Atlanta Fed predicts -2.8% GDP
218 comments
·March 3, 2025JumpCrisscross
itishappy
> GDPNow is an excellent tracking model, however, the January surge in imports - especially for gold - caused the model to move negative. As the Atlanta Fed noted: "the contribution of net exports to first-quarter real GDP growth fell from -0.41 percentage points to -3.70 percentage points".
Anyone know what's up with the surge of gold imports? We don't have gold tariffs, right? Are people hedging against the dollar's instability?
asciimike
Drive by comment, I saw: https://unusualwhales.com/news/the-race-to-move-gold-bars-ou...
> The sudden shift is fueled by fears of tariffs as Donald Trump threatens a trade war that could disrupt the gold market. Traders, worried that gold imports may soon face tariffs, are rushing to get their bullion into the U.S. before the policy takes effect.
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bb88
That's important because it's a pure mathematical model which may be wrong as it cannot take in all influences that drive it.
JumpCrisscross
> it's a pure mathematical model which may be wrong
Sort of. It means it requires interpretation.
An altimeter is an analog mathematical transformer. It takes a trained pilot to properly read it in cold weather. Similarly, GDPNow is not a headline number, but a tracking model. Someone struggling with the definition of GDP isn’t its intended user.
yorwba
No model can take in all influences that drive the economy. The more important aspect of it being a pure mathematical model is that there's no fudge factor for how much they like the current government. So it's not like the Doomsday Clock where the number is intentionally adjusted to drive the news cycle.
Rather, the GDP nowcast dropped because of the release of economic data that was historically associated with a drop in GDP. So if the model is wrong in this particular instance, there would have to be some reason why the historical association no longer holds.
t_mann
Without knowing the detail, it's almost certainly a statistical model. Call it ML if you like. GDP nowcasting models take contamporaneously observable variables like foot traffic as features and GDP - which is observable only with a several-month lag - as the target.
The same caveats as with all statistical models apply. We only see the relationship as observed in the past and it only captures correlations (clearly, foot traffic in and of itself does not meaningfully cause GDP).
mitchbob
All models are wrong, but some are useful.
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nimish
Ding ding ding
"All models are wrong, some are useful"; Why should I care what the ATL Fed's GDPNow model predicts? By all accounts a mathematical model is only as good as its assumptions and we know even the best economic models have spherical cow level assumptions
whatshisface
Mathematical models are so inflexible and unresponsive to real-world, commonsense facts, that as far as I know the value of what's in my pocket goes up at the grocery store. What we need is a grounded, grassroots approach to banking that eschews the elitism of sums involving numbers that, as far as anyone knows, are no more real than Plato's perfect spheres.
ummonk
GDP itself is a mathematical model too - just a much more sophisticated one which utilizes more data.
H8crilA
All due to exports collapse (scroll to the bottom):
https://www.atlantafed.org/cqer/research/gdpnow#Tab3
May still hold true, the 2s10s has recently deinverted, which is typically the last stage pre-recession.
whatshisface
After decades of seeing various administrations get blamed for economic downturns that were set up by conditions well preceding their terms, I guess it will be interesting to see what happens now that we're finally heading towards one that actually was caused by a discrete, identifiable policy, all within a couple of months.
rwmj
In Turkey, Erdowan managed to win an election a couple of years ago after pursuing a policy for years of reducing interest rates to "tackle inflation" (resulting, rather predictably, in inflation topping out at 44%).
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CamperBob2
Easy enough to forecast: he'll blame Biden, and his cult will lap it up.
9dev
After the shitshow in the Oval Office, I finally do unironically believe that he could actually walk down fifth avenue and shoot someone, and they’d still cheer for him and proudly declare it the victims fault.
throwup238
I feel like the defining feature of modern American conservatism is now a pathological inability to distinguish cause and effect.
rich_sasha
IME from other countries' autocracies, blaming the predecessors works wonders, but only for so long - maybe 6-12 months.
Eventually voters want cash in their pockets and if they don't have it, they get angry with whoever is at the top.
bryanlarsen
His cult don't matter though. It's the 5-20% of Americans that don't consistently vote for a single party that matter. They've already been convinced that inflation was Biden's fault -- keeping the blame on Biden might be possible.
myth_drannon
And then will force ceasefire between Ukraine-Russia and Russia will open the market to US and it will be flooded with US products.
JumpCrisscross
lotsofpulp
It is funny seeing this thread's title compared to the disclaimer right on the title page (specifically that the numbers in this report are NOT an official forecast of the Atlanta Fed):
>Note: The Atlanta Fed GDPNow estimate is a model-based projection not subject to judgmental adjustments. It is not an official forecast of the Atlanta Fed, its president, the Federal Reserve System, or the Federal Open Market Committee.
