Obvious that the end of the $8,000 first time home buyer credit caused a spike that has been more than reversed, much like November.

The question is how much that pull back, along with the euro and China issues, will slow what has been a moderately growing US economy.

With demand leakages like pension fund contributions and income compounding in pension funds and other corporate reserves, aggregate demand can only be sustained by the private sector or the public sector spending more than its income.

And right now the drivers of private sector debt- housing and cars- don’t show signs of the increases necessary to close our output gap.

That leaves the public sector.

For the current size of govt, we remain grossly over taxed by a govt that thinks its run out of money and is now dependent on the confidence of investors to fund itself.

Note, for example, the expired unemployment benefits mean a reduction in aggregate demand which in fact works against employment.

And this is with a Democratic majority.

As long as the ‘deadly innocent fraud’ that to be able to spend dollars the US Govt needs to tax or borrow is taken as a given, it seems unlikely that pro growth policy will be implemented and unlikely growth will be sufficient to materially close the output gap any time soon.