Fiscal Spending—The Steroids of GDP

Last week, first quarter GDP numbers came out—they weren’t pretty: GDP grew at a pace of 1.8% per year, during January through March. These figures are supposed to be adjusted for inflation. But if you think as I do that the Bureau of Labor Statistics is off in its inflation estimates, then at this pace, the American economy is probably contracting.

Body-builder, after a round of
Keynesian steroids—
I mean, “stimulus”.

Apropos of the announcement, Brad DeLong said, “Contractionary fiscal policy is contractionary.” Andrew Leonard at Salon added, “When you cut government spending in a slack economy, you practically guarantee a slowdown.”

DeLong and Leonard presuppose several things by these statements. One, of course, is that there have actually been cuts in government spending. Two, that the GDP number would have been better if there had simply been more government spending—so therefore, anyone opposed to increasing government spending is also against increasing the GDP.

But the third assumption they make is the assumption I’m interested in discussing: The notion that the GDP number is something we always want growing. The notion that a positively growing GDP number is always and with absolute certainty the thing we want most, as a society.

First off, let’s put away DeLong and Leonard:

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