Actually, it says that in the first sentence of the second paragraph on OP's link too:
>GDPNow is not an official forecast of the Atlanta Fed.
rybosworld
Seems like a disclaimer more than anything.
GDPNow is a forecast.
And it's a forecast coming from the Atlanta Fed.
The fact it's not "official" means what exactly?
hn_throwaway_99
Looking at that graph, though, while exports collapse is certainly the biggest factor, it's not the only one. That is, looking at the March 3rd entry, "Residential Investment" is now negative, and if I'm reading it correctly (I hate it when colors on a graph are too similar) consumer spending is now zero when it was recently quite positive.
throw0101d
> May still hold true, the 2s10s has recently deinverted, which is typically the last stage pre-recession.
Perhaps worth noting that Harvey's original paper was about 3-month and 10-year Treasuries, but 2-year is now used by some folks:
> To determine whether the yield curve is inverted, it is a common practice to compare the yield on the 10-year U.S. Treasury bond to either a 2-year Treasury note or a 3-month Treasury bill. If the 10-year yield is less than the 2-year or 3-month yield, the curve is inverted.[4][5][6][7]
* https://en.wikipedia.org/wiki/Inverted_yield_curve
* https://people.duke.edu/~charvey/Term_structure/Harvey.pdf
> Harvey: Flat or inverted yield curves are historically associated with slow economic growth or recessions. I did notice that the yield curve inversion of the 10-year Treasury bond and the 3-month Treasury bill yield curve preceded all four recession since the 1960s. My dissertation committee at the University of Chicago was concerned that this might be a fluke given there were only four recessions. Frankly, I was nervous too because it is well known in science that strong findings become weaker after publication -- or sometimes vanish. However, in my case, this did not happen. Yield curve inversions preceded each of the next three recessions, including the important global financial crisis.
* https://www.linkedin.com/pulse/yield-curve-inversion-explain...
smallmancontrov
I always wondered about the choice of 2 years, it's fascinating to learn that the original choice was 3 months. What motivated the change? Is 3 months so short that it captures "noise" not related to long term planning or something?
H8crilA
It's not really clear which one is "objectively better" to look at. The tradeoffs are exactly those that you've listed. But you know, for a given point of time you can look at the entire yield curve - that's what I usually do. And when it comes to plotting you can plot both differences (it's easy to do in FRED, you can do many fun things with time series there).
AnimalMuppet
> May still hold true, the 2s10s has recently deinverted, which is typically the last stage pre-recession.
For those of us not in the know, could you give some more detail? What is 2s10s, what does it mean that it's deinverted, and why is that typically the last stage pre-recession?
nostrademons
I assume they mean the 2 year Treasury vs. 10 year treasury yield curve (dunno what the s stands for).
https://fred.stlouisfed.org/series/T10Y2Y
Normally long-term bonds have higher interest rates than short-term bonds, because investors need to be paid more money to take the risk of locking up their money for longer time period. The exception is that when you expect interest rates to fall in the near future, it makes more sense to hold long-term bonds, because you lock in today's rates for a longer time period, while the investor that picks up 2 year bonds will have to roll them over at whatever they can get in two years. That bids up the price of long-term bonds, which makes the effective interest rate fall. This situation is called an "inverted" yield curve, because it is the opposite of the normal situation.
A "deinverted" yield curve is when you have an inverted yield curve but the difference suddenly goes positive again. That's the situation we're in now, as you can see from the graph. And usually you get into that situation because the scenario investors feared actually happens: short-term interest rates drop, partially as a response from the Fed to inject more money into the economy and stave off the recession, and partially because stocks become very risky in a recession and so investors flee them and go to short-term bonds instead to preserve capital.
throw0101d
> https://fred.stlouisfed.org/series/T10Y2Y
And using the 3-month instead, as was done in Campbell Harvey's original paper:
ummonk
The deinverting isn’t so much due to the Fed injecting money as it is an anticipation the Fed will inject money by cutting rates in the coming future. The 2 year yield drops in anticipation of the Fed dropping interest rates in the next couple years. That’s what makes it a leading indicator.
0cf8612b2e1e
My searching turned up this: https://www.simplify.us/blog/trading-2s10s-inversion
So the difference in 2 year vs 10 year treasury bonds. If they are not trending in the same direction, the near term thinking is that the market is doing poorly.
