intervention for the public. If we were to use the resources and minds of our disciplined military like in the middle of the last century, all Americans would benefit. The military would be more integrated into regular society, logical solutions would be one option to resolving conflict, we'd use the trained soldiers in a positive & productive way, kids would be inspired, and we would need fewer manned assault vehicles. There are ways to do this better. Throwing salary or weapons at the problem is not sustainable AND it is ILLOGICAL. Build more tanks and elevate military roles and we then get involved in more & more conflicts that we are expecting. If we keep going in that direction, we could end up like Russia, trying to dominate the world. (By the way, what ever happened to the powerful Roman Empire, anyway?). We are not the world's police, but we could remain world leaders. We must LEAD BY EXAMPLE. Ask yourself, "What kind of example COULD/SHOULD I be setting?" "What kind of example AM I setting?" How different are the answers to those questions? Get it together, SERIOUSLY.
  • robert walters commented on 2/5/2013
    You are our man in Washington !!! we in Virginia can not rely on our own Senators ! fortunately we have you, Congressman Randy Forbes and I am an ardent supporter of you and your brand of politics...just like a captain of a football team ,I believe you can rally support from the uncorrupted in Congress...I have always stood tall for the truth and know beyond a shadow of a doubt that you are one of the very few that are of the same mindset !!! I meet different people every day and express my optimistic views and often mention your name !!! keep up the great job !!!
  • Ronald Seagrave commented on 2/5/2013
    Wise cuts to defense spending are necessary in addition to other spending cuts. Including huge cuts to Congress salaries and benfits
  • Albert Nelson commented on 2/5/2013
    I beleive in the unstable world we live in, that a strong Military is a necessary. You cannot "negotiate verbally" with some people. In my part of Virginia, the Military also supports the local economy. Without the Military, all of Southeast Virginia would turn into something similar to Flint, Michigan. I cannot believe how many people around want to "shoot themselves in the foot" so to speak, by voting in favor of Military cuts. The US Government can stop their excess spending on other things, such as their own personal "perks", as well as "Aid" to foreign countries who are not "Allies" of any sort. Lets clean up our own back yard first. I always enjoy the way you try and handle things up against the kind of oppostion you are in Washington. Keep up the good work!
  • Sean Flippin commented on 2/5/2013
    Congressman Forbes, by now the overall message that most Americans are conveying is that we are tired of ALL the politicans in D.C. I'm still trying to figure out how Bill Clinton was impeached and still seemed to stay in office and how the recent Secry. of Treasury was found guilty of tax evasion for over ten years and still was able to serve in the position he did when what he did was enough to put Al Capone in jail. I also find it infuriating that apparently politicians seem to be above the law and immune from any and all forms of criminal prosecution. That is something I cannot stomach for one more second! As a veteran I know what socialized medicine is like and it stinks! The VA healthcare system is dysfunctional at best and yet Obamacare was rammed down Congress's throat and passed! If anybody really read the fine print Obama, Pelosi and Reid would have been tarred, feathered and run out of D.C. long before now! I do not know why progressive liberal-minded people are apparently getting what they want when historically these ideas don't work! I support America's defense and having a strong military is part of that. It also helps to drive an economy through technological developments that trickle out into the commercial fields. We cannot however depend on the military to be the sole provider of our country's GDP, when there are other areas that can contribute. We also have to balance that with some environmental common sense. Finally, we also have to look to the stars if we are going to survive as a species. All of these things can help our economy, but the weak link is in the White House, The Senate, The House, The Supreme Court, shall I go on? I have seen corruption even on a local political level with the quality of local politicians and government employees. Enough is enough and we are all going to have to rise above these petty arguements or they will be saying "Remember that country called the USA that only lasted a couple hundred years and blew it just like the Romans?"
  • Robyn Jones commented on 2/5/2013
    Shameful and childish. Congress only cares about one thing. Instead of getting the job done, I feel that the Republicans are so scared of getting primaried by the Tea Party that it is adding more to the deficit that the Trillion Dollar Coin. It's time Republicans get some grit and kick the teeth out of the radical right and stand up and get the job done. We will not get anywhere fighting each other while the trouble makers sit on the side lines and give lots of lip service. I don't believe for one minute that the congress is going to let this sequester kick in any more than they let us go over the fical cliff or the debt ceiling. Just get off of it folks and get back to the work we sent you up there to do. Each side (D & R) might have good ideas if you would only listen and stop standing on your soap boxes. Remember, you can't get blood out of a turnip and the place to get more money are those folks at the top who don't need ridiculous tax deductions for big toys. Close those loopholes you said you would, pass the reasonable gun laws, give credit where credit is due and stop being childish in your approach to getting your way. If it is viable and really good for the people in this country, then do it. If you give, eventually you will receive something in return. The tactics of the Republican party that I have seen over the past 4 years is a very shameful view of how far a party will go to get their way. Trying to sneak a gerrymandering move on our unsuspecting state is only the latest offensive thing you all have done. Congressman, you were voted in to govern and do what your voters pay you to do. Not all of the voters in this state voted for you, but you have to represent us just the same. I hope you make the right decision for all of us. Tampering with our voting rights is another thing I understand that some are trying to restrict even more. I wouldn't do that if I were you. I for one will fight this again. So will lots of folks here in Suffolk. We will not put up with what we saw in other states that took place in Nov. Shameful, just plain shameful!
  • Rodney Joines commented on 2/6/2013
    Yes I agree we need a strong defense to maintain a strong America. So why isn't the budget a priority for Mr. Obama? Why is he concerned about immigration reform and gun control, the enviroment when this nation is about to go under financially? How can those concerns take a front seat to our budget woes! I can't understand this! I think Mr. Obama wants to ruin this nation!
