A great graphic from The New York Times:
Any higher education students out there who think the whole Washington debate about raising the debt ceiling is just some hypothetical exercise that doesn’t affect you, think again. If the debt ceiling isn’t raised, then we don’t know what the government will pay and what it won’t pay in August and September. And Treasury isn’t dropping any clues as to what they’ll pay and what they won’t. Your student financial aid, your Pell grant or tuition grant or research grant, might be what doesn’t get paid. Just because it’s approved now, doesn’t mean the government will actually pay it without a debt ceiling increase.
In the comments to my post on the extraordinarily weak 2nd qtr 2011 GDP numbers a reader asks for my thoughts about debt-to-GDP ratio and “how can we afford more stimulus”? Since my response will be a little long and others might be interested, I’ll post it here.
Reader AZLeader asks:
Here are some other GDP indicators I’d value your comments on…
Government spending now is somewhere around 28% of GDP, well above the 60 year average of 18.6% or so.
Spending as a % of GDP is indeed up, but it’s not primarily as a result of discretionary spending going up. In other words, the so-called Stimulus spending bill didn’t do the damage. The ratio is up in large part because the denominator (GDP) shrunk. We lost a huge chunk of GDP. That has a double effect on the ratio. When the economy goes into recession and doesn’t recover it reduces the denominator by a big chunk. But a recession also automatically increases government spending through automatic stabilizers. Spending on unemployment compensation, welfare, Medicaid, SS disability claims, etc. automatically increases, thus increasing the numerator as well.
Krugman shows this graph from the St.Louis Fed using non-partisan Congressional Budget Office data that compares the changes in spending to changes in the potential GDP over 60+ years. Potential GDP is the GDP that would be produced if we were at full employment. It indicates our capacity to produce if we choose to put all our resources (labor) to work. Any value that’s above 1.0 indicates that spending is rising faster than potential GDP. A value less than 1.0 indicates that spending is might be increasing in total dollars, but it’s increasing less than what the potential GDP is. When the value is less than 1.0 it means that government spending is having a contractionary effect on the economy. As you can see, the issue in the last few years is that despite the increase in dollars of spending, it’s been peanuts compared to the damage done by the banks’ financial crisis and the ensuing recession with high unemployment. This part of the reason why I’ve (and a lot of others) have said the stimulus program was too little and too short.
Government deficit spending last year was about 10.9% of GDP, way over the sustainable comfort level of 2.6%.
There’s two issues here. First, There’s nothing that says 2.6% deficit as % of actual GDP is “sustainable” and greater than that isn’t. “Sustainable” in the sense that we can operate at that level indefinitely might be less than 2.6% or it might be greater than 2.6%. For private sector entities (you,me, households, corporations, state governments) there’s a real meaning to “sustainable”. But that’s because ultimately our spending ability is limited by the combination of our earning and borrowing ability. Borrow too much and eventually lenders say “I don’t think you can pay it back, so pay higher interest rates, the debt begins to spiral up, etc.”. But for a sovereign national government that creates it’s own currency, borrows using bonds denominated in that currency, and doesn’t strap itself to some fixed exchange rate system (like gold standard), there is no financial limit to the borrowing. All of the nations that are having debt crises now (or in the past) have either strapped themselves to somebody else’s currency (Greece & Ireland with the Euro, Argentina in 2000 with the dollar) OR they borrowed their money in somebody else’s currency (less developed countries borrow in $ not their own currencies) OR they have a fixed exchange rate (under the old gold standard 80 years ago).
What matters for “sustainability” is the ability of the economy to produce. Does it have the real resources to produce what the government is willing to spend on? In this sense we see that even a 1-2% deficit-to-GDP ratio might be too high if we were at full employment and had no excess resources. But the U.S. today has more than 10% of it’s labor force (even more since many would be workers aren’t looking) sitting on it’s hands doing nothing.
Another way of looking at the sustainability and desirability of deficit spending is to compare the interest rate the government has to pay to borrow now vs. the long-term growth rate of the economy. If interest rates on government bonds were in the 6-8% range or higher (like in Greece and Italy), then large deficit spending might not be sustainable. But the U.S. is borrowing at near record low interest rates, less than 1% for a year. Borrow at low rates, spend to invest in those things that grow your economy and get paid back later in larger GDP.