H8crilA
It's one of the most popular predictors of the scary scary recession. In short, borrowing money for longer periods of time should cost more than borrowing money for shorter periods of time (even if you normalize both values to percent per year). There is also an explanation that is more mechanistic and related to central bank activities. However, sometimes the opposite is true, and that is the "inversion". Here's a nice explainer from the FT:
https://ig.ft.com/the-yield-curve-explained/
And here is just the chart (which is the top result for "2s10s"), click on Max:
https://fred.stlouisfed.org/series/T10Y2Y
BTW, there is something very similar in commodities markets - contango and backwardation. Contango comes from some old British word that's similar to "continuation" and describes the usual situation for non-perishable goods where if you, a buyer, want to delay the delivery of goods then I, the supplier, will charge you a little extra for using my storage space. This little extra is called "continuation fee", or "contango". It shows up in modern commodity markets like the CME on price vs time-of-delivery curves. But sometimes the markets are in backwardation and earlier deliveries are more expensive than late deliveries.
PS. "2s" meaning "the twos", meaning "two-year Treasury bonds"; it's a common abbreviation.
Kon-Peki
Thanks for expanding the “2s10s” :)
But to be a little pedantic, the 2-year and 10-year issues are Treasury Notes, not bonds. I don’t know why they use 3 different terms depending on the duration, but they do.
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hn_throwaway_99
Easy fix for that! Just change the definition of GDP by excluding government spending: https://apnews.com/article/trump-gdp-economy-government-spen...
criddell
There are easier ways. I'll write a poem and sell it to you for $50 trillion and you draw a picture and I'll buy it for $50 trillion from you. We could get this done today and bump GDP by $100 trillion.
JumpCrisscross
> I'll write a poem and sell it to you for $50 trillion and you draw a picture and I'll buy it for $50 trillion from you. We could get this done today and bump GDP by $100 trillion
Nominally, yes. Real, no. (In practice, given the barter resemblance of the trade, there would be no impact.)
gitfan86
Why is it real GDP when a government contractor makes a PDF report, but isn't real GDP when I make a poem?
zellyn
That's the point.
saulpw
Sales or income tax will be a problem though.
criddell
True. We'll probably have to make the poem and picture about Jesus and do it through our new church in New Hampshire.
arunabha
I hear the standard practice is to have the IP of the poem owned by a foreign entity(Ireland is pretty popular) and then for the US entity to pay a royalty of $50 trillion to the foreign entity so that the net revenue in the US is zero.
I believe it has it's own name - The double Irish.
onlyrealcuzzo
Not if you sell in a state without income tax. And I imagine someone creative can probably find ways to make this not classify as income.
0cf8612b2e1e
Solve the deficit at the same time!
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gruez
I doubt this sort of chicanery actually happens, or would actually work.
bugglebeetle
I see you’ve never heard of the market for fine art.
lotsofpulp
https://www.bea.gov/system/files/2020-04/GDP-Education-by-BE...
>Who calculates GDP?
>Economists at the U.S. Bureau of Economic Analysis estimate GDP using thousands of data points gathered by other federal agencies and some private data collectors.
I presume these economists would ignore outliers such as that example, especially ones that would result in unrealistic sales tax or other tax liabilities.
They have a spreadsheet showing sources here:
https://www.bea.gov/data/gdp/gross-domestic-product#:~:text=...
JumpCrisscross
Not relevant. The effect is almost entirely from net exports collapsing.
jfengel
But redefining the numbers does effectively prevent us from noticing.
JumpCrisscross
> redefining the numbers does effectively prevent us from noticing
Not really. If they started fucking with BLS statistics, that would be a problem. But DOGE hasn’t gotten there yet.
llm_nerd
I think they are pointing out that the current admin is doing the "sharpie on the hurricane path", or the "if you don't test for it you don't have cases" sort of approach.
But like those two ridiculous events, it's much, much larger than just government cuts. I mean...it doesn't even account for government cuts yet.
epoxia
Does anybody know how that would work? I know of the 3 ways of measuring GDP in econ basics (All income, All expenditure, All value add). I assume they only use one method and just pull out government? I assume it's expenditure method, but what would it mean for income method. Ignore incomes of gov employees? But then what about contractors. At what point do we start to view the number shifting as untrustworthy like China and Russia.
LastTrain
It was a joke
klodolph
This surprises nobody. People import goods before tariffs because the price is lower, and that money going to trade isn’t going to GDP. Greater economic uncertainty and higher savings rates. Difficult labor market.
The only question is the depth and the duration of the dip.
onlyrealcuzzo
It's interesting that the Great Depression was triggered by tariffs.
silveira
https://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Ac...
