I just read a new ABC News story quoting Treasury Secretary Tim Geithner talking about how the chances of a double dip recession are at their lowest point ever! And he mentioned the incredible growth this past quarter. And I remember reading that the growth was kind of anomaly, it wasn't real growth, so to speak, as it was based on businesses working through their inventory. So I asked our resident econ prof, Professor Steven Kyl from Cornell, what he thought about Geithner's comments. Here's what Steve wrote me:
Hey everyone is entitled to an opinion, but it is a bit distressing to see important administration people engaging in cheerleading when they ought to know better.
Sure, 6% quarterly growth is pretty good but one quarter doesn't make a recovery especially, when a large part of it was an entirely predictably (and predicted) inventory bounce. That is not what makes a sustained recovery. In addition, I and others always said that the current stimulus will run out of steam later this year if it isn't followed with a second wave of stimulus. This is still true, but is in fact even worse now that the administration has started to parrot the deficit scolds and talk about actually decreasing spending. This talk is everywhere, see for example my post later tonight in which the NYT is simply accepting as true GOP talking point that we can't spend money on any new programs for another decade. It just isn't true.
Of course, I could be wrong and Geithner right. But I wouldn't count on it.