That brings me to my second point on “sustainability”. The budget, government spending, is dynamic. What GDP is the greatest determinant of what the deficit actually ends up being. The budget discussions in Washington about 10 year projections are usually static projections. They assume they can change the spending amounts while keeping the projected path of GDP the same. Doesn’t work that way. Running a large deficit relative to GDP, the kind of stimulus I think we need, will raise the deficit-to-GDP number immediately, but the ratio will then automatically decline. Again it’s the automatic stabilizers mentioned earlier. As people go back to work and unemployment declines, the GDP rises faster. Those people also pay taxes, so government revenues increase. Spending in the form of unemployment comp, welfare, disability payments, Medicaid, etc all drop as people go back to work. The deficit automatically shrinks relative to GDP. This was how Clinton managed to produce a narrow government surplus at the end of this second term. He eliminated the deficit completely. It wasn’t by cutting spending. It was because the economy grew enough to reach full employment.
Government debt is just under 100% of GDP, the highest level in our economy that we’ve seen since WWII where it briefly spiked well above that.
Yeah, so what? Japan’s debt is around 200% of GDP and has been for over a decade. Government debt is not like private debt. It doesn’t have to be paid off. Government bonds are really just like government issued paper currency that pays interest. This is why banks and investors love government bonds. It’s a way to hold large amounts of cash and still earn interest. A growing economy also needs a growing money supply and a growing supply of government bonds. In the early part of this past decade (I forget the year), Australia was running a surplus for a few years. It was paying down it’s national debt. The bankers went to the Australian Treasury and the Australian central bank and asked the government to borrow and issue bonds anyway because they needed a larger volume of bonds in existence in order to run the banks.
Through “Intergovernmental Holdings” the U.S. government owns about 1/3rd of its own debt.
Yes. $4.6 trillion, approximately 1/3, of the $14.3 trillion total US government debt is “owned” by various other parts of the government. The biggest chunk is the Social Security trust fund, $2.7 trillion. The rest is in various other government “trust funds” such as Railroad employees retirement fund, government employees pension plans, highway building trust fund (paid by gas taxes), etc. These funds reflect special taxes or fees that have been collected that are by law dedicated to a particular purpose, but the government hasn’t spent the money on that purpose yet. The accumulation of money in these funds (think of them as pre-payments of special taxes) must by law then be “invested” in the safest interest bearing assets available, which happen to be U.S. government bonds. Let’s take a brief look at one of these funds: the Social Security trust fund. The way SS works, dedicated SS payroll taxes are collected each month to pay for this month’s benefits. (FICA taxes). Obviously we want benefits to be relatively constant month-by-month. Grandma wants to know just how much her check will be next month. But the payroll taxes collected each month vary greatly. So, by the original law, SS Admin was supposed to make sure it always had enough liquid cash on hand to pay 1 year’s anticipated benefits. This is the trust fund. In the 1980’s the trust fund was too low – nearly depleted because benefits had been increased. So payroll taxes were increased. When the trust fund had fully recovered (circa 1991), the decision was made to continue to collect extra payroll taxes from workers in the 1990’s and early 2000’s in anticipation of the baby boom. The current $2.7 trillion trust fund represents way more than the law said was necessary. It represents the baby boomers having already pre-paid their own retirements.
These intra-governmental bonds cannot be traded on the public market, but they are regular debt obligations of the Treasury nonetheless. To not pay these bonds is to renege on previous promises that people have relied upon. It also might not be legal, although that is outside my experise.
In addition to the $4.3 intragovernmental holdings, there’s $1.6 trillion in government bonds held by The Federal Reserve. These are ordinary bonds that The Fed bought from banks (that’s where banks get reserves). Any interest paid on these bonds goes to The Fed who then sends it back to the Treasury as Fed profits. This amount could easily be reduced by maybe 1/2 without consequences.
Given these constraints, where can we get the money to fund spending programs like the “stimulus” to create jobs and recover the economy?
As I attempted to describe above, it’s a fallacy to think of the government as having a financial constraint on it’s resources. Government (again, a sovereign, fiat money, floating exchange rate, government that borrows in it’s own currency) faces no financial constraint. Government is not like a household no matter how often misguided politicians say it. You, I, households, firms, corporations, and state and local governments must obtain cash from either income or borrowing before we spend it. Government does not face that constraint. Government defines and creates the reserves that can become our spending money. It has a monopoly on the creation of money. And money today can be created as fast a somebody at the central bank can type (although we may not want to create it that fast).
