What drove the U.S. economy in 2011? And can it last?
12/28/2011 Posted by Brad Plumer – washingtonpost
Through the first three quarters of 2011, the U.S. economy expanded at a 1.2 percent annual rate. So where did this (middling) growth come from? The Council of Foreign Relations serves up a handy graph breaking things down:
The left-hand side shows the drivers of economic growth — both up and down. Government layoffs and budget cuts, particularly at the local level, slashed growth by about half a percentage point. On the positive side, meanwhile, the biggest driver of growth was an increase in personal consumption. Americans were buying more stuff. Trouble is, it’s unclear how sustainable even this modest spending binge will prove to be.
As the bar graph on the right shows, 44 percent of the increase in consumption this year came because incomes were growing and people were actually getting richer. By contrast, 36 percent of the consumption bump came because Americans were saving less, while 20 percent of the spending boost came thanks to the payroll tax cut, which is set to expire in two months unless Congress extends it again.
NOW YOU CAN HELP BY CONTACTING YOUR CONGRESS PERSON TO EXTEND THE PAYROLL TAX CUT!