Economy slowing down more than expected

From the WSJ:

The U.S. economy grew more sluggish than initially estimated in the second quarter, and corporate profits nearly dried up, further evidence that the recovery is losing steam.

Gross domestic product, the value of all goods and services produced, rose at an annualized seasonally adjusted rate of 1.6% from April to June, the Commerce Department said Friday.

In the government's first report of the economy's benchmark indicator a month ago, the growth rate was estimated to have slowed to 2.4% after a 3.7% expansion in the first quarter.

Still, the revised estimate for the second quarter was above expectations for a 1.3% gain among economists polled by Dow Jones Newswires.

Friday's report also showed that companies barely managed to post profit gains, following several very profitable quarters. After-tax earnings edged up 0.1%, well off the previous quarter's gain of 11.4%. First-quarter profits were revised down from the initial estimate of a 12.1% increase.

Year over year, profits remained 37.7% higher, with companies cutting costs by trimming payrolls.

So, it is now clear that GDP is in a downward trend after a brief sugar high in the 4th quarter of 2009 from the so-called stimulus package. Here are the GDP numbers:

1st quarter of 2009: -4.90%

2nd quarter of 2009: -.70%

3rd quarter of 2009: 1.6%

4th quarter of 2009: 5%

1st quarter of 2010: 3.7%

2nd quarter of 2010: 1.6% (revised downward from 2.4%)

Bad economic policy ideas continue to abound: The very same people that trumpeted from the highest tree tops that the stimulus was and has worked are now running around telling us that it simply wasn't big enough. Now we have liberals in Congress making noise about a second package. The first one didn't work so they want to try it again! We even see liberal economist Paul Krugman calling to use Fannie and Freddie, agencies that are in conservatorship and that currently carry $5.5 trillion in public liabilities, in more useless transfer schemes. My lord, when will the madness end?

Best post on Paul Krugman recieving the Nobel prize for economics

By Russell Roberts at Cafe Hayek:

I've talked to a number of people who are depressed and angry at Krugman's prize.

For me, it is just another reminder that those of us who believe in liberty are in for a long time in the intellectual wilderness. Today's intellectual climate is a taste of what it must have been like to believe in liberty in 1933, or what it must have been like to be Milton Friedman in say, 1962.

When Al Gore received the Nobel Peace prize I knew that the Academy had tossed political objectivity and credibility out the window.

Paul Krugman needs to get a grip.

Paul Krugman of the NYT has finally lost his marbles. He claims that the Republican political philosophy of privatization. He claims that the Republican political philosophy of privatization has led to FEMA’s weakening as a public safety organization:

…when the government is run by a political party committed to the belief that government is always the problem, never the solution, that belief tends to become a self-fulfilling prophecy. Key priorities are neglected; key functions are privatized; and key people, the competent public servants who make government work, either leave or are driven out.

Except Krugman fails to grasp that the Bush administration is hardly a small government proponent. With massive federal programs like No Child Left Behind and Medicare expansion it is puzzling that liberals like Krugman actually believe that this administration is anything but about big government. If there had been a Democrat in the Whitehouse these last eight years, these same programs would have been lauded as masterful strokes of good governance. FEMA is a perfect example of the problems of a large leviathan attempting to solve problems best left to more nimble organizations—and some of those are private entities. It seemed to me that the more that government (FEMA) tried to act after Katrina, the more it underutilized or prevented resources from being effectively applied.

The tragedy of Katrina wasn’t privatization. It was poor local, state, and federal governance during an emergency combined with decades of punting the obvious problems of weak levees to someone else when it was politically feasible. FEMA was probably never the great organization that many believed because it had never been really tested. Katrina exposed FEMA as the lame government entity that it had always been and, I suspect, still is.