  • Lori Gibson commented on 2/6/2013
    Congressman Forbes, I am greatly concerned as you are about our national defense being disturbingly reduced & weakened by numbers, women in combat , gays , pattern of Navy Seals lost , southern defense mechanism shut down , arms/planes given to radical Islam in Egypt , Benghazi scandal , Leaking serious classified info, Fast & Furious! I want to impress you that this president has been amassing 1.6 billion rounds of ammo , 7,000 assault weapons, tanks ? Are you or your Congressional colleagues aware of this? He is out of control drastically abusing his power DICTATORIALLY & involved in serious high corrupt scandals , never held responsible for any betrayals of country or office! He has talked about organizing his own domestic army . I suggest Congress start investigating his activities in this area & abuse of power has been allowed to go so far UNCHECKED that we are now ALL IN DANGER ...
  • Bob Sharak commented on 2/6/2013
    It’s important to note the drop in defense spending in 4th quarter 2012 was relative to the 3rd quarter 2012. This was, in part, a reflection of a temporary increase in 3rd quarter spending prior to uncertainties about fiscal cliff negotiations. . Since 2009, the Defense budget has been more-or-less stable. DOD military expenditures grew 6% over the period and Army Corps and other civilian expenditures grew about 2%. A sister account, VA expenditures, grew 46% over the period. Both the flat DoD expenditures and the increased VA expenditures reflect troop draw-downs in Iraq and Afghanistan and not a gutting of the military. . That said, it is good to see you recognize the importance of fiscal stimulus (aka government spending, aka Defense spending) in helping a weak economy. Further, I would note the severe, negative effects of the “perpetual fiscal cliff” scenario we seem to now face in the House. Taking the US to the brink every couple of months, particularly when members know, as you've shown in your post, that spending is important to sustaining the economy, doesn't seem to make much sense. In fact, federal spending as a percentage of GDP in 2011, the most current year for which figures are available, was 24.4% - DOWN from 25.4%of GDP in 2009. . Lastly, another factor impacting 4th quarter GDP was a decrease in exports, mainly to Europe. This reflects the still weak European economy, which is largely the result of misguided austerity measures. Measures which, at least according to rhetoric, House budget leadership would have imposed on the US economy as well. Budget Data Source: http://www.whitehouse.gov/omb/budget/Historicals. Tables 4.1 and 15.5 Respectfully,
  • Dave Smith commented on 2/6/2013
    All of you up there...JUST DO YOUR JOB...this is ridiculous, all of you are so busy fighting parties (Republican/Democrat) you have forgotten the people...once you are voted into office, party affiliations should go away...this Repuclican/Democrat crap (and I use that term loosely, have a better word for it) has got to stop...all of you are so busy pointing fingers at one another you have lost sight of the challenges at hand. Once again "JUST DO YOUR JOB"
  • ellen rideout commented on 2/6/2013
    We need a strong defense. The shape the world is in makes it fooish to downgrade our military ever. To do this makes us weak and open to attacks from hostile countries. The best denfense is a strong military. A strong military acts as a deterrence. There are other things we can do to to cut spending. One thing is stop the funding all these Green energy programs that go bankrupt and just wastes our tax dollars. Stop giving our tax dollars to the UN. Even better get the UN out of our country and stop them from trying to interfear in our business. We oppose a National Registry of fire arms because the nexrt step after registration is confisdcation. A part of National Denfense is a Citizenship that is armed and able to protect themselfs and our country. Instead of cutting defense spending, cut out all programs that are run by more than one department of the Goverment. We do not need this duplication of cost and loss of effiency. Also it is time for the US to stop giving away foreign aid to our enemies and to countries that are targeting our closest ally, Israel. The savings from doing these things should be used to lower the deficit.
  • Ron Smith commented on 2/6/2013
    The President takes Air Force One around the country, selling his policies. These proposals which he wants to enact into law, by asking the American People to call or write their Representatives, especially Republican to go along with his plan or else. He wants to break the GOP, as they are now splintered between Conservatives and Moderates. WE NEED a true Republican to travel, like he does, calling the President out and taking him to task on his proposals I would suggest Senator Marco Rubio, R-Fl take this challenge. Like the President, he’s also a great orator who doesn’t need a reading board, who could bring back the Spanish vote for a Republican nominee. Speaker Boehner should do this, but he’s not up to this task.
  • Robyn Jones commented on 2/9/2013
    I just finished reading a lot of these posts and it's nice to see people who seem to be on the same page. Too bad Congressmen seem to have a hard time doing that. I for one have never seen such goings on in congress since I can remember. I can't get over how much time the Republicans have spent on blocking everything Obama has tried to do over the past 4 years. Absolutely nothing has gotten done over this battle of wills and it high time that it stopped. You people are supposed to be adults and what I see on TV has nothing to do with what adults are expected to do. I don't expect anyone to agree with the president on all things but he infact did win the election. I didn't like Bush but he was my president and I supported him. I wish foresight had been better. That's over. Now it is time you Republicans make a sincere effort to work for the people who sent you there instead of your own personal prejudises. WORK IT OUT!! I just wish there were no parties, just good political representatives. I won't put the blame on Democrats because for I can plainly see that they are working for the good of all of us, not just the rich. I have never seen such a display of racial and sexual prejudise a political party since the Old South Dem's. WE fought these fights back in the 60's and 70's for God's sake! I know how I will be voting in November of 2014.
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