The economy sank at a pace of just 1 percent in the second quarter of the year, a new government report shows. It was a better-than-expected showing that provided the strongest signal yet that the longest recession since World War II is finally winding down. The dip in gross domestic product for the April-to-June period, reported by the Commerce Department on Friday, comes after the economy was in a free fall, tumbling at 6.4 percent pace in the first three months of this year. It's [GDP] the total value of all goods and services — such as cars and clothes and makeup and machinery — produced within the United States and is the best barometer of the country's economic health.
Ron Insana said on CNBC today that he thinks things are actually even better than what most people realize. He said that we're seeing continued improvements in many economic indicators such as housing statistics and he predicts that GDP will actually turn positive in the third quarter. That makes sense if this current dip in GDP was only 1%. And he along with many economists are praising the Obama administration's "cash for clunkers" plan, which is helping stimulate car sales.
"It's a huge success," Ken Czubay, Ford's U.S. sales and marketing chief, told reporters Thursday. "(But) if you are planning on buying on Halloween night, I would probably move that forward." Czubay said it is too early to tell just how big of an impact it is having on Ford's July sales, but he said the month appears poised to be up sharply. He said Ford is urging lawmakers to provide more funds for the cash-for-clunkers program, saying the money already allocated could be exhausted by the end of August (UPDATE: Congress is poised to extend the hugely successful program by adding an additional $2 billion. The House has passed it in a solidly, bipartisan way. Dick Garber, owner of several dealership including Garber Buick in Saginaw Township, is hopeful Congress will extend the program. "Selfishly, it's been a great program," Garber said. "And ultimately, it's spurred the economy and reduced emissions, which is good for the environment."What's clear is that if the objective is to get people who are sitting on the fence to purchase new vehicles, Cash for Clunkers surely works. It appears to have succeeded in various countries in Europe and it's now working in the United States. Already, industry analysts are predicting that the initial overwhelming consumer response to the CARS program will boost annual US. market auto sales, once struggling to reach 9-million new units sold, to 10.7 million units or higher. If so, score one solid stimulus win for the Obama administration.
Ron Insana went on to say that perhaps Obama should apply this to other areas such as a withholding tax holiday or apply it to extending the refundable tax credit toward buying house increasing it from $8,000 to $15,000 the housing sector might do better too and faster. Critics say this is insurance America to be a bailout nation, which Insana laughed away saying that he has talked to former federal reserve officials [I suspect he's talking about Allen Greenspan whom I've had my disagreements with but whom I think is overall a smart guy] who have often talked about whether you let the free market work unfettered during a crisis or whether the government, including the federal reserve step in.
The gentleman [says Insana] I talked to at the time said, "Listen, in theory, you know I believe the free market should work but in practice letting something fail or letting an industry go is not a social experiment I'm willing to undertake." And we got to that point here where the government simply had to step in and provide the stimulus and whether or not we're picking winners and losers here as a form of industrial policy because we're getting more fuel efficient cars in the cash for clunkers program is largely irrelevant.
TPJ: It seems the critics of Obama that his stimulus programs are working spoke to soon. I knew that this would be the case and that the economy would be turning around by the mid-term elections next year and certainly by Obama's re-election campaign in 2012.