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The GDP Rorschach test

Today's grim Commerce Department report of GDP contraction (actually, it will probably end up being very tiny growth, once all the revisions are in) is a Rorschach inkblot test for students of the Obama economy.  The optimists say the decline in government spending brought down the numbers.  The pessimists wonder how anyone could think that's good news.  "Sure, the economy looks awful now, but that's only because the unsustainable government spending that's been propping it up for the past year petered out!"

And if we're going to look at GDP without government spending included, we ought to be consistent about it.  As it stands, this is one of those magical statistics - like unemployment - that can be media-massaged into good or bad news, depending on what they choose to include in the mixture of any given report.  

Take government spending out of the mix, and you're left with an economy propped up by strong consumer spending... during a Christmas season noted for its deep discounts, which relieved inventory surpluses that probably shouldn't have been there in the first place, just as consumer confidence hit a one-year low.  No worries, I'm sure investors will recover their optimism and pick up the slack... as soon as they forget every damn word Obama said during his second inaugural address.


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