"GDP: Nothing to write home about" (Curious Capitalist):
Still, there were some interesting numbers within the GDP report. Consumer spending was down 1.2%, after rising slightly in the first quarter. Private investment was down 20.4%—not nearly as bad as the first quarter's spectacular 50.5% decline, but still pretty danged bad. What kept the GDP contraction to just 1% was a 5.6% rise in government spending (made up mostly of a 10.9% increase in federal spending) and an improvement in the balance of trade: imports fell 15.1% while exports fell only 7%.
What's it all mean? Conference Board chief economist Bart van Ark says the takeaway is that "with capital spending still falling and unemployment rising, neither investors nor workers are likely to see strong rewards anytime soon."
This is why the stimulus was a bad idea. Government spending crowds out private investment, which is the real source of long-run growth. Old-fashioned Keynesian theory says the government should spend to revive the economy in recessions, but old-fashioned Keynesian theory isn't worth much generally, and it's dead wrong right now. The government needs to get out of the way so the economy can grow.