Fox Business' Lou Dobbs cited declining GDP growth from 2010 to 2011 to claim the economy is not getting better, failing to mention that the decline coincided with a steep drop-off in federal stimulus spending.
During a discussion on Friday's GDP report on America Live, host Megyn Kelly explained that while the 2 percent rise in GDP was due to increased federal spending, it is an improvement from previous quarters' figures. Dobbs disagreed, pointing to GDP growth rate decline from 2010 to 2011 to illustrate that the economy is not improving.
While Dobbs is correct that GDP growth did decline in 2011, he fails to recognize that this trend coincided with a slowdown in stimulus spending. Previous Media Matters research shows that the increase in GDP after the recession was a partly attributable to federal stimulus, and that the "fiscal drag" experienced in 2011 was due to a phasing out of stimulus spending. In an August 2011 report, the Congressional Budget Office estimated that 85 percent of stimulus funds had been spent by June 2011. In the same report, the CBO noted that the stimulus directly increased GDP growth by between 0.8 and 2.5 percent. Many economists predicted that the phasing out of stimulus funds would lead to a decline in economic growth. Paul Krugman claimed "when the spending begins to tail off, the effect on growth turns negative," and analysts at Deutsche Bank predicted "the real effect of lost stimulus will start to hit" in the first quarter of 2011.