That's what put "Great" in Great Depression. Let's see if this one will be "great again".
zippy5
My understanding is that it was more the 9000 bank failures effectively created a credit crunch. Like if a bank closes and there's no replacement, then most small business were unable to get loans. Farmers who couldn't afford to plant new crops, factories can't improve equipment, inventory get's squeezed across the supply chain, ect. Exports were about 5% of GDP, suggesting that maybe tarrifs may have been the trigger but weren't the primary cause of the depression.
onlyrealcuzzo
Banking crises are largely accounting problems and can - mostly - be fixed from accounting.
There will be winners and losers, and many people won't like the result, but it's not going to end in a Great Depression.
Tariffs - on the other hand - can break your actual, real, non-financial economy - which cannot be fixed by accounting.
borgdefenser
The problem was tightening the money supply, this is common knowledge. It is why the central bankers always flood the system with liquidity when things go south now.
I would honestly pay a monthly fee for a board like this that is completely devoid of political nonsense. It is just so boring to read in every subject.
agent281
Then after that, they passed Hawley Smoot Tariff Act to make up for the budget short fall. That caused an already bad situation to get much, much worse.
827a
Though, to be fair, the level of tariffs we're talking about in the 30s was like 60-70%; that's a very far cry from where we're at today.
JumpCrisscross
> People import goods before tariffs because the price is lower, and that money going to trade isn’t going to GDP
It does, in inventories. But 34 have 77% reporting on inventories and 85% on imports [1]. To the extent this model is saying something, it’s to watch inventories build and deplete.
[1] https://www.ismworld.org/supply-management-news-and-reports/...
psunavy03
Hire clowns, get a circus.
notepad0x90
it's more like the circus hired psychotic villains because they thought it would be funny. The state of things is a direct result of a functioning democracy.
johnecheck
A car rolling down a hill is 'functioning' too, despite the fact that its brakes are out and it's on fire.
I prefer a more exclusive definition.
dgfitz
Hmm, if the brake system on a vehicle designed to have working brakes… doesn’t work, no it is not functional.
zip1234
Truly in the sense that democracy is susceptible to demagogues, of which Trump is certifiably one
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mvelbaum
it's more like the previous guys were so bad that people said that the guy the media lied to them about from 2015 until 2024 wasn't that bad after all.
- we now see that "bidenomics" was a disaster after the media decided to stop lying about it and blaming the people for not believing "the stats". job numbers revised down massively after it was no longer viable to lie during the election.
- crime rates revised silently UP: https://www.realclearinvestigations.com/articles/2024/10/16/...
- apparently there was no need for a "bipartisan border bill" or for "congress to act" in order to shut down the border as encounters are down 90% now.
people have their panties in a bunch about tariffs, but I don't understand why reciprocal tariffs are so bad.
it appears that people here are happy for things to go south just so that they could shit on trump. how about having a bit more optimism for the future, even if the near term will be a bit shakey?
notepad0x90
I'll just comment on the tariff part. They're bad because they're hostile and they damage economic relationships. Maybe you don't care about economic relationships with China but should very much are about Canada and Mexico, the only countries that border the US! They can find other trade partners, and military alliances are now damaged for a long time. Even if the policies are reversed and a new administration takes over, the US is now an unreliable and unstable partner to have. Tariff's can be a useful trade tool, done for economic reasons and after trade negotiations over time. But consider all the demeaning and hostile remarks about Canada, Mexico, their leaders and their people by the current administration, that is the context where tariff's are being applied.
Make no mistake, the current administration is anything but. They are systemically destroying the nation, so that they can forever rule over the ashes that remain. In the mean time, some groups of people will enjoy the warmth of the nation burning down. I desperately wish I was speaking hyperbole, being emotional or exaggerating.
Oh, and what is bidenomics exactly? he hardly passed any controversial economic policies. Just lots of investment on america and creating jobs, infrastructure,etc.. nothing remotely partisan, except the climate focused stuff maybe.
dalyons
The 25p tariffs on ca and mx are not reciprocal.
It’s hard to have optimism when there seems to be no plan to make the economy better, only destruction
timeon
> it's more like the previous guys were so bad that ...
Current "guy" used to be previous as well.
jajko
Are his voters at least in marginal numbers realizing whats happening and possibly about to happen, to US itself and globally? Or its all fine and going on as expected for them.
We get 0 on-the-ground info here in Europe on such topics (at least not in mainstream media), its all bombastic shit like he still runs his reality show and not directly affecting lives of hundreds of millions with each tweet/outburst. I'd expect massive difference in above between cities like SF, LA, NYK compared to midwest or bible south for example.
