by Mitch Kokai
Senior Political Analyst, John Locke Foundation
An article in the latest Bloomberg Businessweek suggests the economy “is likely healthier than the GDP report suggests,” since the fourth-quarter decline can be attributed to unusual factors such as the largest drop in defense spending in 40 years.
Still, “What’s worrisome is that the underlying growth of the economy is so weak that a random fluctuation was enough to push it into negative territory.” The article goes on to quote such right-of-center analysts as Kevin Hassett and Douglas Holtz-Eakin.
Kevin Hassett, the director of economic policy studies at the American Enterprise Institute and a 2012 Mitt Romney adviser, says “horrifying” fiscal and monetary policy is the economy’s basic problem. “Everything’s wrong, and money is on the sidelines,” he says. “The financial sector is tightly controlled by the Fed. There’s rent control for the bond market and massive deficits that crowd out private activity.” Douglas Holtz-Eakin, president of the American Action Forum and an adviser to John McCain’s 2008 presidential campaign, says the economy’s persistent slow growth is evidence that more stimulus won’t work. “We do need to move away from the notion that we’ve got a cyclical problem that can be solved with countercyclical spending policies,” he says. “We’ve played that card.”