Let’s consider what actually happens when the government spends. The Treasury writes a check and sends it to a contractor, or SS beneficiary, or someone. That check is drawn on an account at The Fed Reserve bank. Let’s suppose you get the check. You got income from the government. You take the check to your bank, let’s say it’s Chase. You deposit it in your checking account. You go out and spend the money by using your debit card to buy dinner, thereby helping to create a job and employ a waiter and kitchen staff. But what happens at the bank? Chase takes your check and sends it to The Federal Reserve. The Federal Reserve takes the government check and credits Chase’s account at The Fed. This creates bank reserves. The Federal Reserve has no limit on how much bank reserves they can create. They can create all they want. In the barbarous old days of the gold standard (before 1971), The Fed would have had to make sure it had enough gold on hand before issuing any reserves. No such limit now.
So why doesn’t the government just spend endlessly with no limit? Well, there’s no financial constraint on the government spending, but there’s a real resource constraint. When the government attempts to increase deficit spending it is in effect placing orders for work to be done, things to be produced, and people to be employed (you do the same thing when you spend). As long as there are unemployed resources to be put to work, the deficit spending is OK. It stimulates more activity. But if there are no idle resources then increased deficit spending will produce inflation because the government would be bidding against everybody else for resources. At nearly 10% unemployment we have plenty of idle resources and that’s why there’s no threat of inflation despite the worries of those who don’t understand the gold standard ended 40 years ago.
There’s one other aspect of deficit spending that’s important. This is not the result of theory, but rather is pure accounting. I’ll just give a very brief mention of it here, but there’s a full tutorial here by Randall Wray. A one page view of this idea is here. Basically, government deficits are the mirror of the private sector. There’s three “balances” that must add up to zero. There’s the government spending vs. taxes balance, called the budget deficit. There’s the question of whether the private sector (all households and firms together) are accumulating financial assets. This is called “net private financial wealth”. It’s the difference between what our private incomes each year and our private spending. If we spend less than our income, then we are accumulating net financial assets, or in plain language, we’re putting money away in our bank accounts and investment accounts. There’s a third balance which is the external capital account balance. Basically it’s like the private net financial asset accumulation except it records how much foreigners are accumulating U.S. denominated financial assets. If imports are greater than exports (trade deficit), then foreigners are collecting U.S. financial assets, typically government bonds.
Now there’s no way the private sector can create net any new financial assets. If I loan money to you, yes, I create a financial asset on my books. But you’ve created an exactly offsetting private debt on your books. In aggregate, the private sector cannot create new financial assets. That’s because financial assets are things like money, currency, and bonds. And they can only be created by government. They can also be gotten from foreigners by selling more exports than imports, but that ain’t gonna happen anytime soon. By accounting, these three balances must equal zero. This means that when the government runs a deficit it creates net financial assets that the private sector can accumulate. If the government creates a surplus.
In simple language, this means that, assuming we run a trade deficit, that a government deficit means the private sector can accumulate financial assets. If the government runs a surplus, though, it means the private sector must go deeper into debt itself. See the answer to question 1 here for another explanation. There’s a dramatic historical graph that beautifully illustrates this relationship over the last 60 years. Unfortunately, I can’t put my hands (mouse, really) on it right now. When I find it again I’ll update. The point is that government surpluses, the kind that the Tea Party and many Republicans claim they want as being responsible, can only happen if the private sector as a whole goes deeper into debt. It’s private debt that got us into the Great Recession/Financial Crisis, not public debt. In fact, the Clinton surpluses were a small part of it because to create those Clinton surpluses the private sector had to go deeper into private debt – which we did. It was called mortgages, corporate debt, credit cards, student loans, etc.
A long response, but I hope it was worth it and helps.
