All too often, we hear the comforting notion that when it comes to economic growth, a “rising tide lifts all boats”–that a growing economy benefits everyone through rising incomes. As the latest issue of Prosperity Watch makes clear, however, the reality of North Carolina’s economic growth has exploded this myth for far too many families in the state. Despite steady growth in Gross State Product–the total value of all the goods and services produced in North Carolina–median household income has actually declined since 2004, suggesting that the rising tide of growth is leaving too many families alone to sink. See the latest issue of Prosperity Watch for details.
It turns out government spending is the problem with the economy—there’s been too little of it over the last few months, according to Wednesday’s report from the U.S. Bureau of Economic Analysis (BEA).
Gross domestic product (GDP) dropped by 0.1 percent during the 4th quarter of 2012, the first GDP contraction in three years. While this would ordinarily seem an ominous sign for the health of the nation’s economic recovery, most economists and market-watchers have argued that the contraction is temporary and likely the result of government policy, rather than signs of a long-term downturn.
Specifically, the fourth quarter contraction is due to sharp reductions in government spending on national defense contracts coupled with a $40 billion drop in business inventories resulting from the same policy environment.