The third-quarter GDP figures, released on Oct. 29, showed the economy growing at a 3.5% annual pace, breaking a string of four consecutive negative quarters. The growth was driven mostly by a surge in the production of motor vehicles and other manufactured goods.
This number was greeted by many economists and journalists as confirmations that the recession is over. What’s more, the rise in real GDP, combined with a sharp fall in employment in the third quarter, implies that productivity also soared during the period. Good news, right?
The trouble is that those GDP and productivity growth figures could be significantly overestimated—perhaps by one percentage point or even more.
That’s because the official statistics are not designed to pick up cutbacks in “intangible investments” such as business spending on research and development, product design, and worker training. There’s ample evidence to suggest that companies, to reduce costs and boost short-term profits, are slashing this kind of spending, which is essential for innovation.
[…]
Here’s a sobering sign that companies are robbing the future to pay for short-term profits: Over the past year, U.S. employment of scientists and engineers—the people who create the next generation of products and make the U.S. more competitive over the long term—has fallen by 6.3%, according to a BusinessWeek tabulation of unpublished data. Yet overall employment has fallen only 4.1%.
Not only does this show that government numbers like unemployment and GDP are too broad to be really useful, but that the details within them are more troubling for the future than the public realizes.
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GDP went up because of the government spending to boost it. When those funds are gone, it will go back down.
Think of it this way — you have a tire with a hole in it. Instead of patching the hole, you air it up to prove it isn’t bad. When it’s aired up, you proclaim that all is fixed! It’s good for a day or two until the air leaks back out, at which time you proclaim you must have hit another nail.
This is our economy right now.
Companies should be monitored but, if being productive creating jobs, sales, and tax revenues in the US should be given some latitude in operations. As a small business owner/former owner government interference is a huge problem. As the gov seeks to find new taxes and ways to fine, fee, surcharge, and pay for non accountable non productive employees small businesses go out of existence, they succeed? In Rochester,NY I’m most familiar with auto and towing. I started in 03, and tracked public marketing stats watching about a third of tow companies go out of existence. I was productive, not profitable and due to the government was forced out of my area, and other personal government interference put me out finally in June. My efforts towards the economy paid 70K into the local economy last year including a small amount into charities. I had 3 trucks, was able to intermittently add a limited partner doing salvage recovery work. Cleaning up junk/hazard vehicles. This had longstanding outward community safety and property value improvements. Companies leave NY taking jobs due to high taxation and expenses. As one of the highest taxed states it should be an example of what not to do. Kodak used to employ 60K employees locally and last I knew of now below 10K. They are demolishing buildings to reduce tax burdens I believe. These are some good examples of where repairs to the economy need to take place. Forcing efficiencies needs to start with the government, not beef up a false economy with taxes as it can’t last. Who’s going to repay it when the jobs keep dropping off. Replace a $15/hr job or 5 with a min wage one, who won? What was really created, a loss to us all. You could start with the terror watch positions, we already have pd, fbi, military, and cia make what is there efficient to cut the waste reducing tax burdens and companies can profit, people become employed, and the economy heals productively.
Because many companies assemble or box up their overseas manufactured products in the United States it looks like the more we spend the better we are doing. Actually it is the opposite.
It is not the companies but unregulated greed. It is like cancer to the underlying economics of the country that is the problem. Why is it unregulated? Probably because greedy politicians are paid off by the lobbyists who pull their strings.
McCain was the top recipient of campaign contributions from the telecom industry, taking in $894379. He does not want Net Neutrality…wonder why.
#4 is spot on. I would suspect that the taxing entities funnel the monies to their chums in the private sector. Graft has to be eliminated.
I heard GM needs another 5 billion, looks like cash for clunkers worked.
#6 Alf said “Graft has to be eliminated.”
So true. And it’s too bad we might have to kick the good out with the bad, but we need to flush Washington of the lobbyists (especially if they are related to politicians), the politicians and all of their staff. And many (if not most) of the states.
@4 “Companies should be monitored but, if being productive creating jobs, sales, and tax revenues in the US should be given some latitude in operations.”
Eventually we’ll figure this out … but not very soon.
Having utopian lefty ideas is a good thing, but those ideas have to be financed.
Destroying the domestic USA private sector with excessive regulations and a huge inefficient government footprint that requires fat taxes isn’t going to fund anything.
Is the Czar Of Czars one or two newly created jobs?
Visit the U.S. Bureau of Labor Statistics.
Look up the U6, U3 and U1 numbers
You do the math and you will discover
saved + created = less than zero
Do not be an ignorant American, allowing the “news” to make your decisions.
I know I’ll get dinged for this, but:
How about tax cuts? (Not stimulus spending).
When the government spends money it must use tax revenue or run a deficit (or both) which really means there isn’t any real money be generated.
But with tax cuts, the only way to take advantage of a tax cut is to make a profit. If a company makes a short-term cut to its own productivity in order to make a profit, it will lose out to competition. The competition is rewarded for taking the long-term approach by being allowed to keep more of it’s profits.
And no one gets a bail-out.
@#12
Chuck .. the government knows how to do tax cuts.
What they don’t know how to do is:
1) Pay federal employees a REASONABLE salary. Average federal government salary = $79,000K per year.
2) Trim federal jobs
3) Be cost effective
So, they could cut taxes but what they don’t understand is the idea of cutting SPENDING.
If the government cut taxes without cutting spending, the problem would actually be accelerated.
Therefore, the only solution is the federal government going flat out broke with ruined credit.
It is absurd that it will take this scenario to reform our government to be more efficient.
IF our government was actually cost-efficient, we could have national health care for $40 billion a year — but our government isn’t cost efficient and the health care bill is a clustermess.
OK,
Fun trick..
A SMART company looks for the CHEAPEST in what EVER it does.
CHEAPEST place to build the company head quarters..
Cheapest employees..
Cheapest TAXES..
BEST tax cuts..
If you dont get them, MOVE..
SAME should be for our government..
Washington DC was built in a swamp are, in a SLUM area. What happened? Washington was SUPPOSED to be a cheap place for our representatives, away from home, as they were ONLY supposed to get a STIPEND(allowance) for travel and living expence WHILE in washington, then go back home to WORK.
I suggested it before..MOVE washington.
1. eastern seaboard is a target.
2. you can protect it, you cant fire ANTI aircraft guns and NOT HIT some civilian.
3. you can fire a Missile at an attacking air craft..
4. MOVE to a NICE open area with VERY little around it, and build from the bottom up. ALL the EXTRA stuff thats been added in the last 100 years is FLUFF and OLD. BUILD whats needed and NEW.
How does business work??
EASY..
I find a CHEAP item,
Sell it to you at 10 times the price.
have it MADE CHEAPER,
And KEEP the price HIGH..
And if I can sell you a CRAP product, for 100 times COST…I WILL..
LET THE BUYER BEWARE.
Someone wants to MAKE a 1 world ORDER..
LETS START with TOP WAGES..
Comparatively around the world..
USA Corps make the HIGHEST markup AND the highest wages..Even as a comparison of COST/PRICE/WAGE Percentage.
Heres my point.
I buy a Name brand $20 Microphone, and it craps out.
I buy a GE/Jasco $10 microphone and it WORKS great and sounds great. They sell so many they are thinking of raising the price.
Logitech made a TRACKBALL..$59
It didnt sell
They cut production..
Cut the price to $20..
SOLD LIKE HOT CAKES AT A FAT FARM..
Its still selling at $20
They Brought back production..and after 10 years, you can STILL GET IT..
Wrong Title. A better version would be:
Are Politicians Screwing The Future?
I think most Americans clearly know the answer.