Wednesday, April 29, 2009

US GDP Dropped 6.1% in The First Quarter of 2009

The GDP of the United States fell 6.1% during the first quarter of 2009. That was more than the expected drop of 4.7%. There is an obvious downside to a drop in our gross domestic product, but there is a more hidden consequence as well. The deficit projections (see Berman Post: Congressional Budget Office Project Higher Deficits For Obama'a Budget and Berman Post: Bush Deficit vs Obama Deficit - The Picture) are based on an assumed rate of economic growth or decline. Less growth or more decline and the projects are off. A smaller economy means less tax revenue. That means the deficit may be higher then currently projected. I have not seen any revised calculations yet, but we could be looking at a $2 trillion deficit for this year alone.

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