White House Council of Economic Advisors Chairman Austan Goolsbee’s take on the GDP numbers:
Notable contributions to real GDP growth in the second quarter included net exports (0.6 percentage points) and fixed investment (0.7 p.p.). Defense spending added 0.4 p.p. to GDP, but this gain was offset by declines in state and local government (-0.4 p.p.) and nondefense spending (-0.2 p.p.). Consumer spending rose just 0.1 percent at an annual rate, with a steep decline (23 percent) in motor vehicle consumption accounting for the weakness. The downward revision to first quarter GDP from 1.9 percent to 0.4 percent reflects lower contributions from inventory investment and imports.
So why is it that the administration has conceded the idea that we need spending cuts? Why they’re willing to concede it legislatively I can see. You’ve got to count the votes. But they seem to me to be conceding it conceptually, and have been for over a year. Why? Or to put it another way, suppose John Boehner phones the president up and says, “You’re right, let’s do a balanced grand bargain with $1 trillion in new revenue and $3 trillion in spending cuts,” what component of GDP will that make accelerate? Why?