HEmanZ
My MIL lost half the people she works with in the federal cuts. She’s been a massive massive trump supporter (wears maga hats in public, even in San Francisco, has a painting of trump in her house, etc), but the cuts shook her. She told me “I thought they were only going to fire the people who didn’t do anything!” And “but what we do is so important, why are they firing us?”
Now she’s very worried because her, her husband, and all of their children except my wife work for the federal government. And one of her son’s entire life is funded by Medicare (which republicans have made clear they want to gut to make room for tax cuts).
Of course, they blame musk and not trump, but even for diehards like them I’m starting to see some cracks. They still have “faith” in the Donald but I think it’s a shaky faith now. If things get bad enough people really may stop liking him. We’re not there yet tho.
tokioyoyo
Sunk cost fallacy for a lot of them, to be honest. I’ve heard people criticize his big policies (trade war, trying to be isolationist and etc.), but still say “still better than what the alternative could become”.
jghn
It's hard to say as conflicting reports float around out there. Some things claim his approval rating is increasing, and others say it is decreasing. And of course there's plenty of stories out there about people who "regret their vote" or whatever, but you can also find stories about upset people who then say they'd still vote for him.
I can't find it now but I did see something the other day where a question like "Are you happy with the job Trump is doing" had an overall positive response. BUT, asking "Are you happy with topic X" for a variety of X like economy, DOGE, etc and most of them were quite negative. I suspect this is closer to reality: people aren't happy but they're not blaming him.
0x5f3759df-i
My previously mostly sane center right family members have all been spouting Russian talking points after the blow up in the Oval Office.
I think the information environment of most Americans that do not actively seek out true information is just cooked.
shakezula
I can give you some anecdata on this. Just yesterday I was talking with my Trump-supporter family members, and they literally had no idea he'd been convicted for felony fraud - they thought his only charges were related to the sexual assault accusations from E. Jean Carroll and they hand-waved those away with gusto anyway.
So to answer your question: It's all fine and going on as expected for them, and if you tell them otherwise you're labeled an alarmist crybaby democrat.
mjd
I think that's unlikely. My theory is that the voters will prefer to blame immigrants, Muslims, DEI, the Woke mob, Democrats, trans people, Antifa, and RINOs in approximately that order.
If Hitler could convince 65 million Germans that all their problems were caused by a million Jews, Trump should be able to manage something similar.
nwiswell
I believe this is due to a surge in imports in response to looming tariffs - supply chains are trying to stockpile before they hit. I am skeptical that this stockpiling is significantly displacing real investment.
The way that the figures are calculated views imports as a negative factor to GDP (because NET exports is an input to the model). Please correct me if I am wrong.
In any event, view the headline with suspicion.
bryanlarsen
Imports are neutral to GDP. The reason they're subtracted in the standard formula for GDP is that makes it easier to count.
GDP = Consumption + Investment + Government Spending + Exports - Imports
The reason that imports are subtracted is because Consumption, Government Spending and Exports all have a domestic and imported component. So instead you could have GDP = (Domestically produced consumption) + Investment + (Government spending on domestic products) + (Domestically produced Exports) and not subtract imports.
But that's a lot harder to measure than measuring totals and subtracting imports.
827a
Imports may be neutral to GDP, but they aren't neutral to this forecasting model [1]
[1] https://www.calculatedriskblog.com/2025/03/a-comment-on-gdpn...
bryanlarsen
Yes, they're part of the model because they're not excluded during consumption calculations.
JumpCrisscross
> this is due to a surge in imports in response to looming tariffs
“GDPNow is an excellent tracking model, however, the January surge in imports - especially for gold - caused the model to move negative. As the Atlanta Fed noted: ‘the contribution of net exports to first-quarter real GDP growth fell from -0.41 percentage points to -3.70 percentage points’.
Usually there would be an offsetting increase in inventories, but that is a lagging indicator. This is a short-term distortion and will balance out over the next month or so. I don't expect negative GDP in Q1.”
[1] https://www.calculatedriskblog.com/2025/03/a-comment-on-gdpn...
simne
I think, this named deferred demand - people known before about new tariffs and buy really need things before new policy taken effect, so now will be some time without new buys.
It will normalize in few years, may be for some markets in few months, and for some will need decades, from EU practice.
i_have_an_idea
This looks like the work of a team of stable geniuses.
pcj-github
You ain't seen nothing yet.
In a few short weeks, Trump imploded the fundamental US brand from good to um, pretty much pure evil. We are untrustworthy backstabbers. Rightly so, people hate us now; they are literally burning the American flag all over the world. USA products and services are toxic items. Not that we make much money off the travel industry, but you'd have to be a complete idiot to vacation in (or really even travel to) the US now.
