Yet if you delve into the numbers one should be cautious of too much optimism.  The component which had the largest impact on the growth of GDP was personal consumption expenditures (PCE), specifically that of motor vehicles.  This was the result of the government program “Cash for Clunkers”, which enticed car buyers to trade in their old vehicles for a new fuel-efficient one—with the help of a federal government subsidy. 

One other component which had an impact on the growth of GDP was changes in inventories.  For the past couple of years inventories have fallen as firms, which faced falling demand for their goods, chose not to replenish their shelves and warehouses.  Face with limited goods, firms began to replenish their inventories for the upcoming Christmas season. 

I am sure President Obama’s economic advisers will be out in force telling everyone this is evidence that the president’s economic policies are working.  They should be cautious.  One quarter’s growth in GDP does not make a recovery.  Auto sales have fallen significantly since the end of the “Cash of Clunkers” program in late August.  As well, if holiday sales are stagnant, businesses will be reluctant to continue to restock their shelves.  Unless consumers pick up their purchases of non-automobiles in the final three months of 2009, the U.S. economy will not see such robust growth in the fourth quarter.

Because 2010 is an election year, President Obama and some Democrats in Congress propose sending each Social Security recipient a check for $250 to make up for the lack of COLA.  This will cost the federal government an additional $13 billion.  Rest assured, the president said the money would not come out of the Social Security “Trust Fund.”

In reality, retirees will receive a raise in their monthly benefit checks.  Because of the drop in overall prices and the fact the federal government will not reduce any retiree’s monthly Social Security check, each recipient will be able to purchase more goods and services next year.  In other words, the real value of their monthly payments increased due to the drop in prices.

Secondly, not to burst anyone’s bubble, but there is no Social Security Trust Fund.  The Social Security Administration (SSA) is required by law to “invest” any surplus in special U.S. Treasury bills.  In turn, the Treasury uses the money to pay for current government expenditures.  When it comes time for the SSA to redeem these special T-bills, they go the Treasury for payment.  The U.S. Treasury has four options to come up with the money:  raise taxes; cut spending in other areas of the budget; borrow the needed funds; or monetize the debt (i.e. create the money out of thin air). 

The average retiree receives $1,150 a month.  Had the CPI rose (instead of fallen) by the long-term average of 2.5% the COLA would come out to an additional $28.75 a month, on average.  If the president and Congress are afraid ask retirees to forego an additional $29 in Social Security payment for one year, how will they have the political courage to reduce the $100 billion in Medicare funding needed to make the various health care reform bills revenue neutral?

h/t Mark Perry’s Blog Carpe Diem

h/t Greg Mankiw’s Blog

Blame Friedman:  Or, How I Learned to Stop Worrying and Love the Bailout — Kevin Williams, nationalreview.com

Stimulus Spending Sags After Deadline Rush — The Washington Times

The President’s Best Hope in the GOP — The New York Times

Amid Health Reform, Massive Medicare Agency Still Headless — The Hill

President Obama Speaks on the Economy in NY Then Hits Another T.V. Show — The Washington Examiner

Boehner, McConnell Counter Obama’s Healthcare Blitz, Say Votes Aren’t There — The Hill

Spin Meter:  $2 Trillion in Health Savings?  Where? — Breitbart.com (via Betsy’s Page)

Does a Federal Mandate Requiring the Purchase of Health Care Insurance Exceed Congress’ Powers Under the Commerce Clause? – The Volokh Conspiracy (via Instapundit)

Baucus and the Threshold — Paul Krugman, NY Times

New Tax in Senate Health Plan Draws Bipartisan Fire — New York Times

Obama Begins Health Plan Media Blitz — The Washington Times

A couple of questions arise from their conclusion:  1) what will be the impact on the economy be when the federal government has to raise taxes or cut spending to pay back the principal and interest on the $797 billion stimulus bill?  2) will the same economists who said the stimulus would create millions of jobs be the ones who will judge whether any health care reform bill passed by Congress will or will not add to the deficit?