Market Watch: Are we already in a recession?

[Better Believe It]

Are we already in a recession?
Commentary: We could be just one shock away from a double dip
By Rex Nutting
August 4, 2011

Far from being supportive of the economy, government could be the source of that final shock driving the economy over the cliff, according to Dumas of Lombard Street.

The main source of economic weakness in the first half of the year was fiscal drag, a fact not universally recognized in tea-party nation. Government spending fell at a 3.5% annual rate in the first half of the year, subtracting 0.7 percentage points from annualized growth in the first half.

Government policy is likely to become an even stronger drag on the economy in 2012, argues Dumas. The debt-ceiling deal means federal spending will slow by a modest $20 billion or so, but the bigger problem will be the expiration of several stimulus programs, such as extended unemployment benefits, the payroll-tax cut, and the business-investment tax break. And, of course, the continuing decline in state- and local-government spending.

All told, fiscal policy will subtract about two percentage points from growth in 2012, according to Dumas’s reckoning. That’s a huge drag on an economy that’s only growing at 2%.

Read the full article at:

http://www.marketwatch.com/story/are-we-already-in-a-recession-2011-08-04?reflink=e2emsn

[Taverner]

1. What is it? 2 or 3 quarters of negative growth?

[DJ13]

2. For the top incomes, not yet

For the rest of us, it never ended.