America’s attention has been focused lately on the unnecessary debate in Congress over the debt-ceiling law. Part of the motivation (at least the vocalized motivation) for cutting the deficit and trying to limit the national debt, according to both Republicans and the President, is that supposedly government deficits are holding back the economy. They assert that cutting the government’s spending will somehow stimulate the economy. This is what all that Republican rhetoric about “jobs-killing spending” is about. In more formal terms it’s referred to as a policy of “austerity”. But it’s more than flawed thinking. It’s flat out wrong. Cutting government spending when there is significant unemployment and excess capacity will not stimulate the economy. It will cause the economy to slow down and contract further. That’s why we economists call it “contractionary fiscal policy”.
GDP, the total value of all goods and services produced, is how we measure the economy. We can count GDP two ways. Either we add up the total spending in the economy or we add up the total incomes (wages and profits, mostly). Government spending is part of that spending – close to 25% in fact. If the government spends less, it means less GDP. It also means less income for people because what is one person’s spending is another person’s (or business’s) income.
Across the ocean, the British fell for this silly make believe idea that government austerity would create prosperity. In 2010 they elected a Conservative government (actually a Conservative-New Democrat coalition). The Conservatives, led by Prime Minister Cameron and Chancellor George Osborne (equivalent of the U.S Treasury Secretary), began to implement sharp cuts in government spending in mid-2010. The results have been clear. And bad. The Guardian reports the results. The British economy actually shrank by 0.5% in the 4th quarter of last year. It barely avoided an official recession when growth in the 1st quarter with 0.5% growth. (the Brits define a recession as two negative quarters). Now the 2nd quarter numbers are in and the economy is basically dead in the water: 0.2% annual growth rate.
Yes, contractionary fiscal policy, cutting the budget, is, well, contractionary. It makes things worse. If you want to reduce government spending, do it when you have full employment, not when unemployment has been running over 9% for more than two years. The examples are legion. Britain is only one. Three years ago Ireland thought it could budget-cut it’s way out of the Great Recession/Financial Crisis. It only made things worse and grimmer in the emerald isle. Austerity is making things worse for Greece. There’s really no end to the examples. What’s missing is any evidence from a developed country that austerity when unemployment is high actually helps.
In yesterday’s release of the 2nd quarter 2011 GDP numbers for the U.S., the BEA also revised some past numbers. This is not an unusual event. It’s routine. But the news and revisions this year were disturbing and sobering.
First, a little about how GDP numbers are reported. In this day and age of instant info when stock markets report numbers within seconds, we tend to think we should get all our data that quickly. But it’s a really tough job. Think about it. GDP is the total market value of all the goods and services produced in a period of time. For the U.S., that’s a lot of stuff. There’s over 300 million of us buying things, making things, providing services, etc. The BEA has to add all that up. Actually it’s got to find out what we did before it can add them up. Some of the activity must be estimated. Hard data on a lot of production isn’t even available until months or even years afterward. In addition, to estimate real GDP from nominal GDP (nominal is what’s observable at current prices), they have to collect immense data on prices of nearly everything. Looked at this way,they do a pretty good job.
So what happens is that each quarter they release three “estimates” of GDP and growth rates. The first version is released at the end of the month after the quarter closes. This is the “advance” estimate. That’s what we got yesterday, on July 29, for the quarter ending June 30. Next month in late August they will issue a revision of this number based on more and better information. Then in late September comes the “final” estimate based on even better analyses. Then they start over in October with the 3rd quarter “advance” estimate, etc. But in July each year, the BEA takes the opportunity to revise any of the data for the previous year, and at times for several previous years. There’s nothing sinister here, just more time allows a better, more precise estimate. And that brings me to yesterday’s news.
The BEA revised GDP numbers back to 2003. Most of the numbers from 2003-2007 were pretty much unchanged, but from 2007 there’s a significant revision, a significant downward revision. The change shows that the Great Recession (what I prefer to call the Lesser Depression or Workers’ Depression) in 2007-2009 was much worse than previously reported. Instead of losing close to 5% of GDP in the recession, we lost close to 6% of GDP. Calculated Risk shows the revisions graphically:
The following graph shows the current estimate of real GDP and the pre-revision estimate (blue). I’ll have more later on GDP.
The revisions also mean (as the graph shows) that we aren’t back to where we were in 4th quarter 2007 yet. In other words, it’s almost four years after the recession began and we still have an economy that’s producing less goods and services than we did back then. Keep in mind that our population is close to 3.5% larger now than it was then. Kind of explains the bad the feelings you’ve been having, huh?