It's going to get really ugly; I don't think people get it yet.
vladms
I think in various parts of the world people were already quite negative towards US. What happens now though is that some other countries will have second thoughts. I hope enough people can distinguish between one administration and "the people", but trust is hard to gain and easy to loose, so yes, some things will get harder.
jghn
The US was already granted its mulligan in 2020. And then 4 years later the populace went and double down on all of this. It won't be so easy going forward.
zamalek
> I hope enough people can distinguish between one administration and "the people"
"The people" voted for this administration precisely because of its xenophobic stance. Nearly half of us didn't want this, but we're going out the bathwater regardless: the majority and the administration are in agreement, and that's the correct perspective to have on the situation.
jajko
Countries? My friend right now add there all former US allies, including whole Europe and both your neighbors. Maybe gaining some new like guy from Argentina, Saudis with their murderous chieftain, and of course lets not forget biggest country on Earth by landmass.
US is a bully, and extremely unreliable one. We're in a no-trust era now. You will find some sympathizers of him everywhere of course, they mainly align with russian war supporters, at least in Europe. No surprises.
All this could reverse eventually but I just don't see it happening. 4 years is painfully long period and things will change forever, and I suspect not in ways 'architects' wish for. God I desperately hope we have at least some leaders with balls in Europe now that can steer adaptation to new situation quickly. We have massive potential at least matching current US one, but incorrect ideology for these times. And I suspect in 4 years situation won't change dramatically, if at all.
Remember those times that were, and how they were, how world was. I slightly feels like when 60s hippie era died and one Hunter S. Thompson quote comes to mind.
morkalork
I'm reading his book Hell's Angels: A Strange and Terrible Saga right now and there's an uncanny resemblance to present day in his comments about both the media and the ignorant, violent and societally useless men with deep-seated masculinity issues who became the Hells Angels (or MAGA as it is now).
lpapez
I'm sorry to break the news to you, but for a large section of the world population (especially in the global South), the US was the villain for a long time before Trump came along - and I don't mean only in the "evil empire" countries.
Trump only managed to spread this sentiment into the West, where it wasn't dominant so far, and sow doubts among formerly close allies.
LastTrain
Sure but we are talking about economics, and now the list includes our two biggest trading partners. Why he thinks making every day Canadians hate us is good strategy is beyond me.
skyyler
If the US being a villain to most of the world is a surprising concept to you, I highly suggest you read about the original 9/11 in Chile.
mikevm
Europeans don't like Americans, but are happy for Uncle Sam to bankroll their defense while they take 4-6 week summer vacations, retire at 60 with pension, have free education and throw away welfare on illegal migrants.
Maybe it's time to cut down the $700+B/year of spending on NATO and let the proud Europeans pick up the slack?
tokioyoyo
We both know that US wanted to do it, because that’s how you become the global soft-power and have influence on every other nation. Also, it’s not the fault of Europe that Americans don’t want free education, pension, 4-6 week summer vacations and etc.
You’re trying to find a reason why quality of life is worse in the states, compared to Europe and some Asian countries. However, you’re not willing to blame yourselves, and will keep finding an excuse.
Most of people who say the same thing at the same time call Europeans “poor, no growth, no ambition” citizens. And that’s ok. But you can’t have it both ways, you know. Go enjoy your richness or growing stock market.
mikevm
Europeans went wild with their social welfare spending so badly that now they need to import 3rd worlders because they have too many people who are on the government dole and not enough young people to pay into the system. Quite ironically, these "guests" are ending up eating away further from the welfare system and repaying their hosts with terrorism, as was recently seen, and will continue to be seen.
Also, it's easy to have social welfare when you have a homogeneous high-trust society... The more migrants the EU lets in, the more you see the whole thing deteriorate.
There's no such thing as "free" anyway, it's always paid by someone else. Pension at 60 is unsustainable, free education just devalues it, making it harder to fire people makes it harder to hire people, etc...
Europe is in economic decline, it's in population decline (as many other western nations btw), it's becoming more authoritarian (the UK prolly arrests more people for social media posts than Russia nowadays), and it's failing to compete on the world stage.
bdangubic
too funny how the MAN made you believe you cant have nice things because of “nato budget” :)
onlypassingthru
Whoa, and who's gonna replace the loss in the primes' revenue, hmmm? They pay top dollar lobbyists to prevent such a radical notion.
nobunaga
lol
Not only could America have had better benefits than Europe but you guys chose over and over again not to yet it’s Europe’s fault.
