WOW: Government Spending Drops 5.1% in First Quarter

So much winning.

RESIDENT TRUMP: “It helps when you know that borders are not racist, speech is not violence, America is good, terrorists are bad, men can never become women, police are not criminals, and criminals are not victims

MRCTV: ….the decline was driven by lower expenditures of taxpayers’ money and a one-time spike in imports, as BEA explains:

“The decrease in real GDP in the first quarter primarily reflected an increase in imports, which are a subtraction in the calculation of GDP, and a decrease in government spending. These movements were partly offset by increases in investment, consumer spending, and exports.”

Imports skyrocketed 41.3% in the first quarter as consumers stocked up in anticipation of price hikes that would result if President Donald Trump made good on his threat to institute reciprocal to offset the onerous tariffs other countries are imposing on U.S. products.

Without the huge spike in imports, GDP would’ve recorded an increase in the first quarter. Because net exports are a part of the GDP calculation, GDP lost roughly five percentage points due to the spike in imports.

Lower government expenditures, fueled by the Trump Administration’s Department of Government Efficiency’s (DOGE) success eliminating waste of tax dollars, also suppressed GDP. Additionally, the BEA reports that January’s California wildfires had a negative effect on GDP.

According to the BEA’s annualized, inflation-adjusted advanced GDP estimate released Wednesday:

• Real GDP decreased 0.3%, off from a 2.4% increase in the fourth quarter of 2024.
• Government spending was down 1.4%, following a 3.1% increase in the fourth quarter.
• Federal government expenditures fell 5.1%, after increasing 4.0%.
• Federal spending on national defense activities was down 8.0%, after increasing 4.8%.
• Nondefense spending declined 1.0%, off from the previous quarter’s 2.9% increase.
• State and local government spending rose by 0.8%, the slowest growth since the second quarter of 2022, after increasing 2.5% in the fourth quarter.
• Imports increased 41.3%, after falling 1.9% the previous quarter.
• Final sales to private domestic purchasers rose 3.0%, up from the fourth quarter’s 2.9% rise.
• Consumer spending rose 1.8%, down from last quarter’s 4.0% gain, as both services (+2.4%) and goods (+0.5%) increased.

Pres. Trump’s chief economic adviser Peter Navarro said in an interview with CNBC Wednesday:

“We had a 22 percent increase in domestic investment. That is off the charts. When you strip out inventories and the negative effects of the surge in imports because of the tariffs you have three percent growth, so we really like where we are at now.”

“Get the tariff barriers down, get the non-tariff barriers down. And we do that with the strategy we’re adopting – and I think it’s working beautifully,” Navarro said, reporting that trade representatives are lining up to negotiate tariffs with the U.S.

“Basically, the way GDP is calculated is: consumption plus investment plus government spending – plus net exports,” Navarro said, explaining why GDP won’t continue to contract:

“So, right off the bat, when you have this import surge that we’ve had to try to get in ahead of tariffs, that’s dragging down our GDP growth by something like five percent.

“I mean, it’s just like it’s extraordinary – but, that’s not going to be the case next quarter. So, like, take that off the chart.”

What’s more, the elimination of wasteful government spending, combined with successful extension of the Trump tax cuts, will greatly benefit Americans, Navarro said:

“And then, government spending, that’s like, obviously when you’re doing the DOGE thing and contracting government, that’s going to be fine and good for America because it gets rid of the waste, fraud and abuse.

“So, that leaves you with the two big drivers: consumption, which is the biggest of the two, and investment. And look, the Trump Program, with the deregulation, with the tax cuts that’s coming – which will be retroactive to January, which will allow complete expensing – it surged like 22 percent.”