Another implication of the revision is that it clearly shows that the government policy response has been grossly inadequate. The Obama stimulus program, which was clearly too small to deal with even the recession as we thought it was then, was definitely much, much too little. Given what we now know of the size and scope of the recession, the government stimulus program needed to be at least twice, perhaps three times, as big as it was. And, it needed to be more focused on stimulating demand through actual spending instead of having 40% of the money be tax cuts that wouldn’t be saved and wouldn’t help the economy.
Finally, a perusal of the graph shows us two things. First, we lopped off a big chunk of the economy in 2007-09. That’s lost opportunity. It’s lost income. And it’s the 10%+ unemployment rate. But more disturbing is the fact that the so-called “recovery” since then, a recovery that hasn’t gotten us back to the beginning, is itself running out of steam. The curve is flattening in 2011. That’s because the rage in Washington by both Republicans and the President has been for budget-cutting. Budget cutting is contractionary fiscal policy. They’re trying to slow down the growth of an economy that’s pretty much already run out of steam.
Yesterday I took a stab at describing what the consequences of a government default might be and I added to it here. There’s basically three lessons to take away from those questions. One, nobody knows now exactly what happens, especially in financial markets. Two, it all depends on the specifics of a deal or no deal to raise the debt ceiling. Truth is that many of the proposed “deals” to raise the debt ceiling will have negative consequences for the economy as bad as if we don’t raise the ceiling. And three, regardless of the specifics in financial markets, it will have very negative consequences on GDP and the real economy where most of us live and work. What I want to address now is less of what the disaster will be as the how the economic side of crisis will likely unfold.
Reporters and politicians are using the metaphor or image of the economy moving toward a cliff to describe how things will happen economically. They, and the President is one of them, are conjuring up an image whereby the economy is moving along just fine and dandy and then, if we don’t raise the debt ceiling, we will just fall off a cliff into a giant abyss on Aug. 2. They’re acting as if there’s this hard-and-fast, unalterable deadline when the machine just stops. If Congress passes a debt ceiling increase before Aug. 2 then they act like everything will be OK. The image that comes to my mind is one of Coyote from the old Loony Tunes cartoons racing along a plateau towards a giant cliff. At his current rate he’ll reach the edge on Aug 2. If Congress votes an increase before Aug 2, then a bridge will appear out of nowhere and he goes on safely. If they don’t Coyote just falls into the abyss. That’s wrong and it’s misleading.
The better metaphor is not of a someone racing toward a cliff. The better metaphor is to imagine thousands of people all standing around at the edge of a cliff looking over the edge. The key is the cliff isn’t made of rock. It’s made of ordinary sand and dirt and it’s weak. And the cliff has a bit of an overhand to it. Nobody can see clearly over the edge. What will happen is that gradually people will get nervous. Some folks decide to move back from the edge – banks, investors, and funds decide to move their money out of US T-bills. But the movement starts to weaken and shake the ground. Some dirt can be seen sliding over the edge. More people begin to pull back. The earth shakes and slips more. It turns into a mob rush to start getting away from the cliff’s edge. But it’s too late. The ground starts sliding slowly but it gains momentum. It turns into a landslide. The whole cliff slides down in a massive landslide taking huge numbers of people with it. That’s how I see it.
We’re already seeing the beginning of the movements this week. We have reports from the New York Times that Debt Ceiling Impasse Rattles Short-Term Credit Markets. The stock markets aren’t in full panic mode. There’s been no 3-5% decline days of panic selling like we saw in 2008. Yet. But we’ve seen the market turn decidedly down. It’s been losing about .8% per day all week for a 4% loss on the week. Interest rates on short-term government T-bills are up a little, indicating that a growing desire to sell by many and get out. (interestingly, the rate on long-term bonds are actually down a bit – funds appear to still be bullish on the U.S. long-term). Right now there’s no panic. But as JP Morgan Chase CEO Jamie Dimon said today “We’re praying. And we’re planning”.
How bad could it get? Again I’ll turn to Jamie Dimon:
Now, here’s what really would happen.
Every single company with treasuries, every insurance fund, every — every requirement that — it will start snowballing. Automatic, you don’t pay your debt, there will be default by ratings agencies. All short-term financing will disappear. I would have hundreds of work streams working around the world protecting our company for that kind of event.