Love watching you guys shoot yourselves and yell at others. Popcorn has never tasted better.
mikevm
> Not only could America have had better benefits than Europe but you guys chose over and over again not to yet it’s Europe’s fault.
The social welfare experiment has negative expectation. That's partly why the Europeans are importing young migrants from 3rd world countries who despise them -- they are running out of people who pay into the ponzi scheme.
I can't wait for Trump to exit NATO and show that the European king really had no clothes after all.
timeon
> bankroll their defense
Like post 9/11 Article 5 or Afghanistan or Iraq?
Also decent amount of European defense budget went to US manufacturers. This will probably change with de-facto end of NATO.
drivebyhooting
Just wondering: If we magically made the federal government 20% more efficient would that decrease GDP substantially?
klodolph
The question is underparameterized.
20% more efficient happens when you accomplish 20% more work with the same amount of money.
It also happens when you accomplish the same amount of work with 17% less money.
Right now it looks like neither option is happening.
Tempest1981
What percent of government spending is due to federal employee payroll?
I heard it was 3% to 5%. If so, then 20% layoffs would save < 1%.
Unless they have a "trickle down/up" effect?
Similar data downthread: https://news.ycombinator.com/item?id=43246891
youngtaff
But then those 20% stop spending money which has a knock on impact on the rest of the ecomony
BWStearns
What if we make it accomplish 20% less but spend 10% more money?
ArnoVW
Ah yes but you see, all that government spending was just waste. So in the mind of the administration (or at least their public statements) they have miraculously achieved the second case.
hristov
Not necessarily. Hypothetically speaking, if the federal government becomes more efficient, i.e., it produces the same services for less money, the FED could stimulate the economy with low interest rates, so that the private market employs the people released from the federal government and we will have higher production and higher GDP.
Practically, speaking if you just fire a bunch of federal employees and close departments randomly, you are not making the government more efficient you are just making it less productive. Then if, at the same time, you put in a bunch of sudden arbitrary tariffs that cause inflation across the board, then you tie the hands of the FED and the FED cannot lower rates to preserve employment. So in that case, yes GDP will decrease.
pembrook
In the short term, yes. Long-term, no (it would have the opposite effect). Productivity gains accrue compounded over time, spending cuts show up immediately.
Government spending is included as part of GDP, so a 20% reduction in spending would have an immediate effect on this number.
That's why a lot of economists think GDP is a bad metric, since a debt-fueled spending spree (like the US government loves to do) shows up as GDP growth which makes it hard to compare GDP numbers since nobody ever adjusts for debt-to-GDP ratios.
If you look at this chart, you can see what I'm talking about. For the sake of argument let's say both Sweden and the UK had the same GDP growth rates and similar levels of government spending. Sweden would be the more productive economy because they'd be doing that with far less debt: https://en.wikipedia.org/wiki/Debt-to-GDP_ratio#/media/File:...
CPLX
A debt fueled spending spree by private enterprises boosts GDP too, for the same reason. That’s kind of the point of the number that measures spending sprees (and the other various kinds of spending).
The degree to which it’s a “good thing” or not is another question. The assumption that either party is automatically productive or wasteful is obviously incorrect. Governments can burn money or invent the internet and private industry can build jet engines or tamagotchis.
pembrook
If GDP is growing equally fast in both countries but with dramatically different levels of indebtedness, you can unequivocally claim one is more productive than the other at present.
Sure, either country might invent the next AI in the future.
But if we're assuming debt-fueled government investment is what results in this future growth (big assumption), then the less indebted competitor still has the capacity to take on all the debt they aren't shouldering at present to grow even faster.
marsovo
It depends on what the broader economy is doing
Is government spending crowding out private investment? (Is the private sector competing with the government for employees?). If so then GDP should increase
Is unemployment high? Then probably it would hurt GDP, but that depends on interest rates. If interest rates are very low, then there's very little cost to having excess employees being paid by the government: indeed presumably you can find something else useful for them to do. If interest rates are high, then the government is paying a heavy rate to subsidize these now-redundant employees. That's stagflation, which is essentially economic hard mode.
For example, what a waste it was during the Great Recession, when interest rates were basically zero, to have people unemployed instead of doing something useful, like maintaining or upgrading infrastructure. Alas!
simne
Definitely, no. After Laffer, in normal open market, all government spending (equal to sum of all taxes), should be less than 30% (less then optimum, so will have gap for emergency cases).
Why it is more effective to limit taxes, because by definition, private business is most effective form of production, and gov't entities are least effective form, and with tiny taxes people will have more money to reinvest into economy grow (via investments into existing and new private businesses), which is definitely more effective than spend money by government or just use government to redistribute money to people.
