While government spending rises, private domestic investment declines.
Recent data on the American economy shows that private investment is in a slump, while government contributions to GDP are rising. Even before the release of the figures for the fourth quarter of 2019, this trend was noticed.
In October, the Wall Street Journal reported: “What is driving the U.S. expansion? Consumers and government spending, according to a close look at Wednesday’s report on third-quarter economic output. A Trump administration priority — business investment — is lagging behind, while trade, another priority, is producing mixed results.” 1
The Journal article notes the spending boost during the Trump administration: “Mr. Trump has twice reached agreements with Congress to boost spending beyond budget caps enacted during the Obama years, adding to the fiscal stimulus that was applied with tax cuts.”
Then, the same article notes the trend in business investment: “Corporate tax rate reductions were meant to spur business investment, but that isn’t happening. Business investment has expanded at a 4.2% annual rate since Mr. Trump’s election, a slowdown from the 5.2% annual rate that prevailed before it.” Data since the publication of this article shows business investment in what can only be described as a recession.
The interactive visualization I’ve created shows gross domestic product by major sector: Personal consumption, gross private domestic investment, next exports of goods and services, and government. It is easy to see the decline in private investment and the rise in government.
Click here to access the visualization.
- Hilsenrath, Jon. What Is Driving The Economy — Before Trump and Now. Wall Street Journal, Oct. 30, 2019. Available at https://www.wsj.com/articles/what-is-driving-the-economybefore-trump-and-now-11572449817. ↩