Even the Aug 2 deadline itself isn’t as hard and fast as the President and Secretary of the Treasury have made it out to be. The original projected date when new government borrowing would have to stop was in mid-May. But when that date came, the Treasury began to implement some extraordinary measures. Instead of making cash payments to some government employee pension funds he gave them IOU’s – promises to make it good soon. Cash payments to many government vendors have been slowed down. They implemented tricks that are the big government equivalent of searching the sofa for loose change, or borrowing from the kids’ piggy banks, or using the full 15-day grace period to make the mortgage payment. At the same time, cash tax collections have a just a tick better than projected. Eventually these tricks run out. Right now the latest estimates I’ve seen say the real cash-drop dead date is closer to Aug 10. But it’s likely the Treasury will stop something on Aug 2. We just don’t know what.
My point here is that it’s not like Tuesday August 2 is calamity day and everything happens then. It might. But things might fall apart before then. Or they might fall apart a few days later. Or things might continue to gradually get worse but without us realizing how bad it’s getting because we’re waiting for the dramatic fall off a cliff. By the time we realize in mid-August that it’s a real disaster, we’ll be buried in the landslide.
This is crazy. It’s no way to run a government or an economy, but it’s clear that the Republicans and Tea Party types would rather crash the economy than compromise. Unfortunately Obama is willing to help them do it.
UPDATE: Some indicators of possible trouble could show up next Monday when the Treasury holds a “routine” auction of T-bills for refunding purposes. Refunding doesn’t add net debt, it only rolls-over existing maturing debt. Treasury will also announce it’s plans for future auctions at that time. According to the Wall Street Journal Marketwatch:
A refunding is a replacement of government debt, often debt that is about to mature, with new debt. Officials typically meet with about half of the primary dealers each quarter to discuss the refunding.
On Monday, Treasury plans to release estimates of future borrowing. Two days later, it will release its refunding decisions, including how much in Treasury securities will be sold.
The Bureau of Economic Analysis released the “advance estimate” of 2nd Quarter 2011 GDP growth. The numbers are bad. Worse than most analysts expected. I’ll let BEA explain:
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.3 percent in the second quarter of 2011, (that is, from the first quarter to the second quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.4 percent.
A 1.3 percent annualized growth rate is very bad. Yes, it’s a positive number which indicates real growth and not decline, but it’s not enough to keep people even, let alone putting unemployed people back to work. What’s worse, the BEA, as part of it’s annual revision process in July of year, revises the past numbers based on better data and better information than what was available at the time. They revised their estimate of real GDP growth in first quarter 2011 down to 0.4% annualized rate from the previously estimated 1.8%.
Putting both quarters together it means the U.S. economy has grown at a 0.8% growth rate for the first six months of 2011. As said earlier, yes, that’s a positive number so it indicates “growth”. But that’s growth in the total or aggregate size of the economy. During those same six months our population grew at a 1% annualized rate. So do the math. The pie is 0.8% bigger but there’s 1% more mouths at the table. It means less per person.
I’ve mentioned before how economists have an inadequate vocabulary when it comes to describing the condition of the economy. We tend to use only the terms “recession”, which means decline or negative growth, and “recovery” which technically means “not a recession” or any positive growth rate. But not all positive growth rates have positive results.
There’s an unofficial term used in economics called a “growth recession”. A growth recession is when real GDP is growing – the rate is above zero – but it’s too small to really make an improvement in living standards or improvement in employment. That’s where we’re at now. We’re in a “growth recession”. Technically GDP is still growing, but it’s so slow and so weak that unemployment will actually rise.
Today’s news on GDP in first and second quarters has taken
many most analysts by surprise. But it really shouldn’t be a surprise. The Obama “stimulus” spending program started in 2009, which was way too small to begin with, is being phased out. With it federal government spending in the first six months has actually declined. The biggest culprit in the weak GDP numbers though is consumption spending by households. It has come to a virtual standstill at the end of June. Why? Well, unemployment is rising again – no jobs, no money to spend. Unemployment compensation has been cut in many states and many long-term unemployed have run out of benefits. Again, that cuts spending. And in Congress, Republicans with Obama’s help have been pushing a cut-spending, cut-deficits agenda. In economics this is called “contractionary fiscal policy”. And that’s what we’re getting – a contraction of GDP. No surprise really.