America's Grossly Distorted Product

If the Obama administration were managing a company, it might have hoped the latest gross-domestic-product numbers would be greeted with cries of "great quarter, guys!"
At least the stock-market obliged, rising on the back of better-than-expected GDP data Thursday morning. But then bulls have become used to looking to Washington for inspiration. Zero rates and stimulus programs boost economic data as well as nudge money toward riskier assets.
Fully 2.2 percentage points of the third quarter's 3.5% growth figure related to vehicle purchases and residential construction, both juiced by government support. Federal spending added 0.6%.
If these GDP data were company earnings, they would be what analysts euphemistically call "low quality." Investors buying into the market off the back of them are ignoring weekly unemployment-claims data that came in above 500,000 again on the same day.
The danger is that all these short-term fixes leave the economy dangerously addicted to taxpayer-funded steroids. The circularity in the housing market, whereby Washington provides tax breaks to first-time buyers, guarantees most of the mortgages written, and then buys most of those, beggars belief, and suggests a worrying case of amnesia following the bursting of the housing bubble.
Another idea that has been floated is to give tax breaks to firms to encourage them to hire. Yet with earnings besting forecasts so far, it doesn't look like firms are exactly short of funds to pay workers. What they lack is a clear sense that the economy is on a stable footing. Distorting the cost of money, durable-goods demand and labor productivity won't help that, but merely serve to build up further problems.