BUSINESS
07/30/2014 12:25 pm ET | Updated Jul 30, 2014

The U.S. Government Has Hurt The Economy In 11 Of The Past 12 Quarters

The U.S. economy has just gone through some big, big changes. Big, good changes! But one thing has not changed: federal government spending, which can't ever stop being the giant turd in the economy's punch bowl.

U.S. gross domestic product grew at a shockingly large 4 percent annualized rate in the second quarter, the Bureau of Economic Analysis reported on Wednesday. That was a wild swing from a shockingly bad 2.1 percent GDP collapse in the first quarter.

Everything was up in the quarter -- consumer spending, business spending, housing, imports, exports, hooray. One thing was not, however, up: federal government spending. That fell for the 7th quarter in a row. Federal spending has cut into GDP for 11 of the past 12 quarters, in fact. Here is how that looks in chart form:

government spending

In other words, the U.S. government has been a drag on the economy for the past three years, which was not coincidentally when congressional Republicans started holding the government hostage in exchange for painful austerity measures. In fact, big spending drags began hitting the economy in the fourth quarter of 2010, just as Republicans were winning control of the House of Representatives, setting the stage for the budget fights to come.

The constant harping you hear about government spending is designed to make you not hear about how government spending has been slashed at the fastest rate since the end of the Vietnam War.

That slashing has helped keep the recovery from the Great Recession sluggish and terrible. Even that second-quarter GDP number wasn't as strong as it looked on the surface: Nearly half of the 4 percent GDP growth was due to businesses restocking inventories, which could mean they weren't selling enough stuff, or it could mean they won't want to build inventories again in the third quarter.

Of course, all of these numbers are subject to being revised dramatically a month from now. There could be big changes to these big changes. But one thing will not change any time soon: the drag of weak federal spending.

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