A warning about that good-looking GDP

Thursday, August 30, 2018
 | 
Chris Woodward (OneNewsNow.com)

cash 100-dollar billThere's something to consider about the latest look at second quarter GDP: government spending.

While the U.S. economy did grow at a strong 4.2 percent annual rate in the second quarter, the best showing in nearly four years, government spending is among the reasons for growth and that is a cause for concern, says economist Stan Veuger of the American Enterprise Institute.

"In a sense, a good chunk of this very good number is a sugar high," he adds. "The federal government just set a new level of spending that is significantly higher than it was, and some of that was military but all kinds of federal spending."

Veuger points out that the increased spending comes after Americans enjoyed GOP-passed tax cuts.

"To the extent that the tax cuts were deficit financed," he warns, "that's also going to be a temporary stimulus, and so the combination of those two types of fiscal stimulus is going to temporarily increase the GDP growth numbers but in a way that's not going to be sustainable a year out."

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