So in ideal case, fed gov should be zero size, and only in extreme cases appear and save world, then immediately disappear and return zero taxes.
https://en.wikipedia.org/wiki/Laffer_curve
PS what's also funny, usually money redistribution bureaucracy spend more money to their functioning than distribute to people, even in cases of very large systems with millions participants.
PPS yes, exist number of cases, where concentrated spending via government is beneficial, because of size factor. But problem is, many of such cases are only seen post factum, and it is not easy to predict, if something is such big thing.
Examples of cases benefit from fed size, are: railway from west to east on early 20th century; nuclear power ~80 years ago; space scale rockets in 1960s. - Now all these cases will be more effective handled at private business.
For now we have perspective cases of AI and quantum computers, but at the moment we don't know, which approaches will deliver value and which will just gather low hanging fruits.
simne
PPPS must admit, army/navy (including veterans care) and weapons industry are special cases, which need concentrated money to effectively function, and unfortunately they typically cannot be optimized, because already working underfunded.
Why need finance own army - to not finance enemy army. In ideal case, own army must be only tiny bit more powerful than enemy army, and this will be enough to save from war.
youngtaff
> After Laffer, in normal open market, all government spending (equal to sum of all taxes), should be less than 30% (less then optimum, so will have gap for emergency cases).
And your evidence for this claim is?
simne
Please explain, what exactly you don't understand from my comment?
- I have included source where you could find additional info, but sure I have not included huge number of other sources, because they are well known for people really interested in economy, and sure I will add some others if somebody ask.
JumpCrisscross
> If we magically made the federal government 20% more efficient would that decrease GDP substantially?
Not in the long run. (Particularly not if being done in the current deficit-increasing way.)
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light_hue_1
It's funny that this question isn't answered anywhere in the news!
The question is a bit vague, let's split it up into different options:
1. The government does exactly the same work as it does today, but with 20% fewer employees. The US spends $270B on civilian employees. So 20% of that is $54B. US GDP is 27.72T. 54B is totally irrelevant.
2. The government spends 20% less on everything it can. Most of what the government spends on cannot be cut, it's fixed. Social security, medicare, defense, healthcare, veterans benefits, interest in existing loans, etc. https://fiscaldata.treasury.gov/americas-finance-guide/feder... If you take away the parts that cannot be cut, you're left with discretionary spending. https://usafacts.org/articles/how-much-of-the-federal-budget... That's about $300B (because we need to leave out defense and things like veteran's benefits and income security which are discretionary but must be paid). What remains is education, parks, research, etc. If we cut 20% of that about $300B which is left over, we're still talking $60B.
So no, a magically 20% more efficient federal government won't do anything to GDP, because it won't do anything for government spending. Pretty much all government spending is in direct payments to help people and in defense. That's why DOGE and others cannot possibly make any difference at the large scale, they can only hurt people while providing nothing meaningful to the country.
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resters
Trump wants lower interest rates. The road to getting there will inevitably involve some pessimistic forecasts. That benefits Trump too because he can say "they all said the economy was going to be bad, but look what I accomplished" when the higher rates heat things up.
killerteddybear
Hey e/acc subset who were pro-Trump because of how much he was recruiting from Silicon Valley, is this the whole massively revitalized economy we were supposed to be getting?
jarsin
Guarantee you the super wealthy want deflation here.
Buffett etc is sitting on hoards of cash and want to swoop in and save the day again by taking over banks and oil companies.
mikevm
killing woke is worth it, even at the price of a temporary economic decline.
nobunaga
You really love commenting in this thread don’t you? Are you Russian or American? Can’t tell.
Either way, americas downfall is Gloria to watch. If you’re Russian, well you can’t really fall further down. lol
skyyler
Is woke in the room with us now?
dralley
How does economic decline "kill woke"?
Not the Atlanta Fed, the Atlanta Fed’s GDPNow model [1].
It’s pretty good [2]. And we are seeing a flattening of 2024’s aggregate wage growth of 4.15%. But the difference in wages is like 0.42% which is indistinguishable from noise. (GDPNow predicted a phantom recession in 2022.)
In this case, the model is probably recording a surge in January imports without “an offsetting increase in inventories,” as “that is a lagging indicator” [3].
[1] https://www.atlantafed.org/-/media/documents/research/public...
[2] https://caia.org/blog/2024/08/15/increased-accuracy-gdp-mode...
[3] https://www.calculatedriskblog.com/2025/03/a-comment-on-gdpn...